<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 5, 1998
REGISTRATION NO. 333-42935
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BELK, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 5311 56-2058574
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
2801 WEST TYVOLA ROAD
CHARLOTTE, NORTH CAROLINA 28217-4500
(704) 357-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JOHN M. BELK
CHIEF EXECUTIVE OFFICER
BELK, INC.
2801 WEST TYVOLA ROAD
CHARLOTTE, NORTH CAROLINA 28217-4500
(704) 357-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
JOHN D. CAPERS, JR. RALPH A. PITTS
KING & SPALDING GENERAL COUNSEL
191 PEACHTREE STREET BELK, INC.
ATLANTA, GEORGIA 30303 2801 WEST TYVOLA ROAD
(404) 572-4600 CHARLOTTE, NORTH CAROLINA 28217-4500
(704) 357-1000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable following the effectiveness of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==============================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE(1)
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Class A Common Stock,
$.01 par value per share........ 60,244,877 $11.28 $679,615,000 $200,486.43
- ------------------------------------------------------------------------------------------------------------------------------
Class B Common Stock,
$.01 par value per share........ 60,244,877 -- -- (2)
==============================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee and
computed pursuant to Rule 457(f)(2) under the Securities Act of 1933, as
amended, based on the aggregate book value of the shares of Common Stock of
the Belk Companies to be converted into the right to receive shares of Class
A Common Stock of Belk, Inc. upon consummation of the Reorganization. The
aggregate book value of such shares of common stock as of November 1, 1997,
was $679,615,000.
(2) Pursuant to Rule 457(i), no registration fee is required.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
BELK, INC.
CROSS REFERENCE TABLE
LOCATION IN PROXY STATEMENT/PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF FORM S-4
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION IN FORM S-4 LOCATION IN PROSPECTUS
----------------------------------- ----------------------
<C> <S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of
Prospectus.............................. Outside Front Cover of Proxy
Statement/Prospectus; Facing Page of the
Registration Statement
2. Inside Front and Outside Back Cover Pages
of Prospectus........................... Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information........... Summary; Risk Factors
4. Terms of the Transaction.................. Summary; The Reorganization; Terms of the
Reorganization Agreement
5. Pro Forma Financial Information........... Unaudited Pro Forma Combined Condensed
Financial Information
6. Material Contacts With the Company Being
Acquired................................ Summary; The Reorganization; Certain
Relationships and Transactions
7. Additional Information Required For
Reoffering by Persons and Parties Deemed
to be Underwriters...................... Not Applicable
8. Interests of Named Experts and Counsel.... Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. Not Applicable
10. Information With Respect to S-3
Registrants............................. Not Applicable
11. Incorporation of Certain Information by
Reference............................... Not Applicable
12. Information With Respect to S-2 or S-3
Registrants............................. Not Applicable
13. Incorporation of Certain Information by
Reference............................... Not Applicable
14. Information With Respect to Registrants
Other Than S-3 or S-2 Registrants....... Summary; Business of New Belk; Security
Ownership; Selected Financial Information of
New Belk; Management's Discussion and
Analysis of Financial Condition and Results
of Operations of the Belk Companies; Index to
Historical Combined Financial Statements
15. Information With Respect to S-3
Companies............................... Not Applicable
16. Information With Respect to S-2 or S-3
Companies............................... Not Applicable
17. Information With Respect to Companies
Other Than S-2 or S-3 Companies......... Summary; Prospectus Supplement for Applicable
Belk Company
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION IN FORM S-4 LOCATION IN PROSPECTUS
----------------------------------- ----------------------
<C> <S> <C>
18. Information if Proxies, Consents or
Authorizations Are to be Solicited...... Summary; The Reorganization; Terms of the
Reorganization Agreement; The Special
Meetings; Management; Security Ownership;
Prospectus Supplement for Applicable Belk
Company; Stockholder Proposals and Other
Matters
19. Information if Proxies, Consents or
Authorizations Are Not to be Solicited,
or in an Exchange Offer................. Not Applicable
</TABLE>
<PAGE> 4
PROXY STATEMENT
THE BELK COMPANIES
FOR SPECIAL MEETINGS OF SHAREHOLDERS OF THE BELK COMPANIES
TO BE HELD APRIL 15, 1998 AND APRIL 16, 1998
------------------------------------------------------------------
PROSPECTUS
BELK, INC.
CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE
This Proxy Statement/Prospectus is being furnished to the shareholders (each
an "Existing Belk Shareholder" and, collectively, the "Existing Belk
Shareholders") of 112 separate Belk companies (each a "Belk Company" and,
collectively, the "Belk Companies") in connection with the solicitation of
proxies by the Board of Directors of each Belk Company for use at a special
meeting of shareholders of each Belk Company to be held on April 15, 1998 or
April 16, 1998, and at any adjournment thereof (each, a "Special Meeting"). The
Belk Companies consist of (i) 101 companies that currently operate 202 retail
department stores, (ii) six companies that historically operated retail
department stores during their existence but whose assets now consist primarily
of proceeds from the sale of their retail department stores, and (iii) five
companies that operate businesses that provide services to other Belk Companies
and their subsidiaries. The Belk Companies are listed on Annex A to this Proxy
Statement/Prospectus. The Belk Companies, either individually or in the
aggregate, own 100% of the capital stock of (a) 11 companies that currently
operate 21 retail department stores, (b) nine companies (including Belk Stores
Services, Inc. ("BSS")) that operate businesses that provide services to the
Belk Companies and their subsidiaries, (c) one company that has historically
operated a retail department store during its existence and whose assets now
consist primarily of proceeds from the sale of its retail department store and
(d) three companies that do not operate retail department stores, but own,
directly and indirectly, capital stock in certain of the Belk Companies
(collectively the "Surviving Belk Subsidiaries"). The Surviving Belk
Subsidiaries are also listed on Annex A to this Proxy Statement/Prospectus.
At each Special Meeting, the shareholders of each Belk Company will be asked
to consider and vote upon a proposal to approve (a) the Plan and Agreement of
Reorganization, as amended (the "Reorganization Agreement"), dated as of
November 25, 1997, by and among the Belk Companies, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which each Belk Company (other than
Belk-Simpson Company, Greenville, South Carolina ("Belk-Simpson")) will be
merged with and into New Belk and New Belk Sub will be merged with and into
Belk-Simpson, with Belk-Simpson becoming a wholly-owned subsidiary of New Belk
(for each such Belk Company, the "Merger" and, collectively, the
"Reorganization") and (b) the Merger of such Belk Company (other than
Belk-Simpson) with and into New Belk and the Merger of New Belk Sub with and
into Belk-Simpson. New Belk would be the surviving corporation upon consummation
of the Reorganization, Belk-Simpson would survive its Merger as a wholly-owned
subsidiary of New Belk and the Surviving Belk Subsidiaries would become
wholly-owned subsidiaries of New Belk. Upon the consummation of each Merger,
each outstanding share of common stock of each Belk Company (the "Belk Companies
Common Stock") (other than treasury shares and shares entitled to dissenters'
rights of appraisal and other than shares in Belk Companies owned by other Belk
Companies which, with certain exceptions described herein, will be canceled)
will be converted into a number of shares of Class A Common Stock, par value
$.01 per share, of New Belk ("New Belk Class A Common Stock"), set forth in
"Determination of Applicable Exchange Ratios" (for each Belk Company, the
"Applicable Exchange Ratio"). All of the shares of New Belk Class A Common Stock
to be received by each Existing Belk Shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued. Upon consummation of the Reorganization, all
of the Existing Belk Shareholders (with the exception of any Existing Belk
Shareholders who exercise dissenters' rights of appraisal) will become
stockholders of New Belk ("New Belk Stockholders"). The methodology used to
determine the Applicable Exchange Ratio for each Belk Company was developed by
BSS, as discussed more fully in this Proxy Statement/Prospectus under the
sections entitled "Summary -- Determination of Applicable Exchange Ratios" and
"Determination of Applicable Exchange Ratios." Following the Reorganization, New
Belk's executive officers, directors and 5% stockholders will beneficially own
an aggregate of approximately 68.2% of the outstanding shares of New Belk Class
A Common Stock. In particular, Mr. John M. Belk, Mrs. Sarah Belk Gambrell and
their immediate family members, family trusts and family controlled entities
will beneficially own approximately 46.2% of the outstanding shares of New Belk
Class A Common Stock.
The shares of New Belk Class A Common Stock to be issued to the Existing
Belk Shareholders in connection with the Reorganization are convertible into
shares of Class B Common Stock, par value $.01 per share, of New Belk ("New Belk
Class B Common Stock" and, together with New Belk Class A Common Stock, the "New
Belk Common Stock"), in whole or in part, at any time and from time to time at
the option of the holder, on the basis of one share of New Belk Class B Common
Stock for each share of New Belk Class A Common Stock converted. Shares of New
Belk Class B Common Stock are identical to shares of New Belk Class A Common
Stock in all respects, with the exception that holders of New Belk Class B
Common Stock are entitled to one vote per share on all matters which are
submitted to the New Belk Stockholders for their vote or approval while the
holders of New Belk Class A Common Stock are entitled to 10 votes per share on
all such matters. The holders of both classes of New Belk Common Stock are
entitled to vote and will vote together as a single class on all matters
presented to the New Belk Stockholders for their vote or approval except as
otherwise required by Delaware law. Shares of New Belk Class A Common Stock will
convert automatically, on a one-for-one basis, into shares of New Belk Class B
Common Stock if (i) such shares are transferred to any person other than a Class
A Permitted Holder (as defined herein) or (ii) the holder of such shares ceases
to qualify as a Class A Permitted Holder. See "Description of New Belk Capital
Stock."
------------------------
(continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN
INFORMATION RELEVANT TO OWNERSHIP OF NEW BELK CLASS A COMMON STOCK AND THE
REORGANIZATION.
THE SHARES OF NEW BELK CLASS A COMMON STOCK TO BE ISSUED IN THE REORGANIZATION
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
This Proxy Statement/Prospectus and the Prospectus Supplement for each Belk
Company also constitute the prospectus of New Belk filed as part of the
Registration Statement (as defined herein) relating to the issuance of shares of
New Belk Class A Common Stock pursuant to the terms of the Reorganization.
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS AND EACH PROSPECTUS SUPPLEMENT IS
AND THEY
ARE FIRST BEING MAILED OR OTHERWISE DELIVERED TO EXISTING BELK SHAREHOLDERS ON
OR ABOUT , 1998.
<PAGE> 5
(continued from previous page)
Consummation of the Reorganization is conditioned upon, among other things,
the approval of each Merger by the percentage of outstanding shares of common
stock of each Belk Company required under such company's governing documents and
applicable state law. Mr. John M. Belk and certain other persons who are
expected to serve as directors of New Belk have indicated that they intend to
vote in favor of the Mergers for all of the Belk Companies in which they own
common stock. If Mr. Belk and such other prospective directors of New Belk vote
in favor of the Mergers for all of such Belk Companies, and if the family
members, controlled corporations and family trusts of Mr. Belk and such other
prospective directors who also own common stock in such Belk Companies vote in
favor of the Mergers for all of such Belk Companies, the vote by such persons,
corporations and trusts in favor of the Mergers would be sufficient to approve
the Mergers for 102 of the 112 Belk Companies under their governing documents
and applicable state law.
Your vote is important. Whether or not you intend to be present at the
Special Meeting for your Belk Company, please complete, sign, date and return
the accompanying proxy in the enclosed envelope. If you choose to attend the
Special Meeting for your Belk Company, you may revoke your proxy and personally
cast your votes.
No person has been authorized to give any information or to make any
representation other than as contained herein in connection with the offer of
New Belk Class A Common Stock to be issued in connection with the
Reorganization, and, if given or made, such information or representation must
not be relied upon as having been authorized by New Belk, any of the Belk
Companies or any other person. Neither this Proxy Statement/Prospectus nor the
Prospectus Supplement for any Belk Company constitutes an offer to sell or a
solicitation of an offer to purchase New Belk Class A Common Stock in any
jurisdiction in which such offer or solicitation is not authorized or in which
the person making such offer or solicitation is not qualified to do so or to any
person to whom it would be unlawful. Neither the delivery of this Proxy
Statement/Prospectus or the Prospectus Supplement for any Belk Company nor any
distribution of such New Belk Class A Common Stock shall, under any
circumstances, create any implication that the information contained herein is
correct as of any time subsequent to the date hereof.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Proxy Statement/Prospectus and the
Prospectus Supplements for each Belk Company constitute forward-looking
statements. The forward-looking statements relate to anticipated financial
performance, management's plans and objectives for future operations, growth
strategies, business prospects, industry trends and other matters. The following
discussion is intended to identify the forward-looking statements and certain
factors that could cause future outcomes to differ materially from those set
forth in the forward-looking statements.
Forward-looking statements include the information concerning possible or
assumed future results of operations of New Belk set forth under "Summary -- The
Reorganization," "Summary -- Dividend Policy," "Risk Factors," "The
Reorganization -- Surviving Belk Subsidiaries," "The
Reorganization -- Recommendations of the Boards of Directors," "The
Reorganization -- Reasons for the Reorganization," "Determination of Applicable
Exchange Ratios," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Unaudited Pro Forma Combined Condensed Financial
Statements" and "Business of New Belk" and other statements in this Proxy
Statement/Prospectus and the Prospectus Supplements for each Belk Company
identified by words such as "anticipate," "estimate," "expect" and "believe,"
and include, in particular, the statements related to the expectations of
management of BSS, the Belk Companies or New Belk as to the potential for New
Belk to achieve (i) strengthened competitive position, (ii) enhanced
opportunities for expansion, (iii) increased access to capital markets, (iv)
cost efficiencies through consolidation, (v) increased shareholder value and
(vi) possible future tax savings resulting from the Reorganization. Readers are
cautioned that such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of New Belk following the Reorganization to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors may affect New Belk's
operations, markets, products, services and prices. In addition to any
assumptions and other factors referred to specifically in connection with such
forward-looking statements, factors that could cause New Belk's actual results
to differ materially from those contemplated in any forward-looking statement
include, among others, the following: general economic and business conditions;
changes in the competitive environment within the retail department store
industry; the ability of New Belk to integrate the operations of the Belk
Companies following the Reorganization; the ability to open new retail
department stores on a profitable basis; the ability of New Belk to implement
and to obtain anticipated cost savings related to the Reorganization and realize
anticipated cost savings; the actual costs required to effect the Reorganization
and to realize synergies and cost savings from the Reorganization; and changes
in business strategy or development plans.
AVAILABLE INFORMATION
New Belk has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act")
covering the shares of New Belk Common Stock to be issued in connection with the
Reorganization. Neither this Proxy Statement/Prospectus nor the Prospectus
Supplement for any Belk Company contains all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information relating to
New Belk and the shares of New Belk Class A Common Stock offered hereby,
reference is hereby made to the Registration Statement, including the exhibits
and schedules thereto, which may be inspected without charge at the office of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of
which may be obtained from the Commission at prescribed rates. Statements
contained in this Proxy Statement/Prospectus or the Prospectus Supplement for
any Belk Company as to the contents of any contract, agreement or other document
referred to are not necessarily complete and in each instance reference is made
to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
As a result of the filing of the Registration Statement with the Commission,
New Belk will become subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith will be required to file periodic reports and other information with
the Commission. Also in accordance with the requirements of the Exchange Act,
New Belk intends to furnish its stockholders with annual reports containing
audited consolidated financial statements and a report
<PAGE> 6
thereon by independent public accountants and with quarterly reports for the
first three quarters of each fiscal year containing unaudited summary financial
information.
Each Existing Belk Shareholder will receive a copy of this Proxy
Statement/Prospectus and a copy of the Prospectus Supplement for each Belk
Company in which such Existing Belk Shareholder owns of record shares of common
stock. Prospectus Supplements for any Belk Company are available without charge,
upon written or oral request, from Mr. Ralph A. Pitts, General Counsel, Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, telephone number (704)357-1000. In order to ensure timely delivery
of the documents prior to the Special Meetings, any such request should be made
by April 8, 1998. Prospectus Supplements for any of the Belk Companies are also
publicly available on the Commission's web site at (http://www.sec.gov).
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PROXY STATEMENT..........................Cover
PROSPECTUS...............................Cover
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS......................Inside Cover
AVAILABLE INFORMATION.............Inside Cover
SUMMARY................................. 1
The Parties........................... 1
Special Meetings...................... 2
Risk Factors.......................... 3
The Reorganization.................... 4
Determination of Applicable Exchange 9
Ratios..............................
Comparison of Shareholder Rights...... 10
Summary Historical Combined and
Unaudited Pro Forma Combined
Condensed Financial Information..... 11
Comparative Per Share Data............ 13
Markets and Market Prices............. 13
Dividend Policy....................... 13
RISK FACTORS............................ 14
Risks and Effects of the 14
Reorganization......................
Risks of Ownership of New Belk Common
Stock............................... 16
Risks of Operations................... 17
Miscellaneous Risks................... 18
GENERAL INFORMATION..................... 19
SPECIAL MEETINGS........................ 19
Time, Date, Place and Purpose; Record
Date and Shares Entitled to Vote.... 19
Vote Required; Security Ownership of
Management.......................... 20
Solicitation and Revocation of 20
Proxies.............................
THE REORGANIZATION...................... 21
History of the Belk Stores............ 21
Background of the Reorganization...... 21
Professional Advisors................. 22
Surviving Belk Subsidiaries........... 22
Non-Belk Stores....................... 23
Recommendation of Boards of 23
Directors...........................
Reasons for the Reorganization........ 23
Consequences of Non-Participation in
the Reorganization.................. 26
Terms of the Reorganization 26
Agreement...........................
Effective Time of the Reorganization
and Exchange of Shares.............. 28
Belk-Simpson Reorganization........... 28
Interests of Certain Persons in the
Reorganization...................... 28
Accounting Treatment.................. 29
Certain Federal Income Tax 29
Consequences........................
Certain Conversion Requirements and
Transfer Restrictions............... 30
Resales of New Belk Class A Common 31
Stock...............................
Dissenters' Rights of Appraisal....... 31
Regulatory Approvals Required......... 32
DETERMINATION OF APPLICABLE EXCHANGE
RATIOS................................ 32
Fairness Opinion...................... 37
NEW BELK................................ 41
CAPITALIZATION.......................... 41
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS..................
42
SELECTED HISTORICAL COMBINED AND
UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL INFORMATION.................
48
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF THE BELK COMPANIES......
50
General............................... 50
Results of Operations................. 51
Comparison of Nine Months Ended
November 1, 1997 and November 2, 51
1996................................
Comparison of Fiscal Years Ended
February 1, 1997 and February 3, 53
1996................................
Comparison of Fiscal Years Ended
February 1, 1996 and January 31, 54
1995................................
Seasonality and Quarterly 54
Fluctuations........................
Liquidity and Capital Resources....... 55
Recent Accounting Pronouncements...... 57
Impact of Inflation................... 57
Year 2000 Issues...................... 57
BUSINESS OF NEW BELK.................... 57
Business Overview..................... 57
Business Strategy..................... 58
Growth Strategy....................... 59
Merchandising......................... 59
Marketing............................. 60
Buying................................ 61
Store Locations and Operations........ 61
Systems and Technology................ 62
Non-Retail Businesses................. 62
Industry and Competition.............. 63
Trademarks and Service Marks.......... 63
Employees............................. 63
Legal Proceedings..................... 64
MANAGEMENT.............................. 65
Directors............................. 65
Committees of the New Belk Board of
Directors........................... 67
Compensation of Directors............. 67
Directors and Officers Insurance...... 67
Executive Officers.................... 68
Executive Compensation................ 69
Pension Plan.......................... 69
Supplemental Pension Plan............. 70
Belk Profit Sharing Plan.............. 70
Deferred Compensation Plan............ 70
Limitation of Liability and 71
Indemnification.....................
CERTAIN RELATIONSHIPS AND
TRANSACTIONS.......................... 72
General............................... 72
Certain Transactions with Management
and Business Relationships Between
the Belk Companies.................. 72
Indebtedness of Management............ 74
SECURITY OWNERSHIP...................... 75
</TABLE>
i
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
DESCRIPTION OF NEW BELK CAPITAL STOCK... 78
General............................... 78
New Belk Common Stock................. 78
Preferred Stock....................... 79
Transfer Agent and Registrar.......... 79
Certain Effects of Authorized but
Unissued Stock...................... 79
Certain Charter and Bylaw 79
Provisions..........................
Directors' Liability.................. 81
COMPARISON OF RIGHTS OF HOLDERS OF BELK
COMPANIES COMMON STOCK AND NEW BELK
CLASS A COMMON STOCK..................
81
EXPERTS................................. 81
LEGAL MATTERS........................... 82
THE BELK COMPANIES INDEX TO HISTORICAL
COMBINED FINANCIAL STATEMENTS.........
F-1
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ANNEX A THE BELK COMPANIES............. A-1
THE SURVIVING BELK
SUBSIDIARIES................... A-3
ANNEX B PLAN AND AGREEMENT OF
REORGANIZATION................. B-1
ANNEX C SHARES OF NEW BELK CLASS A
COMMON STOCK ALLOCATED TO EACH
EXISTING BELK SHAREHOLDER...... C-1
ANNEX D FAIRNESS OPINION OF WILLAMETTE
MANAGEMENT ASSOCIATES, INC. ... D-1
PART II INFORMATION NOT REQUIRED IN
PROSPECTUS..................... II-1
</TABLE>
ii
<PAGE> 9
SUMMARY
The following is a summary of certain information contained, or
incorporated by reference, elsewhere in this Proxy Statement/Prospectus and the
related Supplement to this Proxy Statement/Prospectus for each Belk Company (for
each Belk Company, the "Prospectus Supplement"). This summary is not intended to
be complete and is qualified in its entirety by reference to, and should be read
in conjunction with, the detailed information and financial statements appearing
elsewhere in this Proxy Statement/Prospectus and the Prospectus Supplements.
Each Existing Belk Shareholder is urged to read this Proxy Statement/Prospectus
and the Prospectus Supplement related to each Belk Company of which it is a
shareholder and the Annexes hereto and thereto in their entirety and with care.
THE PARTIES
THE BELK COMPANIES
The Belk Companies operate the largest privately-owned department store
business in the United States, with total revenues of $2.1 billion, on a pro
forma combined basis, for the fiscal year ended February 1, 1997. The Belk
Companies and their subsidiaries operate 223 retail department stores in 13
states in the southeastern United States. Belk stores sell top national brands
of fashion apparel, shoes and accessories for men, women and children, as well
as cosmetics, home furnishings, housewares, gifts and other types of
merchandise. Belk stores also offer customers exclusive private label brands,
such as Andhurst, Heiress, Home Accents, J. Khakis, Kim Rogers, Maryann's
Boutique, Meeting Street, Saddlebred, Sweetbriar and 24/Seven. Certain larger
Belk stores include hair salons, restaurants, optical centers and other
amenities. Belk stores attempt to provide customers with the convenience of
one-stop shopping, with a large merchandise mix and extensive offerings of
brands, styles, assortments and sizes.
The Belk Companies consist of (i) 101 companies that operate retail
department stores, (ii) six companies that historically operated retail
department stores during their existence but whose assets now consist primarily
of proceeds from the sale of their retail department stores, and (iii) five
companies that operate businesses that provide services to other Belk Companies
and their subsidiaries. The Belk Companies, either individually or in the
aggregate, own 100% of the capital stock of the Surviving Belk Subsidiaries. New
Belk will own 100% of the capital stock of the Surviving Belk Subsidiaries upon
consummation of the Reorganization. The Belk Companies and the Surviving Belk
Subsidiaries are listed on Annex A to this Proxy Statement/Prospectus.
Immediately following the Reorganization, New Belk intends to merge all of the
Surviving Belk Subsidiaries with and into New Belk, with the exception of
Archdale Advertising Agency, Inc., Belk Leasing Company, BSS, United Electronic
Services, Inc. ("UES"), Belk Stores Mutual Insurance Company, The Belk Center,
Inc. ("Belk Center"), Belk International, Inc. ("Belk International"), TAGS
Stores, LLC and Belk Funding, LLC, which will remain subsidiaries of New Belk.
There is no trading market for shares of capital stock of any of the Belk
Companies. The state of incorporation, date of incorporation, mailing address
and telephone number of each Belk Company are set forth in the Prospectus
Supplement for that Belk Company. Unless the context otherwise requires, all
references herein to the Belk Companies include the Belk Companies and their
respective subsidiaries.
NEW BELK
New Belk is a Delaware corporation that was organized in November 1997 for
the purpose of consolidating the retail department store businesses now operated
by the Belk Companies on the terms described in this Proxy Statement/Prospectus.
New Belk has no assets or business and has not carried on any activities to date
other than those incident to its formation and in connection with the
Reorganization and the other transactions contemplated by the Reorganization
Agreement. As a result of the Reorganization, the businesses currently conducted
by the Belk Companies and their subsidiaries will become the business of New
Belk.
The mailing address of New Belk's principal executive offices is 2801 West
Tyvola Road, Charlotte, North Carolina 28217-4500, and its telephone number is
(704) 357-1000.
<PAGE> 10
NEW BELK SUB
New Belk Sub is a South Carolina corporation that was organized in November
1997 for the purpose of merging with and into Belk-Simpson as part of the
Reorganization on the terms described in this Proxy Statement/Prospectus and in
the Reorganization Agreement. New Belk Sub has no assets or business and has not
carried on any activities to date other than those incident to its formation and
in connection with the Reorganization.
The mailing address of New Belk Sub's principal executive offices is 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, and its telephone number
is (704) 357-1000.
SPECIAL MEETINGS
TIME, DATE, PLACE AND PURPOSE
The Special Meeting of the shareholders of each Belk Company will be held
on April 15, 1998 or April 16, 1998, as specifically set forth in the Prospectus
Supplement for each Belk Company, at the offices of BSS located at 2801 West
Tyvola Road, Charlotte, North Carolina 28217-4500. The record date for each Belk
Company is March 12, 1998 (the "Record Date"). At the Special Meetings, the
shareholders of each Belk Company (other than Belk-Simpson) will be asked to
consider and vote upon a proposal to approve the Reorganization Agreement and
the Merger of such Belk Company with and into New Belk. The shareholders of
Belk-Simpson will be asked to consider and vote upon a proposal to approve the
Reorganization Agreement and the Merger of New Belk Sub with and into
Belk-Simpson. Upon consummation of the Reorganization, each outstanding share of
Belk Companies Common Stock (other than treasury shares and shares of Belk
Companies Common Stock owned by Existing Belk Shareholders who perfect
dissenters' rights of appraisal under applicable state law and other than shares
in Belk Companies owned by other Belk Companies which, with certain exceptions
described herein, will be canceled at the Effective Time) will be converted into
the right to receive that number of shares of New Belk Class A Common Stock
determined in accordance with the Applicable Exchange Ratios set forth in
"Determination of Applicable Exchange Ratios." All of the shares of New Belk
Class A Common Stock to be received by each Existing Belk Shareholder in the
Reorganization will be aggregated and the total will be rounded to the nearest
whole share. No fractional shares will be issued. A copy of the Reorganization
Agreement that has been executed by each of the Belk Companies, New Belk and New
Belk Sub is attached hereto as Annex B.
RECORD DATE AND SHARES ENTITLED TO VOTE
Only holders of record of shares of Belk Companies Common Stock at the
close of business on the Record Date are entitled to notice of and to vote at
the Special Meeting for each Belk Company and any adjournment thereof. As of the
Record Date, each Belk Company had the number of shares issued and outstanding
and the number of holders of record specified in the Prospectus Supplement for
such Belk Company.
VOTE REQUIRED; SECURITY OWNERSHIP OF MANAGEMENT
The presence in person or by proxy of the holders of a majority of the
shares of common stock of each Belk Company outstanding and entitled to vote at
such Belk Company's Special Meeting is necessary to constitute a quorum at such
Belk Company's Special Meeting. The affirmative vote of the holders of a
majority of the shares of common stock issued and outstanding as of the Record
Date of certain Belk Companies and two-thirds of the shares of common stock
issued and outstanding as of the Record Date of certain other Belk Companies,
voting in person or by proxy, is necessary to approve the Reorganization
Agreement and each Merger (in each case, the "Required Shareholder Vote"). The
Required Shareholder Vote of each Belk Company is specified in Annex A. A
failure to vote or an abstention will have the same effect as a negative vote.
2
<PAGE> 11
Holders of record of Belk Companies Common Stock on the Record Date are
entitled to one vote per share on any matter that may properly come before the
Special Meeting of the applicable Belk Company.
As of the Record Date, Mr. John M. Belk and certain other persons who are
expected to serve as directors of New Belk have indicated that they intend to
vote in favor of the Mergers for all of the Belk Companies in which they own
common stock. If Mr. Belk and the other prospective directors of New Belk vote
in favor of the Mergers for all of such Belk Companies, and if the family
members, controlled corporations and family trusts of Mr. Belk and such other
prospective directors who also own common stock in such Belk Companies vote in
favor of the Mergers for all of such Belk Companies, the vote by such persons,
corporations and trusts in favor of the Mergers would be sufficient to approve
the Mergers for 102 of the 112 Belk Companies under their governing documents
and applicable state law. These family members, controlled corporations and
family trusts have voted in the past in a manner consistent with the member of
their family who will serve as a director of New Belk.
SOLICITATION AND REVOCATION OF PROXIES
A form of proxy for each Belk Company's Special Meeting is enclosed with
the Prospectus Supplement for such Belk Company being sent to such Belk
Company's Existing Belk Shareholders. Each Existing Belk Shareholder should
complete and properly execute a proxy for EACH Belk Company in which such
Existing Belk Shareholder owns shares of Belk Companies Common Stock. All shares
of Belk Companies Common Stock held of record as of the Record Date represented
by properly executed proxies will, unless such proxies have been previously
revoked, be voted in accordance with the instructions indicated on such proxies.
If no instructions are indicated, such shares will be voted FOR approval of the
Reorganization Agreement and the Merger of the applicable Belk Company and in
the discretion of the proxy holders as to any other matter which may properly
come before the Special Meeting for such Belk Company.
None of the Boards of Directors of the Belk Companies are aware of any
other matters which may be presented for action at the Special Meeting for any
of the Belk Companies, but if other matters do properly come before any of the
Special Meetings, it is intended that shares represented by proxies in the
accompanying forms will be voted by the persons named in the proxy in accordance
with their best judgment. Any proxy given pursuant to this solicitation may be
revoked in writing by the person giving it at any time before the proxy is
exercised by giving notice to the Secretary of the applicable Belk Company or by
submitting a proxy having a later date or by such person appearing at the
Special Meeting for the applicable Belk Company and electing to vote in person.
RISK FACTORS
An investment in New Belk Class A Common Stock involves certain risks,
including the following: (i) the particular Belk Companies participating in the
Reorganization will be uncertain at the time of the Special Meetings; (ii) no
third-party appraisals of the Belk Companies were obtained in connection with
the Reorganization; (iii) the Applicable Exchange Ratios were not determined
through negotiations with third parties; (iv) the Reorganization involves
certain conflicts of interest; (v) the Fairness Opinion (as defined herein)
contains certain qualifications; (vi) a single investment in one Belk Company
may outperform an investment in the combined Belk Companies; (vii) certain risks
are associated with a larger company; (viii) the Reorganization is expected to
involve significant expenses; (ix) potential benefits of any alternatives to the
Reorganization may not be realized; (x) certain New Belk Stockholders may enjoy
considerable influence over New Belk; (xi) no public market exists for New Belk
Common Stock; (xii) the New Belk Class A Common Stock is subject to certain
conversion requirements and restrictions on transfer; (xiii) the New Belk
Certificate and New Belk Bylaws contain substantial anti-takeover provisions;
(xiv) the Belk Companies have no combined operating history; (xv) the retail
industry is highly competitive; (xvi) the retail industry is highly seasonal;
(xvii) the Belk Companies own and/or operate a substantial amount of real estate
which could be subject to environmental risks; (xviii) New Belk will be
dependent on senior management and other key personnel; (xix) New Belk will
assume substantial liabilities in the Reorganization, some of which may be
contingent or undisclosed; and (xx) New Belk may consummate the Reorganization
without receiving all necessary consents from third parties. See "Risk Factors."
3
<PAGE> 12
THE REORGANIZATION
RECOMMENDATION OF BOARDS OF DIRECTORS
THE BOARD OF DIRECTORS OF EACH BELK COMPANY HAS DETERMINED THAT THE MERGER
OF SUCH BELK COMPANY IS IN THE BEST INTERESTS OF SUCH BELK COMPANY AND ITS
SHAREHOLDERS, HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE
MERGER OF SUCH BELK COMPANY PURSUANT TO THE REORGANIZATION AGREEMENT AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE THE
REORGANIZATION AGREEMENT AND THE MERGER OF SUCH BELK COMPANY PURSUANT TO THE
REORGANIZATION AGREEMENT. For additional information with respect to the
determination made by, and recommendation of, the Board of Directors of each
Belk Company, see "The Reorganization -- Reasons for the Reorganization" herein
and "The Reorganization -- Reasons for the Reorganization" in the applicable
Prospectus Supplement for such Belk Company.
REASONS FOR THE REORGANIZATION
The Boards of Directors of the Belk Companies believe that significant
benefits will result from the Reorganization. These expected benefits include
the following:
- Enhanced Competitiveness. The retail department store industry is highly
competitive and, in the judgment of management, competition in the
industry is likely to increase. Management believes that the companies in
the retail department store industry that will be successful in this
increasingly competitive environment will be larger companies that have
an efficient legal structure, modern and attractive stores in key
markets, effective inventory management, merchandise that appeals to
their best customers, sophisticated management information systems,
operating efficiencies and access to significant sources of capital.
Management believes that the Reorganization will create a new Belk store
organization that will be larger, stronger and more effective in
competing against larger companies in the industry. See "The
Reorganization -- Reasons for the Reorganization -- Enhanced
Competitiveness."
- Operational Integration. The Reorganization will combine all of the
operations presently conducted separately by the Belk Companies into one
operating entity. The integration of the separate operations of the Belk
Companies will enable New Belk to: (i) avoid potential and actual
conflicts of interest inherent in relationships among separate
corporations having common directors and officers; (ii) take advantage of
financing and investment opportunities that may not be as profitably
pursued by the Belk Companies individually; and (iii) avoid duplication
of administrative functions. See "The Reorganization -- Reasons for the
Reorganization -- Operational Integration."
- Enhanced Access to Capital. As of November 1, 1997, New Belk had, on a
pro forma combined basis, total assets of approximately $1.5 billion and
total debt of approximately $441 million. The Boards of Directors of the
Belk Companies believe that New Belk's capital structure will provide New
Belk with opportunities to refinance its existing debt on more favorable
terms and will provide access to new sources of capital on terms more
favorable than would be available to the Belk Companies individually. See
"The Reorganization -- Reasons for the Reorganization -- Enhanced Access
to Capital."
- Growth Potential. The combination of all of the operations presently
conducted by the Belk Companies separately will give the Existing Belk
Shareholders an opportunity to participate in the growth of the retail
department store industry through an ownership interest in a single
business enterprise. See "The Reorganization -- Reasons for the
Reorganization -- Growth Potential."
- Potential Liquidity. New Belk has no present intention to list the
shares of New Belk Class A Common Stock issued in the Reorganization or
any other capital stock of New Belk on any national or regional exchange
or to qualify shares of New Belk Class A Common Stock or any other
capital stock for trading on any over-the-counter market. Nevertheless,
the liquidity of the Existing Belk Sharehold-
4
<PAGE> 13
ers' investment may increase because the New Belk Class A Common Stock
issued in the Reorganization generally will be transferable, subject to
the transfer restrictions and conversion requirements described herein,
and the creation of a single business enterprise with a substantial
number of stockholders may make it more likely that a trading market for
shares of New Belk Common Stock will develop than for shares of common
stock of any of the Belk Companies individually. See "The
Reorganization -- Reasons for the Reorganization -- Potential Liquidity"
and "Risk Factors -- Risks of Ownership of New Belk Class A Common
Stock -- Certain Conversion Requirements and Restrictions on Transfer of
New Belk Class A Common Stock."
- Asset and Risk Diversification. Upon consummation of the Reorganization,
New Belk will be substantially larger and more diversified than any of
the Belk Companies individually. The size and geographic diversity of New
Belk's business may translate into more consistent performance and stable
returns for Existing Belk Shareholders than is now the case with an
investment in a single Belk Company. The Reorganization will also allow
the Existing Belk Shareholders to diversify the risks of an investment in
a retail department store business over a broader group of assets and
business operations and reduce exposure to the risks inherent in an
investment in a single Belk Company. See "The Reorganization -- Reasons
for the Reorganization -- Asset and Risk Diversification."
- Expense and Tax Savings. Upon consummation of the Reorganization,
management of BSS estimates that New Belk will realize considerable
savings resulting from, among other things, (i) a reduction in finance
costs due to reduced banking fees and interest expense, consolidation of
credit lines and the consummation of more efficient financing
transactions for the Belk Companies as a whole, such as securitization of
receivables, (ii) more efficient cash management and (iii) tax savings
from the use of previously unused operating losses and other tax
benefits. Management estimates that such savings could amount to as much
as $8 to $10 million in the first year following the Reorganization and
$3 to $5 million on an annual basis thereafter. Management cannot
determine with certainty, however, whether, when and to what extent such
savings will actually be realized by New Belk. See "The
Reorganization -- Reasons for the Reorganization -- Expense and Tax
Savings."
No assurance can be given, however, that all of these benefits, if any,
will be achieved. See "Risk Factors."
TERMS OF THE REORGANIZATION AGREEMENT
General. The Reorganization Agreement provides that, following the
approval of the Reorganization Agreement by the shareholders of each Belk
Company and the satisfaction or waiver of the other conditions to the Merger of
such Belk Company, at the Effective Time (as defined herein), such Belk Company
(other than Belk-Simpson) will be merged with and into New Belk and New Belk Sub
will be merged with and into Belk-Simpson, in each case in accordance with the
provisions of the applicable state corporate law of such Belk Company
("Applicable State Corporate Law"). New Belk will be the surviving corporation
in the Reorganization. As a result of the Reorganization, (i) the separate
corporate existence of each Belk Company (other than Belk-Simpson) will cease,
(ii) Belk-Simpson will survive its Merger with New Belk Sub as a wholly-owned
subsidiary of New Belk and (iii) the Surviving Belk Subsidiaries will survive
the Reorganization as wholly-owned subsidiaries of New Belk.
Conversion of Shares. The Reorganization Agreement provides that each
share of Belk Companies Common Stock issued and outstanding immediately before
the Effective Time (other than treasury shares and shares of Belk Companies
Common Stock held by Existing Belk Shareholders who perfect their Applicable
State Law Appraisal Rights (as defined herein) and other than shares in Belk
Companies owned by other Belk Companies which, with certain exceptions described
herein, will be canceled at the Effective Time) and all rights in respect
thereof will, at the Effective Time, be converted into and become exchangeable
for a specified number of shares of New Belk Class A Common Stock determined in
accordance with the Applicable Exchange Ratios. See "Determination of Applicable
Exchange Ratios." All of the shares of New
5
<PAGE> 14
Belk Class A Common Stock to be received by each Existing Belk Shareholder in
the Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
Board of Directors of New Belk. The Reorganization Agreement provides
that, at the Effective Time, the Board of Directors of New Belk (the "New Belk
Board") will consist of John M. Belk, Sarah Belk Gambrell, Thomas M. Belk, Jr.,
H. W. McKay Belk, John R. Belk, David Belk Cannon, J. Kirk Glenn, Jr., Karl G.
Hudson, Jr., John A. Kuhne and B. Frank Matthews, II. John M. Belk will be the
Chairman of the New Belk Board.
Certificate of Incorporation and Bylaws of New Belk. The Reorganization
Agreement provides that, at the Effective Time, the Certificate of Incorporation
of New Belk and the Bylaws of New Belk will be amended and restated in the forms
attached to the Reorganization Agreement as Exhibits B and C, respectively (as
so amended, the "New Belk Certificate" and the "New Belk Bylaws").
Conditions to Consummation of the Reorganization. In addition to approval
of the Reorganization Agreement by the Required Shareholder Vote for each Belk
Company, consummation of each Merger is subject to the satisfaction or waiver
of, among certain other customary conditions, the following: (i) no Existing
Belk Shareholder will have elected to dissent from and exercise Applicable State
Law Appraisal Rights with respect to any Merger; (ii) the Mergers of all of the
Belk Companies (other than Belk-Simpson) with and into New Belk shall have been
consummated in accordance with the terms of the Reorganization Agreement; (iii)
the Merger of New Belk Sub with and into Belk-Simpson shall have been
consummated in accordance with the terms of the Reorganization Agreement; (iv)
Belk-Simpson shall have completed the plan of reorganization agreed to between
New Belk and Belk-Simpson (the "Belk-Simpson Plan of Reorganization") that will
result in the assets of Belk-Simpson consisting solely of assets related to and
necessary for the conduct of the retail department store business; (v) the
Registration Statement shall be effective; and (vi) the applicable waiting
period shall have expired under the Hart-Scott-Rodino Act of 1976, as amended
(the "HSR Act").
Amendment and Waiver. The Reorganization Agreement may be amended by
mutual agreement of the parties thereto. Any amendment to the Reorganization
Agreement must be in writing and signed by the parties thereto. Any provision of
the Reorganization Agreement may be waived in writing at any time by the party
that is, or whose shareholders are, entitled to the benefits of such provision.
Termination. The Reorganization Agreement may be terminated prior to the
Effective Time: (i) with respect to the Merger of any particular Belk Company by
mutual written agreement between New Belk and such Belk Company; (ii) by a Belk
Company with respect to its Merger or by New Belk with respect to such Merger or
the Reorganization as a whole if an event occurs that renders impossible the
satisfaction of the conditions to such party's obligations to consummate the
Merger, unless the failure of such occurrence shall be due to the failure of the
party seeking to terminate the Reorganization Agreement to perform or observe
its covenants, agreements and conditions required to be observed by it prior to
the Effective Time; (iii) by New Belk with respect to the Merger of any
particular Belk Company or the Reorganization as a whole if the shareholders of
such Belk Company do not approve the Reorganization Agreement; (iv) by New Belk
with respect to the Merger of any particular Belk Company or the Reorganization
as a whole if the Board of Directors of such Belk Company withdraws, or modifies
in a manner adverse to New Belk, its recommendation that the Reorganization
Agreement be approved; (v) by a Belk Company with respect to its Merger or by
New Belk with respect to such Merger or the Reorganization as a whole if the
Effective Time has not occurred by June 1, 1998; and (vi) by New Belk with
respect to the Merger of any particular Belk Company or the Reorganization as a
whole if any Existing Belk Shareholder owning shares in such Belk Company shall
have elected to dissent from and exercise his Applicable State Law Appraisal
Rights with respect to such Merger.
Covenants. In addition to customary covenants regarding conduct of
business pending consummation of the Reorganization, each Belk Company has
agreed that it will only pay dividends for fiscal year 1998 in amounts
consistent with dividends paid for prior years, subject to normal working
capital requirements. Moreover, no Belk Company may, without the prior written
consent of New Belk, pay dividends for fiscal year 1998 in an aggregate amount
greater than the aggregate amount paid in dividends for fiscal year 1997.
6
<PAGE> 15
Fees and Expenses. BSS will pay all fees, costs and expenses incurred in
connection with the Reorganization Agreement, the Reorganization and the
transactions contemplated thereby (the "Reorganization Expenses").
EFFECTIVE TIME OF THE REORGANIZATION AND EXCHANGE OF SHARES
Effective Time of the Reorganization. The Reorganization and each Merger
consummated pursuant to the Reorganization will become effective upon the latest
to occur of the filing of the certificates of merger or articles of merger, as
applicable, relating thereto with the Secretaries of State of Delaware and the
applicable states of incorporation of the Belk Companies (the "Effective Time").
The Reorganization Agreement provides that the parties thereto will cause such
certificates of merger or articles of merger, as applicable, to be filed as soon
as practicable after all of the conditions to consummation of each Merger
contemplated thereby have been satisfied or waived.
Exchange of Belk Companies Stock Certificates. Prior to the Effective
Time, instructions and a letter of transmittal will be furnished to all Existing
Belk Shareholders for use in exchanging their stock certificates for
certificates evidencing the shares of New Belk Class A Common Stock that they
will be entitled to receive as a result of the Reorganization. EXISTING BELK
SHAREHOLDERS SHOULD NOT SUBMIT THEIR STOCK CERTIFICATES FOR EXCHANGE UNTIL
INSTRUCTIONS AND THE LETTER OF TRANSMITTAL ARE RECEIVED.
INTERESTS OF CERTAIN PERSONS IN THE REORGANIZATION
The Reorganization and the recommendation of the Boards of Directors of the
Belk Companies involve conflicts of interests. See "Risk Factors -- Risks and
Effects of the Reorganization -- Conflicts of Interest." Such conflicts of
interest may arise from the fact that (i) certain executive officers now serve
in management of more than one Belk Company which may limit the ability of these
officers to act independently and in the best interests of each separate Belk
Company for which they serve in management, (ii) certain executive officers and
directors of the Belk Companies are expected to become involved in management of
New Belk and (iii) the Reorganization will consolidate the holdings of John M.
Belk, Sarah Belk Gambrell and other Belk family members in the combined
enterprise and give Mr. Belk, Mrs. Gambrell and such other Belk family members
substantial control over the operations of New Belk. These relationships cause
Mr. Belk, Mrs. Gambrell and such other Belk family members to have interests in
the Reorganization that are different from, or in addition to, the interests of
other Existing Belk Shareholders. Each Board of Directors considered these
conflicts of interest when determining whether to recommend the Reorganization
Agreement and its Merger to the Existing Belk Shareholders. See "The
Reorganization -- Interests of Certain Persons in the Reorganization."
ACCOUNTING TREATMENT
The Reorganization will be accounted for using the purchase method of
accounting. See "The Reorganization -- Accounting Treatment."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
New Belk expects that each Merger (other than the Merger of New Belk Sub
with and into Belk-Simpson (the "Belk-Simpson Merger")) will constitute a
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code") and that the Belk-Simpson Merger will constitute a
transaction described in Section 351(a) of the Code. Generally, no gain or loss
should be recognized for federal income tax purposes by the Existing Belk
Shareholders, with the exception of Existing Belk Shareholders who elect to
exercise their Applicable State Law Appraisal Rights. New Belk has received an
opinion of King & Spalding, counsel to New Belk, to the effect that, subject to
the assumptions, qualifications and limitations set forth therein, each of the
Mergers (other than the Belk-Simpson Merger) will qualify as a reorganization
for federal income tax purposes and the Belk-Simpson Merger will qualify as a
transaction described in Section 351(a) of the Code. See "The
Reorganization -- Certain Federal Income Tax Consequences."
7
<PAGE> 16
CERTAIN CONVERSION REQUIREMENTS AND TRANSFER RESTRICTIONS
The shares of New Belk Class A Common Stock to be issued to the Existing
Belk Shareholders in connection with the Reorganization are convertible into
shares of New Belk Class B Common Stock, in whole or in part, at any time and
from time to time at the option of the holder, on the basis of one share of New
Belk Class B Common Stock for each share of New Belk Class A Common Stock
converted. Shares of New Belk Class B Common Stock are identical to shares of
New Belk Class A Common Stock in all respects, with the exception that holders
of New Belk Class B Common Stock are entitled to one vote per share on all
matters which are submitted to the New Belk Stockholders for their vote or
approval while holders of New Belk Class A Common Stock are entitled to 10 votes
per share on all such matters. The holders of both classes of New Belk Common
Stock are entitled to vote and will vote together as a single class on all
matters presented to the New Belk Stockholders for their vote or approval except
as otherwise required by Delaware law. See "Description of New Belk Capital
Stock."
Shares of New Belk Class A Common Stock may be owned only by Class A
Permitted Holders. Upon a transfer of a share of New Belk Class A Common Stock
to any person other than a Class A Permitted Holder, each such share of New Belk
Class A Common Stock so transferred will be automatically converted into one
share of New Belk Class B Common Stock. Shares of New Belk Class A Common Stock
held by a New Belk Stockholder who is a Class A Permitted Holder will also
automatically convert to New Belk Class B Common Stock in the event such New
Belk Stockholder no longer meets the requirements of a Class A Permitted Holder.
See "The Reorganization -- Certain Conversion Requirements and Transfer
Restrictions."
RESALES OF NEW BELK CLASS A COMMON STOCK
Shares of New Belk Class A Common Stock to be issued to the Existing Belk
Shareholders in connection with the Reorganization will be freely transferable
under the Securities Act (but will still be subject to compliance with
applicable conversion requirements and transfer restrictions), except for shares
issued to any Existing Belk Shareholder who, at the time of the Reorganization,
may be deemed to be an "affiliate" of New Belk within the meaning of Rule 145
under the Securities Act ("Rule 145"). In general, affiliates of New Belk
include the executive officers and directors of, and any other person or entity
who controls, is controlled by or is under common control with, New Belk. Rule
145 imposes, among other things, certain restrictions upon the resale of
securities received by affiliates in connection with certain reclassifications,
mergers, consolidations or asset transfers. These restrictions will consist of
volume and manner of sale restrictions on the resale of New Belk Class A Common
Stock issued to such persons or entities. Shares of New Belk Class B Common
Stock will also be freely transferable under the Securities Act, except for
those restrictions on transferability under Rule 145 applicable to New Belk
Class B Common Stock owned by New Belk Stockholders who may be deemed to be
affiliates of New Belk. New Belk may place legends on certificates representing
shares of New Belk Common Stock that are to be issued to such Existing Belk
Shareholders in the Reorganization to reflect the restrictions on
transferability under Rule 145 applicable to affiliates of New Belk. See "The
Reorganization -- Resales of New Belk Class A Common Stock" and "Description of
New Belk Capital Stock -- New Belk Common Stock."
DISSENTERS' RIGHTS OF APPRAISAL
Each Existing Belk Shareholder is entitled to dissenters' rights of
appraisal and, if the Merger relating to such Existing Belk Shareholder's Belk
Company is consummated, to receive payment in cash for the statutory "fair
value" of his shares (excluding any element of value arising from the
accomplishment or expectation of the Reorganization) upon compliance with the
provisions of state law applicable to each such Belk Company (the "Applicable
State Law Appraisal Rights"). See "The Reorganization -- Dissenters Rights of
Appraisal."
The Applicable State Law Appraisal Rights for each such Belk Company are
summarized in the Prospectus Supplement for such Belk Company and the full text
of the Applicable State Law Appraisal Rights for each Belk Company is set forth
in Annex A attached to the applicable Prospectus Supplement. It is a condition
to the obligation of New Belk to consummate the Merger with each Belk Company
and the
8
<PAGE> 17
Reorganization as a whole that no Existing Belk Shareholder exercises his
Applicable State Law Appraisal Rights. The exercise of Applicable State Law
Appraisal Rights by any Existing Belk Shareholder will have the effect of (i)
requiring New Belk to waive the condition that no Existing Belk Shareholder
exercise his Applicable State Law Appraisal Rights or (ii) allowing New Belk to
terminate the Reorganization Agreement. See "The Reorganization -- Terms of the
Reorganization Agreement."
REGULATORY APPROVALS REQUIRED
Under the HSR Act and the rules promulgated thereunder by the Federal Trade
Commission (the "FTC"), the Reorganization may not be consummated unless
notification has been given and certain information has been furnished to the
FTC and the Antitrust Division of the Department of Justice (the "Antitrust
Division") and the waiting period has expired or been terminated. Pursuant to
the HSR Act, on December 19, 1997, John M. Belk and certain Belk Companies filed
a Notification and Report Form with the FTC and the Antitrust Division for
review in connection with the Reorganization. The 30-day waiting period under
the HSR Act applicable to the Reorganization was terminated early by action of
the FTC on January 2, 1998. The requirements of the HSR Act will be satisfied if
the Reorganization is consummated by January 2, 1999. There can be no assurance
that the Reorganization will not be investigated or opposed by the FTC or the
Antitrust Division, or that at any time before the consummation of the
Reorganization, the FTC, the Antitrust Division, states or private parties will
not take action under the antitrust laws challenging the consummation of the
Reorganization. See "The Reorganization -- Regulatory Approvals Required."
DETERMINATION OF APPLICABLE EXCHANGE RATIOS
The Applicable Exchange Ratios for the Mergers have been calculated to take
into account the different financial and operating characteristics of each Belk
Company. Although the Belk Companies operate similar businesses, the Belk
Companies are separate legal entities governed by separate Boards of Directors.
Over time, the Boards of Directors of the Belk Companies have made their own
decisions regarding their respective businesses, including decisions regarding
store operations, capital structures, investments in other Belk Companies and
other securities, capital expenditures, the level of distributions made to its
equity owners and the retention of cash in the businesses. As a result of these
decisions, the Belk Companies generally have different financial and operating
characteristics that make it unlikely that using a single method of determining
the value of each of the Belk Companies for purposes of calculating the
Applicable Exchange Ratios would be fair to all of the Existing Belk
Shareholders. In addition, a number of the Belk Companies own equity interests
in other Belk Companies. As a result of these investments, the value of each
Belk Company consists not only of the value of its retail department store
operations or other directly held assets but also the value of its equity
interests in other Belk Companies.
To determine exchange ratios for the Mergers that would take into account
the different financial and operating characteristics of the Belk Companies and
the investments by Belk Companies in other Belk Companies, BSS developed a
methodology to determine the exchange ratios based upon the "Net Relative Value"
(as defined herein) of each Belk Company. This methodology is described in more
detail in "Determination of Applicable Exchange Ratios." BSS first determined
five different values for the department store operations and other directly
held assets of each Belk Company based upon five valuation formulas and
attributed to each Belk Company with continuing operations the highest of the
five values resulting from the application of these formulas (the Applicable
Exchange Ratio for each Belk Company with discontinued operations was determined
by using the Adjusted Book Equity Valuation Formula (as defined herein)). BSS
then adjusted the value attributed to each Belk Company by adding to the value
attributed to that Belk Company the proportionate share (based upon percentage
ownership) of the value attributed to each other Belk Company, if any, in which
that Belk Company owns any equity interest, resulting in a "Total Relative
Value." The "Total Relative Value" was then reduced by the proportionate share
(based upon percentage ownership) of the value of that Belk Company owned by any
other Belk Company. The value resulting from such methodology is the "Net
Relative Value" of that Belk Company. The effect of these adjustments is to
allocate to the individual shareholders of each Belk Company both the value of
the assets of that Belk Company and the value of that Belk Company's interest in
other Belk Companies.
9
<PAGE> 18
After determining the Net Relative Value of each Belk Company, BSS
calculated the percentage that the Net Relative Value of each Belk Company
represents of the total of the Net Relative Values of all of the Belk Companies.
The Applicable Exchange Ratio for the Merger of each Belk Company is then based
upon the percentage of the total of the Net Relative Values of all of the Belk
Companies attributed to that Belk Company.
The Applicable Exchange Ratio for each Belk Company is set forth in
"Determination of Applicable Exchange Ratios" herein and the Prospectus
Supplement for each Belk Company describes the calculation of the Applicable
Exchange Ratio for the Merger of such Belk Company. The methodology used to
determine the Applicable Exchange Ratio for each Belk Company is referred to
herein as the "Valuation Process."
FAIRNESS OPINION
On November 25, 1997 Willamette Management Associates, Inc. ("Willamette"),
an independent financial advisory firm with substantial experience in valuing
retail businesses, delivered its opinion (the "Fairness Opinion") to each of the
Belk Companies and their directors that, based upon and subject to its analysis
and assumptions and limiting conditions, the Valuation Process is reasonable and
is fair, from a financial point of view, to the Existing Belk Shareholders. For
a summary of the assumptions and qualifications that limit the scope of the
Fairness Opinion, see "Determination of Applicable Exchange Ratios -- Fairness
Opinion." The full text of the Fairness Opinion, which sets forth the
assumptions made, matters considered and limits of review undertaken in
connection with the Fairness Opinion, is attached as Annex D to this Proxy
Statement/Prospectus and is incorporated herein by reference. Existing Belk
Shareholders are urged to read the Fairness Opinion in its entirety.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Reorganization, Existing Belk Shareholders will
receive shares of New Belk Class A Common Stock. For a description of the New
Belk Class A Common Stock, see "Description of New Belk Capital Stock -- New
Belk Common Stock." For a comparison of the material differences between the
rights of the holders of New Belk Class A Common Stock and the holders of common
stock of a Belk Company, see "Comparison of Rights of Holders of Belk Companies
Common Stock and New Belk Class A Common Stock" herein and "Comparison of
Shareholder Rights" in the applicable Prospectus Supplement for each such Belk
Company.
10
<PAGE> 19
SUMMARY HISTORICAL COMBINED AND UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
INFORMATION
The summary historical combined financial information of the Belk Companies
presented below under the captions "Selected Statement of Income Data" and
"Selected Balance Sheet Data" for, and as of the end of, each of the years in
the five-year period ended February 1, 1997, has been derived from the
historical combined financial statements of the Belk Companies. The historical
combined financial statements as of February 3, 1996 and February 1, 1997 and
for each of the years in the three-year period ended February 1, 1997 have been
audited by KPMG Peat Marwick LLP, independent certified public accountants. Such
historical combined financial statements, and the report thereon, are included
elsewhere in this Proxy Statement/Prospectus. The summary historical combined
information of the Belk Companies presented below for the nine-month periods
ended November 2, 1996 and November 1, 1997, and as of November 1, 1997, has
been derived from the unaudited historical combined financial statements of the
Belk Companies included elsewhere in this Proxy Statement/Prospectus. The
unaudited interim data reflects, in the judgment of management, all adjustments
(consisting of only normal recurring accruals) necessary for a fair presentation
of the results for such interim periods. Results of operations for unaudited
interim periods are not necessarily indicative of results which may be expected
for any interim or annual period. The information presented below under the
caption "Selected Operating Data" is unaudited.
The following summary unaudited pro forma combined condensed financial
information of New Belk has been derived from, or prepared on a basis consistent
with, the unaudited pro forma combined condensed financial statements included
elsewhere in this Proxy Statement/Prospectus. The pro forma information gives
effect to the Reorganization as if it had occurred at the beginning of the first
period presented. This data is presented for illustrative purposes only and is
not indicative of the combined results of operations or financial position that
would have occurred if the Reorganization had been consummated at the beginning
of each period presented or on the dates indicated, nor is it necessarily
indicative of the future operating results or financial position of New Belk.
11
<PAGE> 20
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------------------------------------
FISCAL YEAR ENDED
-------------------------------------------------------------------
FEBRUARY 2, FEBRUARY 1, JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1993(1) 1994(1) 1995(1) 1996(1) 1997(1)(2)
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
SELECTED STATEMENT OF
INCOME DATA:
Revenues............. $1,661,942 $1,674,373 $1,694,422 $1,685,470 $1,772,613
Cost of goods sold... 1,131,154 1,151,942 1,151,713 1,149,270 1,205,687
Depreciation and
amortization........ 41,740 44,104 46,762 50,832 54,198
Income from
continuing
operations.......... 54,348 40,715 46,893 42,518 64,497
Income from
discontinued
operations(4)....... 1,445 1,687 1,731 1,298 36,873
Net income........... 55,793 53,923 48,624 43,816 101,370
Income from
continuing
operations per
share............... n/a n/a n/a n/a n/a
Average number of
shares
outstanding......... n/a n/a n/a n/a n/a
SELECTED BALANCE
SHEET DATA:
Accounts receivable,
net................. 275,141 274,011 262,986 263,161 335,914
Merchandise
inventories......... 347,619 356,000 349,610 365,902 425,415
Working capital...... 479,788 498,845 514,228 423,543 442,753
Total assets......... 1,152,706 1,152,071 1,159,735 1,260,979 1,358,900
Short-term debt...... 21,206 20,711 11,000 116,327 187,272
Long-term debt....... 267,609 240,923 203,742 169,264 207,496
Capitalized lease
obligations......... 12,268 11,487 10,708 9,177 8,514
Shareholders'
equity.............. 635,705 672,498 717,284 748,706 672,016
Book value per
share............... n/a n/a n/a n/a n/a
SELECTED OPERATING
DATA:
Number of stores at
end of period....... 227 225 221 216 250
Comparable store net
revenue increases
(decreases)......... 2.7% 4.7% 2.4% (2.3)% 2.3%
<CAPTION>
HISTORICAL PRO FORMA
------------------------- ---------------------------
FISCAL NINE
YEAR MONTHS
NINE MONTHS ENDED ENDED ENDED
------------------------- ------------- -----------
NOVEMBER 2, NOVEMBER 1, FEBRUARY 1, NOVEMBER 1,
1996(1) 1997(1) 1997(1)(2)(3) 1997(1)(3)
----------- ----------- ------------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
SELECTED STATEMENT OF
INCOME DATA:
Revenues............. $1,138,615 $1,342,918 $2,060,236 $1,388,317
Cost of goods sold... 774,294 907,654 1,400,146 938,014
Depreciation and
amortization........ 47,908 39,608 67,337 43,517
Income from
continuing
operations.......... 22,613 18,376 57,109 17,037
Income from
discontinued
operations(4)....... (3,567) (5,143) n/a n/a
Net income........... 19,046 13,233 n/a n/a
Income from
continuing
operations per
share............... n/a n/a .96 .29
Average number of
shares
outstanding......... n/a n/a 59,713,460 59,713,460
SELECTED BALANCE
SHEET DATA:
Accounts receivable,
net................. 312,450 325,954 n/a 338,491
Merchandise
inventories......... 528,589 527,687 n/a 547,158
Working capital...... 354,097 469,456 n/a 469,443
Total assets......... 1,524,065 1,435,997 n/a 1,524,087
Short-term debt...... 316,864 186,766 n/a 197,740
Long-term debt....... 345,452 231,841 n/a 231,841
Capitalized lease
obligations......... 8,683 11,312 n/a 11,312
Shareholders'
equity.............. 590,580 679,615 n/a 755,208
Book value per
share............... n/a n/a n/a 12.65
SELECTED OPERATING
DATA:
Number of stores at
end of period....... 253 225(5) 250 225(5)
Comparable store net
revenue increases
(decreases)......... 2.0% 1.7% 2.2% 1.3%
</TABLE>
- ---------------
All years include 52 weeks (364 days) except that the fiscal year ended February
3, 1996 includes 368 days and the fiscal year ended February 2, 1993 includes
371 days.
(1) The historical financial information includes financial information for
Belk-Simpson on an equity basis. The pro form financial information includes
the financial information of Belk-Simpson on a consolidated basis.
(2) In November 1996, Belk of Virginia, Inc. acquired a controlling interest in
various corporations that owned and operated 42 Leggett stores. The
historical financial information for the fiscal year ended February 1, 1997
includes only three months of financial information for the acquired Leggett
stores. The pro forma financial information for the fiscal year ended
February 1, 1997 includes a full fiscal year of financial information for
the Leggett stores.
(3) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock expected to be outstanding upon
consummation of the Reorganization, which includes the one share of New Belk
Class A Common Stock issued in connection with the formation of New Belk,
but excludes the 246,042 shares of New Belk Class A Common Stock which will
be acquired by Belk-Simpson in the Belk-Simpson Merger and the 285,375
shares of New Belk Class A Common Stock which will be acquired by
Belk-Lindsey Stores, Inc. in the Reorganization that will be cancelled upon
consummation of the Reorganization. See "Determination of Applicable
Exchange Ratios."
(4) Income from discontinued operations represents the operating results and
gain on the sale of BAC, Inc. ("BAC"), which owned and operated a mall in
Charlotte, North Carolina and the operating results of TAGS Stores, LLC
("TAGS"), which owned and operated outlet stores.
(5) Excludes 13 stores operated as TAGS Stores (as defined herein) closed in
December 1997.
12
<PAGE> 21
COMPARATIVE PER SHARE DATA
Certain historical earnings and book value per share data and certain pro
forma equivalent per share data, giving effect to the Reorganization for and as
of the periods therein presented, for each Belk Company are set forth in the
Prospectus Supplement for that Belk Company. The data set forth in each
Prospectus Supplement should be read in conjunction with the unaudited combined
pro forma financial statements of New Belk, including the notes thereto,
included elsewhere in this Proxy Statement/Prospectus and the financial
statements of the applicable Belk Company included in the Prospectus Supplement
for that Belk Company.
MARKETS AND MARKET PRICES
Each of the Belk Companies is privately held, and there is no established
market for any of the Belk Companies Common Stock. The number of holders of
record of the common stock of each Belk Company and the dividends paid by such
Belk Company during the fiscal year ended February 1, 1997 are specified in the
Prospectus Supplement for such Belk Company.
New Belk is privately held, and there is no established market for New Belk
Class A Common Stock. There is only one holder of record of New Belk Class A
Common Stock and only one share of New Belk Class A Common Stock issued and
outstanding. No dividends have been declared by New Belk on the New Belk Class A
Common Stock. Future payments of dividends by New Belk will depend upon New
Belk's results of operations, financial condition, cash requirements and other
factors deemed relevant by the Board of Directors. See "-- Dividend Policy."
DIVIDEND POLICY
Each Belk Company is expected to pay dividends for the fiscal year ended
January 31, 1998 in amounts consistent with dividends paid with respect to prior
fiscal years. The Reorganization Agreement permits the Belk Companies to pay
dividends in these amounts prior to the Effective Time with respect to fiscal
year 1998, subject to the requirement that each Belk Company retain cash
sufficient to meet normal working capital requirements and not pay dividends
with respect to fiscal year 1998 in an aggregate amount in excess of the amount
paid in dividends with respect to fiscal year 1997.
Subject to approval of its Board of Directors, New Belk expects to pay
annual dividends with respect to fiscal year 1999 in amounts which will
represent approximately 25% of New Belk's net income, excluding unusual or
infrequent items, for fiscal year 1999. The actual amount of dividends paid with
respect to fiscal year 1999 and each subsequent year will be determined at the
sole discretion of the New Belk Board based upon New Belk's results of
operations, financial condition, cash requirements and other factors deemed
relevant by the New Belk Board.
13
<PAGE> 22
RISK FACTORS
An investment in the New Belk Class A Common Stock offered hereby involves
certain risks. In addition to the other information in this Proxy
Statement/Prospectus and the applicable Prospectus Supplements, prospective
investors should carefully consider the following factors in evaluating New Belk
and its business before voting on the Reorganization Agreement and the Merger
for each Belk Company.
RISKS AND EFFECTS OF THE REORGANIZATION
Uncertainty of Participating Belk Companies at the Time of Voting. The
precise number of shares of New Belk Class A Common Stock received by each
Existing Belk Shareholder depends on the specific number and identity of the
Belk Companies participating in the Reorganization. The Belk Companies that will
participate in the Reorganization will not be determined until the conclusion of
the Special Meetings. New Belk's obligation to consummate the Reorganization is
conditioned on a number of factors, including the requirements that (i) no
Existing Belk Shareholder shall exercise his Applicable State Law Appraisal
Rights with respect to any of the Belk Companies and (ii) the Required
Shareholder Vote for each Belk Company is obtained. See "The
Reorganization -- Terms of the Reorganization Agreement." There can be no
assurance that Existing Belk Shareholders will not exercise their Applicable
State Law Appraisal Rights. Mr. John M. Belk and certain other persons who are
expected to serve as directors of New Belk have indicated that they intend to
vote in favor of the Mergers for all of the Belk Companies in which they own
common stock. If Mr. Belk and such other prospective directors of New Belk vote
in favor of the Mergers for all of such Belk Companies, and if the family
members, controlled corporations and family trusts of Mr. Belk and such other
prospective directors who also own common stock in such Belk Companies vote in
favor of the Mergers for all of such Belk Companies, the vote by such persons,
corporations and trusts in favor of the Mergers would be sufficient to approve
the Mergers for 102 of the 112 Belk Companies under their governing documents
and applicable state law. There can be no assurance that any of the Belk
Companies will approve the Reorganization Agreement and the Merger for such Belk
Company. Because the number and identity of the Belk Companies that will
participate in the Reorganization will not be known until the Special Meetings
have concluded, the resulting size, business and leverage, among other things,
of New Belk cannot be finally determined prior to the conclusion of the Special
Meetings. To the extent certain Belk Companies do not participate in the
Reorganization, and New Belk elects to waive the condition to consummation of
the Reorganization that all of the Mergers are consummated, the Existing Belk
Shareholders who do participate in the Reorganization will receive shares of New
Belk Class A Common Stock that may have an aggregate value that is less than the
value of the shares that such Existing Belk Shareholders would have received if
all of the Belk Companies had participated in the Reorganization. See "The
Reorganization -- Consequences of Non-Participation in the Reorganization."
Method of Determining Applicable Exchange Ratios; No Third Party
Appraisals. The Applicable Exchange Ratios were determined on the basis of the
Net Relative Values of the Belk Companies, which constitute for each Belk
Company with continuing operations the highest of five values determined by five
different valuation formulas, adjusted as described herein (the Applicable
Exchange Ratio for each Belk Company with discontinued operations was determined
by using the Adjusted Book Equity Valuation Formula). The Applicable Exchange
Ratios were not determined on the basis of a fair market valuation of any Belk
Company or its assets or business. In addition, there was no valuation of the
Belk Companies through negotiations with prospective purchasers. Willamette was
retained to evaluate only the reasonableness of the Valuation Process and the
fairness of the Valuation Process, from a financial point of view, to the
Existing Belk Shareholders. Accordingly, there can be no assurance that the
value of the New Belk Class A Common Stock to be received by the Existing Belk
Shareholders of a Belk Company will be representative of the actual value of the
assets or business of that Belk Company if the assets or business of that Belk
Company were determined by appraisal or if that Belk Company were to be sold. In
addition, because the Applicable Exchange Ratios were calculated based on the
financial statements of each of the Belk Companies for the fiscal year ended
February 1, 1997, they do not take into account the results of operation of any
Belk Company after such date. See "Determination of Applicable Exchange Ratios."
14
<PAGE> 23
Absence of Arms-Length Negotiations. The terms and conditions of the
Reorganization are not the result of arms-length negotiations between New Belk
and the Belk Companies. The terms and conditions of the Reorganization were
proposed by BSS and approved by the Boards of Directors of the Belk Companies.
No independent representative was retained to negotiate on behalf of any
individual Belk Company. If an independent representative had been retained, the
terms and conditions of the Reorganization may have been more favorable to some
or all of the Existing Belk Shareholders.
Conflicts of Interest. The Reorganization and the recommendation of the
Boards of Directors of the Belk Companies involve certain conflicts of interest.
In managing the affairs of the Belk Companies, each member of the Board of
Directors of a Belk Company is required to act in good faith and with an
undivided duty of loyalty to such Belk Company and its Existing Belk
Shareholders. Certain executive officers and directors of the Belk Companies
have conflicts of interest in recommending the Reorganization to the Existing
Belk Shareholders because they serve as members of the Boards of Directors of
multiple Belk Companies. These common directorships may affect the ability of
these executive officers and directors to independently assess whether the terms
of the Reorganization are fair to the Existing Belk Shareholders of each Belk
Company for which they serve as directors. In addition, certain of such
executive officers and directors, including John M. Belk, Thomas M. Belk, Jr.,
H.W. McKay Belk and John R. Belk, will serve as executive officers and directors
of New Belk. These conflicts of interest could result in decisions that do not
fully reflect the interests of each Existing Belk Shareholder in each Belk
Company. See "The Reorganization -- Interests of Certain Persons in the
Reorganization."
Qualifications to Fairness Opinion. Willamette has provided the Fairness
Opinion in which it addresses the reasonableness of the Valuation Process and
the fairness, from a financial point of view, of the Valuation Process to the
Existing Belk Shareholders. The Fairness Opinion, however, is specifically
limited in scope and contains a number of material qualifications and
assumptions. In rendering the Fairness Opinion, Willamette was not requested to,
and states that it did not, select the method of determining the Applicable
Exchange Ratio for any Merger, establish the value of any Belk Company, make any
recommendations to New Belk or any Belk Company with respect to whether to
approve or reject the Reorganization or express any opinion as to: (i) the
impact of the Reorganization on Existing Belk Shareholders who do not
participate in the Reorganization; (ii) the tax consequences of the
Reorganization for the Existing Belk Shareholders or New Belk Stockholders;
(iii) the capital structure of New Belk or its impact on the financial
performance of New Belk; (iv) the fairness of the Reorganization Expenses borne
by BSS; (v) whether or not alternative methods of determining the relative
amounts of New Belk Class A Common Stock to be issued also would have provided
fair results or results substantially similar to those of the allocation
methodology used; or (vi) the fairness or advisability of any alternatives to
the Reorganization. In rendering the Fairness Opinion, Willamette has relied,
without independent verification, on the accuracy and completeness of all
financial information provided to it by BSS or contained in financial statements
of the Belk Companies used by it for purposes of preparing the Fairness Opinion.
See "Determination of Applicable Exchange Ratios -- Fairness Opinion." These
qualifications to the Fairness Opinion may diminish its usefulness to the
Existing Belk Shareholders in determining whether to approve or reject the
Mergers related to the Belk Companies in which they own shares of common stock
because the Fairness Opinion does not address all factors and circumstances that
may be relevant in evaluating the fairness of such Mergers or the Reorganization
as a whole.
Single Belk Company May Outperform the Business of Belk Companies as a
Whole. The Reorganization will combine the businesses of all of the Belk
Companies into a single organization. An investment in an existing Belk Company,
over time, may outperform an investment in all of the Belk Companies combined in
the Reorganization. An Existing Belk Shareholder with an investment in any such
Belk Company who exchanges shares of Belk Companies Common Stock for New Belk
Class A Common Stock may receive a lower return on an investment in New Belk
than such Existing Belk Shareholder would have received from his investment in
the single Belk Company.
Larger Asset Pool Risks. Existing Belk Shareholders participating in the
Reorganization may own an interest in a combined company that will own or
operate assets or lines of business that were not formerly owned or operated by
the Belk Company in which they now have an interest. Consequently, such Existing
Belk Shareholders will be subject to the risks that are associated with those
assets and businesses and any future adverse developments with respect to those
assets and businesses.
15
<PAGE> 24
Expenses of the Reorganization. The Reorganization Expenses are estimated
to be approximately $4.75 million. BSS will pay all Reorganization Expenses
whether or not the Reorganization is consummated. See "The
Reorganization -- Reorganization Expenses."
Foregoing Potential Benefits of Alternatives to the Reorganization. The
only alternative to the Reorganization considered by the Belk Companies' Boards
of Directors was the continuation of the Belk Companies as separate business
entities. Such a strategy would not expose the Existing Belk Shareholders to the
risks associated with the Reorganization and would not offer the Existing Belk
Shareholders the potential benefits of the Reorganization. An alternative to the
Reorganization that was not considered by BSS and the Belk Companies' Boards of
Directors would be for each Belk Company to sell its assets, distribute the net
proceeds of such sale to the shareholders of that Belk Company and thereafter
dissolve. Such a sale would permit the Belk Companies to value each Belk
Company's assets through negotiations with prospective purchasers (in many cases
unrelated third parties), making it unnecessary to rely upon the Net Relative
Values of the Belk Companies to determine the Applicable Exchange Ratios. Such a
sale would result in substantial taxable income for all of the Existing Belk
Shareholders.
Potential Influence of Certain Stockholders. Following the Reorganization,
New Belk's executive officers, directors and 5% stockholders will beneficially
own an aggregate of approximately 68.2% of the outstanding shares of New Belk
Class A Common Stock. In particular, Mr. John M. Belk, Mrs. Sarah Belk Gambrell
and their immediate family members, family trusts and family controlled entities
will beneficially own approximately 46.2% of the outstanding shares of New Belk
Class A Common Stock. Mr. Belk will be the Chief Executive Officer and Chairman
of the New Belk Board. Therefore, New Belk's executive officers, directors and
5% stockholders, if they acted together, would be able to control the election
of directors and matters requiring the approval of New Belk Stockholders. This
concentration of ownership by certain New Belk Stockholders may also have the
effect of delaying or preventing a change in control of New Belk. See "Security
Ownership."
RISKS OF OWNERSHIP OF NEW BELK COMMON STOCK
Absence of Public Market for New Belk Common Stock. New Belk Common Stock
will be generally transferable, subject to certain transfer restrictions and
conversion requirements discussed herein. New Belk, however, has no present
intention to list the shares of New Belk Class A Common Stock issued in the
Reorganization, or any other shares of capital stock of New Belk, on any
national or regional exchange or to qualify such shares for trading on any
over-the-counter market. Consequently, New Belk Stockholders may not be able to
liquidate their New Belk Common Stock in the event of emergency or for any other
reason. See "Description of New Belk Capital Stock."
New Belk may decide in the future to list the shares of New Belk Class B
Common Stock issued upon conversion of shares of New Belk Class A Common Stock
or otherwise qualify New Belk Common Stock for trading on an established
securities market or to allow the creation of a secondary market (or the
substantial equivalent thereof) for New Belk Common Stock. Such determination
will be made by New Belk only if New Belk determines that such listing or
quotation would be in the best interests of New Belk and the New Belk
Stockholders. There can be no assurance that if New Belk attempts to list New
Belk Class A or Class B Common Stock, either class will be accepted for listing
on a national securities exchange or for quotation in a national automated
quotations system.
Although New Belk has no such intention at the present time, if New Belk
decides in the future to list the shares of New Belk Class B Common Stock issued
upon conversion of shares of New Belk Class A Common Stock or otherwise qualify
New Belk Class B Common Stock for trading, such a listing may impact the holders
of shares of New Belk Class A Common Stock. While the effects of such a listing
cannot be predicted by New Belk with precision, such a listing may (i) impact
the market price and/or liquidity of New Belk Class A Common Stock by allowing
third parties interested in purchasing shares of New Belk Common Stock to do so
through a liquid public market rather than purchasing shares from existing
holders of shares of New Belk Class A Common Stock and (ii) adversely affect the
voting power of shares of New Belk Class A Common Stock if a holder of shares of
New Belk Class B Common Stock were to accumulate enough shares
16
<PAGE> 25
to offset the fact that New Belk Class A Common Stock retains 10 votes for each
share as opposed to one vote for each share of New Belk Class B Common Stock.
Certain Conversion Requirements and Restrictions on Transfer of New Belk
Class A Common Stock. Shares of New Belk Class A Common Stock may only be owned
by Class A Permitted Holders. In addition, upon transfer of shares of New Belk
Class A Common Stock to any person who is not a Class A Permitted Holder such
shares will automatically convert into shares of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock held by a New Belk Stockholder who is a
Class A Permitted Holder will also automatically convert into New Belk Class B
Common Stock in the event such New Belk Stockholder no longer meets the
requirements of a Class A Permitted Holder. Subject to these conversion
requirements and other transfer restrictions, shares of New Belk Class A Common
Stock to be issued to the Existing Belk Shareholders in connection with the
Reorganization will be freely transferable under the Securities Act, except for
shares issued to any Existing Belk Shareholder who, at the time of the
Reorganization, may be deemed to be an "affiliate" of New Belk within the
meaning of Rule 145. In general, affiliates of New Belk include the executive
officers and directors and any other person or entity who controls, is
controlled by or is under common control with New Belk. Rule 145 imposes, among
other things, certain restrictions upon the resale of securities received by
affiliates in connection with certain reclassifications, mergers, consolidations
or asset transfers. These restrictions will consist of volume and manner of sale
restrictions on the resale of New Belk Class A Common Stock issued to such
persons or entities. Because of the transfer restrictions and conversion
requirements of the New Belk Class A Common Stock, the New Belk Class A Common
Stock may be considered less valuable than shares of Belk Companies Common Stock
and may not be as readily accepted by lenders as collateral for loans as shares
of Belk Companies Common Stock. New Belk may place legends on certificates
representing shares of New Belk Class A Common Stock to reflect the transfer
restrictions and conversion requirements with respect to such shares. See
"Description of New Belk Capital Stock."
Anti-Takeover Provisions. Certain provisions of the New Belk Certificate
and the New Belk Bylaws impose certain procedures and limitations applicable to
stockholders' meetings, proposal of business and nomination of directors that
could have the effect of making it more difficult for a third party to acquire,
or discouraging a third party from attempting to acquire, control of New Belk.
Such provisions may limit the price that certain investors may be willing to pay
in the future for shares of New Belk Class A Common Stock. These provisions may
also reduce the likelihood of an acquisition of New Belk. Further, the New Belk
Certificate classifies the New Belk Board into three classes. After an initial
term of office, directors of New Belk will be elected for staggered three-year
terms. The staggered terms for directors may affect New Belk Stockholders'
ability to change control of New Belk even if a change in control were in the
New Belk Stockholders' interest. In addition, under the New Belk Certificate,
New Belk has the authority to fix the rights and preferences of, and issue
shares of, Preferred Stock (as defined herein) without further action of the New
Belk Stockholders. Therefore, Preferred Stock could be issued, without
stockholder approval, that could have voting, liquidation and dividend rights
superior to that of existing stockholders. The issuance of Preferred Stock could
adversely affect the voting power of holders of New Belk Common Stock and the
likelihood that such holders would receive dividend payments and payments on
liquidation, and could have the effect of delaying, deferring or preventing a
change in control of New Belk. New Belk has no present plan to issue any shares
of Preferred Stock. See "Description of New Belk Capital Stock."
RISKS OF OPERATIONS
Absence of Combined Operating History. New Belk was organized in November
1997 and has conducted no operations to date. Except for certain services
provided by BSS, the Belk Companies have been operating independently, and New
Belk may not be able to successfully integrate these businesses and their
operations, employees and management. New Belk's management structure is still
in its formative stages, and there can be no assurance that New Belk management
will be able to oversee the combined entity and implement effectively New Belk's
business strategies. See "Business of New Belk" and "Management."
Competition. The retail department store industry is highly competitive.
New Belk will have, as the Belk Companies separately now have, several
competitors on a national and regional level, as well as numerous
17
<PAGE> 26
competitors on a local level. Many factors enter into competition for a
consumer's patronage, including price, quality, style, service, product mix,
convenience and credit availability. New Belk will compete with a number of
national companies that have longer operating histories, larger customer bases,
substantially greater financial, management, technical, sales, marketing and
other resources than New Belk. Consequently, there can be no assurance that New
Belk will be able to continue to be competitive in its markets or that it will
be able to competitively enter new markets. Failure by New Belk to maintain its
competitiveness would have a material adverse effect on New Belk's business,
results of operations and financial condition. See "Business of New
Belk -- Industry and Competition."
Seasonality of Retail Industry. The Belk Companies experience, and New
Belk will experience after consummation of the Reorganization, seasonal
fluctuations in retail sales and net income, with a disproportionate amount of
the Belk Companies' combined net income typically realized during the fourth
quarter. Retail sales and net income are generally weakest during the first
quarter. New Belk's quarterly results of operations may also fluctuate
significantly as a result of a variety of other factors, including the timing of
new store openings, the net sales contributed by new stores, merchandise mix and
the timing and level of markdowns. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations of the Belk
Companies -- Seasonality and Quarterly Fluctuations."
Environmental Matters. Many of the Belk Companies own or lease real
estate. Under various federal, state and local laws, an owner or operator of
real estate may become liable for the costs of removal or remediation of certain
hazardous substances released on or in its property. Such laws may impose
liability without regard to whether the owner or operator knew of, or was
responsible for, the release of such hazardous substances. The presence of such
substances, or the failure properly to remediate such substances, may adversely
affect the owner's or operator's ability to sell the real estate or to borrow
using the real estate as collateral. In addition to clean-up actions brought by
federal, state and local agencies, the presence of hazardous wastes or materials
on or in a property could result in personal injury or claims for property
damage by private parties. None of the Belk Companies has been notified by any
governmental authority of any liability for fines or other penalties for current
violations of any environmental laws in connection with any of the properties
owned or operated by the Belk Companies. Neither New Belk nor any of the Belk
Companies is aware of any environmental condition with respect to any of the
real estate owned or operated by the Belk Companies that is expected to be
material to the financial condition or results of operations of New Belk after
consummation of the Reorganization.
MISCELLANEOUS RISKS
Dependence on Key Personnel. New Belk is dependent on the efforts of its
executive officers and other key members of senior management. The loss of the
services of one or more of these individuals could have an adverse effect on New
Belk's business, results of operations and financial conditions. See
"Management."
Potential Litigation Related to the Reorganization. Within the last five
years, a number of retail and non-retail businesses have undergone various forms
of structural reorganizations. Certain of such reorganizations have resulted in
lawsuits against the board of directors of the entities and persons that
participated in the structuring of, or derived benefits from, such
reorganizations, as well as claims against the surviving entity and its
directors and officers. If any lawsuits were filed in connection with the
Reorganization, such lawsuits could delay the consummation of the Reorganization
and result in substantial damage claims against the Belk Companies and their
directors and officers. If the Reorganization is consummated, New Belk, as the
surviving corporation in the Reorganization, will become liable for any such
claims against the Belk Companies and may also become liable with respect to
indemnification obligations of the Belk Companies to their directors and
officers.
Contingent or Undisclosed Liabilities. Upon the consummation of the
Reorganization, New Belk will operate the businesses of the Belk Companies and
own the assets of the Belk Companies and will be liable for the indebtedness and
other liabilities of the Belk Companies. The existing indebtedness and other
liabilities of the Belk Companies have been taken into account (directly or
indirectly) in connection with the determination of the Applicable Exchange
Ratios. All liabilities of each Belk Company (known, unknown and
18
<PAGE> 27
contingent) will become the obligations of New Belk in the Reorganization.
Furthermore, New Belk will have no recourse against the Belk Companies, the
Existing Belk Shareholders or any other person with respect to any undisclosed
liabilities. Undisclosed liabilities might include liabilities for cleanup or
remediation of undisclosed environmental conditions, claims of persons dealing
with the entities prior to the Reorganization (that had not been asserted prior
to the Reorganization), accrued but unpaid liabilities incurred in the ordinary
course of business and claims for indemnification of directors and officers of
the Belk Companies.
Lack of Third Party Consents. The Belk Companies intend to seek the
consents of third parties in connection with the Reorganization to the extent
required by applicable contracts with such third parties. While obtaining such
consents is a condition to the consummation of the Reorganization, it is
possible that New Belk may waive this condition and proceed to close the
Reorganization if consents of one or more of such third parties are not
obtained. To the extent consents are not received from third parties, such third
parties may elect to exercise remedies against New Belk which could expose New
Belk to substantial damages and expenses. See "The Reorganization -- Terms of
the Reorganization Agreement -- Conditions to Consummation of the
Reorganization."
GENERAL INFORMATION
This Proxy Statement/Prospectus and a Prospectus Supplement for each Belk
Company in which an Existing Belk Shareholder owns shares are being furnished to
the Existing Belk Shareholders in connection with the solicitation of proxies by
the Board of Directors of each Belk Company for approval of the Reorganization
Agreement and the Merger of each Belk Company (other than Belk-Simpson) with and
into New Belk and the Merger of New Belk Sub with and into Belk-Simpson.
This Proxy Statement/Prospectus and the Prospectus Supplement for each Belk
Company also constitute the prospectus of New Belk with respect to the shares of
New Belk Class A Common Stock to be issued in the Reorganization. Information in
this Proxy Statement/Prospectus and each Prospectus Supplement with respect to
the Belk Companies has been supplied by the Belk Companies and BSS. The
information with respect to New Belk has been supplied by BSS.
SPECIAL MEETINGS
TIME, DATE, PLACE AND PURPOSE; RECORD DATE AND SHARES ENTITLED TO VOTE
This Proxy Statement/Prospectus and the Prospectus Supplements are being
furnished in connection with the solicitation by the Boards of Directors of the
Belk Companies of proxies to be voted at the Special Meetings of the
shareholders of the Belk Companies to be held at the offices of BSS, 2801 West
Tyvola Road, Charlotte, North Carolina 28217 on the dates and at the times set
forth in the Prospectus Supplement for each Belk Company. Only holders of record
of shares of Belk Companies Common Stock at the close of business on the Record
Date are entitled to notice of and to vote at the Special Meeting for that Belk
Company and any adjournment thereof. As of the Record Date, each Belk Company
had the number of shares issued and outstanding and the number of holders of
record specified in the Prospectus Supplement for that Belk Company.
At the Special Meetings, each Belk Company's shareholders will be asked to
consider and vote upon a proposal to approve the Reorganization Agreement and
the Merger of such Belk Company (other than Belk-Simpson) with and into New Belk
and the Merger of New Belk Sub with and into Belk-Simpson. Upon consummation of
the Reorganization, each outstanding share of Belk Companies Common Stock (other
than treasury shares and shares of Belk Companies Common Stock owned by Existing
Belk Shareholders who perfect their Applicable State Law Appraisal Rights and
other than shares in Belk Companies held by other Belk Companies which, with
certain exceptions described herein, will be canceled at the Effective Time)
will be converted into the right to receive that number of shares of New Belk
Class A Common Stock determined on the basis of the Applicable Exchange Ratio
for each Belk Company. See "Determination of Applicable Exchange Ratios." All of
the shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share.
19
<PAGE> 28
No fractional shares will be issued. A copy of the Reorganization Agreement
executed by all of the Belk Companies, New Belk Sub and New Belk is attached
hereto as Annex B and is incorporated herein by this reference. Each Existing
Belk Shareholder who wishes to vote at the Special Meeting for its Belk Company
must either execute and return a proxy in accordance with the procedures set
forth herein and in the accompanying proxy or attend the Special Meeting in
person.
VOTE REQUIRED; SECURITY OWNERSHIP OF MANAGEMENT
The Applicable State Corporate Law and the articles or certificate of
incorporation and bylaws of each Belk Company govern the vote required in order
to approve the Reorganization Agreement and the Merger of that Belk Company. The
Required Shareholder Vote to approve the Reorganization Agreement and Merger
relating to each Belk Company is specified in Annex A. A failure to vote or an
abstention will have the same effect as a negative vote. Holders of record of
Belk Companies Common Stock on the Record Date are entitled to one vote per
share on any matter that may properly come before the Special Meeting of the
applicable Belk Company. As of the Record Date, Mr. John M. Belk and certain
other persons who are expected to serve as directors of New Belk have indicated
that they intend to vote in favor of the Mergers for all of the Belk Companies
in which they own common stock. If Mr. Belk and the other prospective directors
of New Belk vote in favor of the Mergers for all of such Belk Companies, and if
the family members, controlled corporations and family trusts of Mr. Belk and
such other prospective directors who also own common stock in such Belk
Companies vote in favor of the Mergers for all of such Belk Companies, the vote
by such persons, corporations and trusts in favor of the Mergers would be
sufficient to approve the Mergers for 102 of the 112 Belk Companies under their
governing documents and applicable state law. These family members, controlled
corporations and family trusts have voted in the past in a manner consistent
with the member of their family who will serve as a director of New Belk.
SOLICITATION AND REVOCATION OF PROXIES
A form of proxy for each Belk Company's Special Meeting is enclosed with
the Prospectus Supplement being sent to such Belk Company's Existing Belk
Shareholders. Each Existing Belk Shareholder should complete and properly
execute a proxy for EACH Belk Company in which such Existing Belk Shareholder
owns shares of Belk Companies Common Stock. All shares of Belk Companies Common
Stock held of record as of the Record Date represented by properly executed
proxies will, unless such proxies have been previously revoked, be voted in
accordance with the instructions indicated on such proxies. If no instructions
are indicated, such shares will be voted FOR approval of the Reorganization
Agreement and the Merger for the applicable Belk Company and in the discretion
of the proxy holders as to any other matter which may properly come before the
Special Meeting for such Belk Company.
Abstentions will be counted as present for purposes of determining whether
a quorum is present. If a broker or nominee indicates on its proxy that it does
not have discretionary authority to vote on a particular matter as to certain
shares, those shares will be counted as present for purposes of a quorum, but
will not be considered as present and entitled to vote with respect to such
matter.
None of the Boards of Directors of the Belk Companies is aware of any other
matters which may be presented for action at the Special Meeting for any of the
Belk Companies, but if other matters do come properly before any of the Special
Meetings, it is intended that shares represented by proxies in the accompanying
forms will be voted by the persons named in the proxy in accordance with their
best judgment. Any proxy given pursuant to this solicitation may be revoked in
writing by the person giving it at any time before the proxy is exercised by
giving notice to the Secretary of the applicable Belk Company or by submitting a
proxy having a later date or by such person appearing at the Special Meeting for
the applicable Belk Company and electing to vote in person. Attendance at the
Special Meeting of the applicable Belk Company will not in and of itself
constitute the revocation of a proxy.
The cost of soliciting such proxies will be borne by BSS. Proxies may be
solicited by personal interview, mail and telephone. BSS may reimburse certain
persons representing Existing Belk Shareholders for their expenses in forwarding
solicitation materials to Existing Belk Shareholders. Proxies may also be
solicited by certain executive officers, directors and regular employees of BSS,
without additional compensation, personally or by telephone or facsimile
transmission.
20
<PAGE> 29
THE REORGANIZATION
HISTORY OF THE BELK STORES
The Belk department store organization was founded on May 29, 1888, when
William Henry Belk opened a department store in Monroe, North Carolina, called
"New York Racquet." After forming a partnership with his brother John Montgomery
Belk in 1891, William Henry Belk set in motion a blueprint for the development
of a department store business that would eventually result in more than 400
stores in eighteen states in the southeastern United States and Puerto Rico.
Following this blueprint, the Belk brothers expanded their business by
"partnering" with other local merchant families such as the Harry, Matthews,
Hudson, Simpson, Parks and Leggett families.
The department stores organized through these partnerships were owned and
managed by separate corporations in most cases with members of the Belk family
as majority shareholders and the local "partner" families as minority
shareholders and operators. Over time, this practice gave rise to more than 300
separately owned corporations which owned and managed the Belk store businesses.
Over the last 100 years, the ownership of the Belk store businesses has been
consolidated and the number of Belk store corporations has been reduced. Today,
the Belk Companies and the Surviving Belk Subsidiaries operate 223 Belk stores.
BSS provides administrative, merchandising and organizational services to the
Belk Companies.
In addition to their separate ownership, the Belk Companies are also
characterized by pervasive cross ownership among the Belk Companies. In response
to the desire of various shareholders to sell their interests in certain Belk
Companies in the early 1980's, a number of the Belk Companies began purchasing
the stock of such shareholders in other Belk Companies. As a result, 57 of the
112 Belk Companies own stock in one or more of the other Belk Companies.
BACKGROUND OF THE REORGANIZATION
In February 1997, management of BSS initiated a study to determine whether
the decentralized legal structure of the Belk department store organization with
layers of direct and indirect ownership was the most viable structure for an
organization that competes with major national department store chains
structured in a more conventional manner. In April 1997, after interviewing
several nationally prominent investment banking firms, the Board of Directors of
BSS retained Goldman, Sachs & Co. ("Goldman Sachs") as financial advisor to
render advice to BSS in analyzing and considering whether the Belk Companies
should be reorganized into one or more operating entities and, if the
reorganization of the Belk Companies was determined by management of BSS to be
feasible, to render advice to BSS in determining the appropriate organizational
and capital structure of the resulting entity or entities, including advice
related to the financial methods for valuing the Belk Companies (but not with
respect to the fairness of the valuation of any specific Belk Company). BSS also
retained King & Spalding to render legal advice and KPMG Peat Marwick LLP to
perform audit services.
Following the retention of its advisors, senior management of BSS initially
considered whether a consolidated legal structure for the organization was
appropriate and feasible, and management participated in numerous meetings and
discussions with its advisors over the course of the next six months to explore
the various issues involved. The primary focus of such meetings was the
consideration of the potential benefits and risks of merging the Belk Companies
into a single operating entity, the development of an appropriate methodology to
allocate ownership in such an entity and the review of the legal and accounting
consequences of a reorganization. Over a period of several months, management of
BSS concluded that a reorganization of the Belk Companies was in the best
interests of the companies and their shareholders, and the working group
developed a proposed legal structure and valuation methodology to allocate
ownership of New Belk Common Stock among the Existing Belk Shareholders.
Willamette advised BSS on the reasonableness and fairness of the Valuation
Process. KPMG Peat Marwick LLP advised BSS on the accounting and auditing
requirements of a reorganization and commenced field work for an audit of the
combined financial statements of the Belk Companies and individual audits of
certain of the companies. Steps were also undertaken to prepare for the
potential registration of the shares of the combined entity.
21
<PAGE> 30
Prior to formally proposing the Reorganization, representatives of BSS met
individually with certain directors of the Belk Companies to explain the
allocation methodology and to solicit the views of such directors on the wisdom
of a reorganization and the fairness of the suggested allocation of ownership in
the resulting entity. After taking into account all such input, the management
of BSS decided to recommend the Reorganization to the Boards of Directors of
each Belk Company. A combined informational meeting of the Boards of Directors
of the Belk Companies was held on November 24, 1997, at which detailed
presentations and question and answer sessions were conducted by representatives
of BSS, Goldman Sachs and King & Spalding.
After conducting their own review, the Boards of Directors of each Belk
Company voted at separate board meetings held on November 25, 1997 to approve
the Reorganization and to recommend the Reorganization to their Existing Belk
Shareholders. On March 12, 1998, the Reorganization Agreement was amended to
revise certain provisions of the New Belk Certificate and to recalculate the
Applicable Exchange Ratios after taking into account the consummation of the
Belk-Simpson Reorganization. The Boards of Directors of each Belk Company
approved the amendment to the Reorganization Agreement on March 12, 1998.
PROFESSIONAL ADVISORS
Financial Advisor. Prior to being retained as financial advisor, Goldman
Sachs and its affiliates had no pre-existing relationship with BSS or any of the
Belk Companies. For its services as financial advisor, Goldman Sachs has been
paid a quarterly advisory fee of $250,000, commencing April 1, 1997 and will
continue to be paid such quarterly fee for the balance of its engagement, which
is anticipated to continue through the consummation of the Reorganization. In
addition, Goldman Sachs will be entitled to reimbursement of its reasonable
expenses and disbursements in connection with its engagement, subject to certain
limitations. Goldman Sachs is not evaluating the fairness of the relative
valuation of any Belk Company or the reasonableness of the Valuation Process and
will not participate in the solicitation of proxies from Existing Belk
Shareholders and will not receive any compensation related to the solicitation
of proxies from Existing Belk Shareholders. Any reference to "financial advisor"
in this Proxy Statement/Prospectus shall be deemed a reference to Goldman Sachs,
acting as financial advisor to BSS.
Fairness Analysis. Willamette was retained to evaluate the reasonableness
and the fairness of the Valuation Process for the Reorganization. See
"Determination of Applicable Exchange Ratios -- Fairness Opinion." Willamette
was retained because of its experience in the valuation of retail businesses.
Since its founding in 1969, Willamette has provided information, research,
investment, banking and consulting services to clients throughout the United
States, including over 50 companies engaged in the retail business.
For rendering such services and delivering the Fairness Opinion, Willamette
has been paid a fee of $150,000. In addition, Willamette will be entitled to
reimbursement of its reasonable expenses and disbursements in connection with
its engagement, subject to certain limitations. Payment of the fee to Willamette
was not dependent upon consummation of the Reorganization or the opinion
expressed in the Fairness Opinion.
Legal Counsel. King & Spalding, Atlanta, Georgia, was retained by BSS to
represent it in connection with certain corporate, securities and tax matters
involved in the Reorganization. King & Spalding will render an opinion on the
legal validity of the New Belk Common Stock to be issued in the Reorganization.
See "Legal Opinions."
Accountants. KPMG Peat Marwick LLP, an independent public accounting firm,
was retained by BSS to audit certain financial information and to provide its
reports thereon in connection with the Reorganization. See "Experts."
SURVIVING BELK SUBSIDIARIES
The Surviving Belk Subsidiaries are listed on Annex A to this Proxy
Statement/Prospectus. Upon consummation of the Reorganization, New Belk will own
100% of the capital stock of the Surviving Belk Subsidiaries. Immediately
following the Reorganization, New Belk intends to merge all of the Surviving
Belk Subsidiaries with and into New Belk, with the exception of Archdale
Advertising Agency, Inc., Belk Leasing Company, BSS, UES, Belk Stores Mutual
Insurance Company, Belk Center, Belk International, TAGS Stores, LLC and Belk
Funding, LLC, which will remain subsidiaries of New Belk.
22
<PAGE> 31
NON-BELK STORES
All of the companies that operate Belk retail department stores are
involved in the Reorganization. Certain companies that are or have been
affiliated with the Belk department store business, but do not operate Belk
retail department stores, will not be involved in the Reorganization. These
companies include (i) Kitchin's of Alabama, Inc., Kitchin's of Enterprise, Ala.,
Inc., Kitchin's of Troy, Alabama, Inc. and Kitchin's of Starkville, Mississippi,
Inc. (collectively, "Kitchin's"), (ii) Hudson's Department Store, Incorporated
("Hudson's") and (iii) Howard's Department Store of Columbia, S.C., Inc.
("Howard's").
Kitchin's and Hudson's. Kitchin's and Hudson's consist of five companies
that operate four stores under local names in Alabama and Mississippi that are
members of BSS. It is anticipated that these stores will continue to receive
services from BSS.
Howard's. Howard's formerly operated one store under a local name in
Cayce, South Carolina that is a member of BSS. As of February 2, 1998, Howard's
has transferred ownership of such department store to Belk's Department Store of
Columbia, South Carolina, Incorporated and has withdrawn from BSS. New Belk
intends to continue to operate such department store following consummation of
the Reorganization.
RECOMMENDATION OF BOARDS OF DIRECTORS
THE BOARD OF DIRECTORS OF EACH BELK COMPANY HAS DETERMINED THAT THE MERGER
OF SUCH BELK COMPANY PURSUANT TO THE REORGANIZATION AGREEMENT IS IN THE BEST
INTERESTS OF SUCH BELK COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER OF SUCH BELK COMPANY PURSUANT TO THE
REORGANIZATION AGREEMENT AND RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND SUCH MERGER PURSUANT TO THE
REORGANIZATION AGREEMENT.
REASONS FOR THE REORGANIZATION
The Boards of Directors of the Belk Companies, based on certain factors
listed below, have concluded that the Merger relating to each Belk Company, and
the Reorganization as a whole, is fair to and in the best interests of each Belk
Company and the Existing Belk Shareholders, approved the Reorganization
Agreement and resolved to recommend that the Existing Belk Shareholders approve
the Reorganization Agreement. The following is a discussion of the primary
benefits that the Boards of Directors of the Belk Companies believe will result
from the Reorganization for the Existing Belk Shareholders.
Enhanced Competitiveness. The retail department store industry is highly
competitive and, in the judgment of management, competition in the industry is
likely to increase. Management believes that the companies in the retail
department store industry that will be successful in this increasingly
competitive environment will be larger companies that have an efficient legal
structure, modern and attractive stores in key markets, effective inventory
management, merchandise that appeals to their best customers, sophisticated
management information systems, operating efficiencies and access to significant
sources of capital. Management believes that the Reorganization will create a
new Belk store organization that will be larger, stronger and more effective in
competing against larger companies in the industry.
Operational Integration. The Reorganization will combine all of the
operations of the Belk Companies into a fully integrated retail department store
business which owns 223 retail department stores in 13 states in the
southeastern United States. This combination of the Belk department store
businesses will have two primary effects:
Single Business to Pursue Objectives. As separate legal entities with
different groups of shareholders, each of the Belk Companies must segregate
its assets and liabilities from the assets and liabilities of other Belk
Companies, conduct operations independently, maintain separate books and
records and prepare separate financial statements, tax returns and
shareholder information. Although it has been possible through BSS to
coordinate, in part, the separate businesses of the Belk Companies, all of
such
23
<PAGE> 32
coordination efforts must be subject to the general principle that the
assets of one Belk Company cannot be employed for the benefit of the other
Belk Companies as they could if all of the Belk Companies were combined
into a single enterprise. Due to the separate legal existence of the Belk
Companies, with their different groups of shareholders, the directors and
officers of the Belk Companies must always be mindful that the Belk
Companies are separate corporations, and treat them separately, even if
other courses of action would benefit most, if not all, of the Belk
Companies. Potential and actual conflicts of interest frequently arise in
the allocation of management and financial resources and in other areas of
managing the Belk Companies. The Reorganization will place all of the
assets of the Belk Companies, including BSS, under common ownership and
will allow such assets to be used to achieve a common set of objectives.
Through the Reorganization, New Belk intends to pursue opportunities that
cannot be fully pursued by the Belk Companies acting on their own,
including the opportunities to make new investments and to obtain improved
financing. For example, while certain of the Belk Companies are currently
participating in a receivables securitization program, after consummation
of the Reorganization, New Belk intends to implement such a program on a
company-wide basis. Other than the securitization of receivables, however,
management of New Belk has not formulated plans to pursue other specific
opportunities or investments.
Simplified Administration. Each year the Belk Companies must prepare
112 separate sets of annual financial statements, tax returns and
shareholder communications, together with other quarterly tax filings and
periodic reports to shareholders. In addition, the maintenance of 112
separate corporations involves the preparation of separate minutes for
Board of Directors meetings, passing of separate resolutions for the Board
of Directors of each Belk Company and separate shareholder meetings. The
preparation of this material involves substantial management time and
effort. Management believes that the Reorganization will eliminate much of
the duplication in reporting, filing and other administrative services,
thus simplifying the administration of New Belk, which should enable
management of New Belk to expend less effort on administrative tasks and
more time on strategic and operational business issues. Moreover, the
Reorganization will eliminate the risk of misallocating expenses benefiting
one or more but not all of the Belk Companies, and will simplify the
preparation of financial statements, tax returns, shareholder information
and reports and filings.
Enhanced Access to Capital. With a larger base of assets and a greater
equity value, New Belk should be able to obtain additional capital with greater
ease and on more attractive terms than would be available to most of the Belk
Companies individually. New Belk should have more sources of capital available
than the Belk Companies individually through access to equity and debt markets
as well as from more traditional sources of financing. New Belk's structure and
capitalization should make it more attractive to investment banking firms,
financial institutions, institutional lenders and others interested in investing
large amounts of capital in the Belk store organization. This enhanced access to
capital will reduce the risks faced by individual Belk Companies associated with
refinancing existing debt at maturity and eliminate the need for one Belk
Company to obtain equity capital, loans or loan guarantees from other Belk
Companies.
Growth Potential. New Belk's combined structure and capitalization will
allow the Existing Belk Shareholders an opportunity to participate in the growth
of the retail department store industry through an ownership interest in a
single business enterprise. Total annual sales in the retail department store
industry now exceed $60 billion, and management believes that the industry
offers significant growth opportunities for expansion of the Belk retail
department store business. Department stores in general are experiencing a
demographic expansion of their key customer base as the baby-boomer generation
enters its 40's and 50's. Department stores are also consolidating their
position as a preferred distribution channel for high-profile brands, allowing
them to win greater market share from specialty retailers. In addition, the
southeastern United States, where New Belk's stores will be concentrated, is a
region of high growth and relatively low unemployment. Operational integration
and enhanced access to capital should also contribute to New Belk's ability to
strengthen the Belk Companies' market position in the southeastern United States
and allow New Belk to take advantage of the significant growth opportunities
represented by promising industry and regional conditions.
24
<PAGE> 33
Potential Liquidity. New Belk has no present intention to list the shares
of New Belk Class A Common Stock issued in the Reorganization, or any other
capital stock of New Belk, on any national or regional exchange or to qualify
shares of New Belk Class A Common Stock for trading on any over-the-counter
market. Nevertheless, the New Belk Class A Common Stock issued in the
Reorganization and the New Belk Class B Common Stock issued upon conversion of
New Belk Class A Common Stock will generally be transferable, subject to the
transfer restrictions and conversion requirements described herein, and the
creation of a single business enterprise with a substantial number of
shareholders should make it more likely that a more active trading market for
shares of New Belk Class A Common Stock and New Belk Class B Common Stock issued
upon conversion of New Belk Class A Common Stock will develop than now exists
for the Belk Companies Common Stock. See "Risk Factors -- Risks of Ownership of
New Belk Class A Common Stock -- Certain Conversion Requirements and
Restrictions on Transfer of New Belk Class A Common Stock." Such a trading
market should increase the liquidity of New Belk Class A Common Stock and New
Belk Class B Common Stock issued upon conversion of New Belk Class A Common
Stock as compared to the Existing Belk Shareholders' investment in the Belk
Companies.
Asset and Risk Diversification. By combining the Belk Companies into a
single enterprise, the Reorganization will create a single operating entity
substantially larger and more diversified than any of the individual Belk
Companies. The combination of the businesses of the Belk Companies will
diversify the investment risks and rewards of the Existing Belk Shareholders
over a broader group of operations and businesses and will reduce the dependence
of the Existing Belk Shareholders on the performance of, and the exposure to the
risks associated with, their individual Belk Company. See "Risk Factors -- Risks
and Effects of the Reorganization."
Expense and Tax Savings. Upon consummation of the Reorganization,
management of BSS estimates that New Belk will realize considerable savings
resulting from, among other things, (i) a reduction in finance costs due to
reduced banking fees and interest expense, consolidation of credit lines and the
ability to complete more efficient financing transactions for the Belk Companies
as a whole, such as securitization of receivables, (ii) more efficient cash
management and (iii) tax savings from the use of previously unused operating
losses and other tax benefits. Management estimates that such savings could
amount to as much as $8 to $10 million in the first year following the
Reorganization and $3 to $5 million on an annual basis thereafter. Management
cannot determine with certainty, however, whether, when and to what extent such
savings will actually be realized by New Belk.
In addition to the above factors, the Boards of Directors of the Belk
Companies considered the following factors in approving the Reorganization
Agreement and in making their recommendation that the Existing Belk Shareholders
approve the Reorganization Agreement and the Mergers:
(i) the judgment, advice and analysis of its management with respect
to the potential strategic, financial and operational benefits of the
Reorganization;
(ii) current industry, economic and market conditions;
(iii) the advice of, and financial analysis prepared by, management of
BSS;
(iv) the information concerning the financial condition, results of
operations and cash flows and businesses of the Belk Companies and New
Belk;
(v) the terms and conditions of the Reorganization Agreement,
including the requirement for shareholder approval of each Merger;
(vi) the expectation that each Merger (other than the Belk-Simpson
Merger) would be treated as a tax-free reorganization under Section 368(a)
of the Code and that the Belk-Simpson Merger would be treated as a tax-free
transaction under Section 351(a) of the Code;
(vii) the Boards of Directors' evaluation of the potential long-term
value of shares of New Belk Common Stock;
25
<PAGE> 34
(viii) the synergies, cost savings and operational efficiencies that
may become available to the combined enterprise as a result of the
Reorganization;
(ix) the potential strategic benefits of the Reorganization in light
of the increasingly competitive environment in the retail department store
industry, the strategic options available to New Belk and the impact on the
Belk Companies of further consolidation in the industry; and
(x) the ability to obtain required consents and regulatory approvals
to consummate the Reorganization.
There can be no assurance that any of the expected benefits of the
Reorganization, including those considered by the Boards of Directors of the
Belk Companies, will be realized.
The foregoing discussion of the factors and information considered by the
Boards of Directors of the Belk Companies is not intended to be exhaustive. In
view of the variety of factors considered in connection with the evaluation of
the Reorganization and of each Merger, the Boards of Directors of the Belk
Companies did not find it practical to and did not quantify or otherwise assign
relative weights to the specific factors considered in reaching their
determination. In addition, individual members of the Boards of Directors of the
Belk Companies may have given different weights to different factors.
CONSEQUENCES OF NON-PARTICIPATION IN THE REORGANIZATION
If the Existing Belk Shareholders in any of the Belk Companies do not
approve the Reorganization Agreement and the Merger of such Belk Company by the
Required Shareholder Vote, New Belk may elect not to consummate the
Reorganization. See "-- Terms of the Reorganization Agreement." If New Belk
elects to waive the condition to consummation of the Reorganization that all of
the Belk Companies' approve the Reorganization Agreement and the Mergers by the
Required Shareholder Vote and elects to consummate the Reorganization with the
participation of less than all of the Belk Companies, any Belk Company that does
not participate in the Reorganization (a "Non-Participating Belk Company") may
be subject to the following risks:
Risk of Operation as a Stand Alone Company. A Non-Participating Belk
Company will be subject to the risks of operating as a stand alone company. BSS
currently provides administrative, purchasing, merchandising, advertising and
other services to the Belk Companies and their subsidiaries. There is no
assurance that New Belk, as the controlling shareholder of BSS after
consummation of the Reorganization, will elect to cause BSS, to the extent it is
not contractually obligated to provide services, to continue to provide these
services to a Non-Participating Belk Company or that it will continue to provide
such services at prices equal to those which any such Non-Participating Belk
Company may presently pay. Such services, if provided, may also be different in
scope and character than the services currently provided by BSS.
Financing Difficulties. New Belk will be significantly larger in size than
any of the individual Belk Companies, and management of New Belk expects that it
will have increased access to capital on more attractive terms than are
presently available to the individual Belk Companies. One of the primary sources
of financing for the individual Belk Companies has been other Belk Companies.
Additionally, many of the Belk Companies have served as guarantors for bank
borrowings of other Belk Companies. It is not expected that loans, loan
guarantees or equity capital will be available to any Non-Participating Belk
Company from New Belk. Therefore, a Non-Participating Belk Company may be forced
to borrow funds or obtain equity capital from different sources and on less
favorable terms than such Non-Participating Belk Company was able to obtain
prior to the Reorganization.
TERMS OF THE REORGANIZATION AGREEMENT
General. The Reorganization Agreement provides that, following the
approval of the Reorganization Agreement by the Existing Belk Shareholders of
each Belk Company and the satisfaction or waiver of the other conditions to the
Merger of such Belk Company, at the Effective Time, each Belk Company (other
than Belk-Simpson) will be merged with and into New Belk in accordance with the
provisions of Applicable State Corporate Law. New Belk will be the surviving
corporation in the Reorganization. As a result of the
26
<PAGE> 35
Reorganization, (i) the separate corporate existence of each Belk Company (other
than Belk-Simpson) will cease, (ii) Belk-Simpson will survive its Merger with
New Belk Sub as a wholly-owned subsidiary of New Belk and (iii) the Surviving
Belk Subsidiaries will survive the Reorganization as wholly-owned subsidiaries
of New Belk.
Conversion of Shares. The Reorganization Agreement provides that each
share of Belk Companies Common Stock issued and outstanding immediately before
the Effective Time (other than treasury shares and shares of Belk Companies
Common Stock held by Existing Belk Shareholders who perfect their Applicable
State Law Appraisal Rights and other than shares in Belk Companies owned by
other Belk Companies which will be canceled at the Effective Time, except that
shares of common stock of Belk's Department Store of Camden, S.C., Incorporated,
Parks-Belk Company of Clarksville, Tennessee and Belk-Simpson Realty Company,
and the member interests in TAGS, which are owned by Belk-Simpson at the
Effective Time will not be canceled, but will be converted into an aggregate of
246,042 shares of New Belk Class A Common Stock) and all rights in respect
thereof will, at the Effective Time, be converted into and become exchangeable
for a specified number of shares of New Belk Class A Common Stock determined in
accordance with the Applicable Exchange Ratios. See "Determination of Applicable
Exchange Ratios." All of the shares of New Belk Class A Common Stock to be
received by each Existing Belk Shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
Board of Directors of New Belk. The Reorganization Agreement provides
that, at the Effective Time, the New Belk Board will consist of John M. Belk,
Sarah Belk Gambrell, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk, David
Belk Cannon, J. Kirk Glenn, Jr., Karl G. Hudson, Jr., John A. Kuhne and B. Frank
Matthews, II. John M. Belk will be the Chairman of the New Belk Board.
Certificate of Incorporation and Bylaws of New Belk. The Reorganization
Agreement provides that, at the Effective Time, the Certificate of Incorporation
and Bylaws of New Belk will be amended and restated in the forms attached to the
Reorganization Agreement as Exhibits B and C, respectively.
Conditions to Consummation of the Reorganization. In addition to approval
of the Reorganization Agreement by the Required Shareholder Vote for each Belk
Company, the consummation of each Merger is subject to the satisfaction or
waiver of, among certain other customary conditions, the following: (i) no
Existing Belk Shareholder shall have elected to dissent from and exercise
Applicable State Law Appraisal Rights with respect to any Merger; (ii) the
Mergers of all of the Belk Companies (other than Belk-Simpson) with and into New
Belk shall have been consummated in accordance with the Reorganization
Agreement; (iii) the Merger of New Belk Sub with and into Belk-Simpson shall
have been consummated in accordance with the terms of the Reorganization
Agreement; (iv) Belk-Simpson shall have completed the Belk-Simpson Plan of
Reorganization; (v) the Registration Statement shall be effective; and (vi) the
applicable waiting period shall have expired under the HSR Act.
Amendment and Waiver. The Reorganization Agreement may be amended by
mutual agreement of the parties thereto. Any amendment to the Reorganization
Agreement must be in writing and signed by the parties thereto. Any provision of
the Reorganization Agreement may be waived in writing at any time by the party
that is, or whose shareholders are, entitled to the benefits of such provision.
Termination. The Reorganization Agreement may be terminated prior to the
Effective Time: (i) with respect to the Merger of any particular Belk Company by
mutual written agreement between New Belk and such Belk Company; (ii) by a Belk
Company with respect to its Merger or by New Belk with respect to such Merger or
the Reorganization as a whole if an event occurs that renders impossible the
satisfaction of the conditions to such party's obligations to consummate the
Merger, unless the failure of such occurrence shall be due to the failure of the
party seeking to terminate the Reorganization Agreement to perform or observe
its covenants, agreements and conditions required to be observed by it prior to
the Effective Time; (iii) by New Belk with respect to the Merger of any
particular Belk Company or the Reorganization as a whole if the shareholders of
such Belk Company do not approve the Reorganization Agreement; (iv) by New Belk
with respect to the Merger of any particular Belk Company or the Reorganization
as a whole if the Board of Directors of such Belk Company withdraws, or modifies
in a manner adverse to New Belk, its recommendation that the Reorganization
Agreement be approved; (v) by a Belk Company with respect to its Merger or by
New Belk with respect to such Merger or the Reorganization as a whole if the
Effective Time has not occurred
27
<PAGE> 36
by June 1, 1998; and (vi) by New Belk with respect to the Merger of any
particular Belk Company or the Reorganization as a whole if any Existing Belk
Shareholder owning shares in such Belk Company shall have elected to dissent
from and exercise his Applicable State Law Appraisal Rights with respect to such
Merger.
Covenants. In addition to customary covenants regarding conduct of
business pending consummation of the Reorganization, each Belk Company has
agreed that it will only pay dividends for fiscal year 1998 in amounts
consistent with dividends paid for prior years, subject to normal working
capital requirements. No Belk Company may, without the prior written consent of
New Belk, pay dividends for fiscal year 1998 in an aggregate amount greater than
the aggregate amount paid in dividends for fiscal year 1997.
Fees and Expenses. BSS will pay all Reorganization Expenses.
EFFECTIVE TIME OF THE REORGANIZATION AND EXCHANGE OF SHARES
Effective Time of the Reorganization. The Reorganization and each Merger
consummated pursuant to the Reorganization will become effective upon the latest
to occur of the filing of the certificates of merger or articles of merger, as
applicable, relating thereto with the Secretaries of State of Delaware and the
applicable states of incorporation of the Belk Companies. The Reorganization
Agreement provides that the parties thereto will cause such certificates of
merger or articles of merger, as applicable, to be filed as soon as practicable
after all of the conditions to consummation of each Merger contemplated thereby
have been satisfied or waived.
Exchange of Belk Companies Stock Certificates. Prior to the Effective
Time, instructions and a letter of transmittal will be furnished to all Existing
Belk Shareholders for use in exchanging their stock certificates for
certificates evidencing the shares of New Belk Class A Common Stock they will be
entitled to receive as a result of the Reorganization. EXISTING BELK
SHAREHOLDERS SHOULD NOT SUBMIT THEIR STOCK CERTIFICATES FOR EXCHANGE UNTIL
INSTRUCTIONS AND THE LETTER OF TRANSMITTAL ARE RECEIVED.
BELK-SIMPSON REORGANIZATION
It is a condition to the consummation of the Reorganization that
Belk-Simpson shall have completed the Belk-Simpson Plan of Reorganization. The
assets of Belk-Simpson previously consisted of its retail department store
business and certain investment assets which were unrelated to the retail
department store business, including a portfolio of publicly traded stocks and
securities in privately held companies (excluding investments in other Belk
Companies) (the "Stock Portfolio") and real estate (the "Non-Retail Real
Estate"). Under the Belk-Simpson Plan of Reorganization, Belk-Simpson agreed to
sell its Stock Portfolio (excluding securities in privately-held companies) and
to use the proceeds of the sale of such securities to purchase from the
Belk-Simpson shareholders common stock of Belk-Simpson that the shareholders
elected to sell to Belk-Simpson. Pursuant to the Belk-Simpson Plan of
Reorganization, Belk-Simpson sold the publicly traded stocks in the Stock
Portfolio and on February 23, 1998 offered to purchase from the shareholders of
Belk-Simpson up to 70,000 shares of its common stock at a price of $1,080.93 per
share. Of the approximately 99,000 shares of common stock of Belk-Simpson that
were outstanding at the time of the offer, 63,077 shares were tendered for
purchase by Belk-Simpson's shareholders and purchased by Belk-Simpson in
accordance with the Belk-Simpson Plan of Reorganization for an aggregate
purchase price of approximately $68,181,822. The assets of Belk-Simpson now
consist of its retail department store business, the remaining private company
securities in its Stock Portfolio and its Non-Retail Real Estate.
INTERESTS OF CERTAIN PERSONS IN THE REORGANIZATION
The Reorganization and the recommendation of the Boards of Directors of the
Belk Companies involve conflicts of interest. See "Risk Factors -- Risks and
Effects of the Reorganization -- Conflicts of Interest." In managing the affairs
of the Belk Companies, each member of the Boards of Directors of a Belk Company
is required to act in good faith and with an undivided duty of loyalty to the
Belk Companies and the Existing Belk Shareholders. Certain executive officers
and directors of the Belk Companies have conflicts of interest in recommending
the Reorganization to the Existing Belk Shareholders because they serve as
executive officers or directors of more than one of the 112 Belk Companies.
These common directorships may affect the ability
28
<PAGE> 37
of such executive officers and directors to act independently and in the best
interests of each separate Belk Company for which they serve as executive
officers and directors. Certain of such executive officers and directors,
including John M. Belk, Thomas M. Belk, Jr., H.W. McKay Belk and John R. Belk,
will serve as executive officers and directors of New Belk.
The Reorganization will also consolidate the holdings of John M. Belk,
Sarah Belk Gambrell and other Belk family members from a number of business
enterprises into one combined business enterprise and give Mr. Belk, Mrs.
Gambrell and such other Belk family members substantial control over the
operations of New Belk. These relationships cause Mr. Belk, Mrs. Gambrell and
such other Belk family members to have interests in the Reorganization that are
different from or in addition to, the interests of the other Existing Belk
Shareholders. These conflicts of interest could result in decisions that do not
fully reflect the interests of each Existing Belk Shareholder in each Belk
Company. Each Board of Directors considered these conflicts of interest when
determining whether to to recommend the Reorganization Agreement and its Merger
to the Existing Belk Shareholders.
ACCOUNTING TREATMENT
The Reorganization will be accounted for as a purchase business combination
in which Belk Enterprises, Inc. will be treated as the acquiror for accounting
purposes, in accordance with the provisions of Accounting Principles Board
Opinion Number 16 and the requirements of the Commission's Staff Accounting
Bulletin Number 97. Accordingly, the assets and liabilities of Belk Enterprises,
Inc. will be carried forward at the Effective Time of the Reorganization to the
financial statements of New Belk at their previously recorded historical cost
amounts and the assets and liabilities of the remaining Belk Companies will be
recorded based on their fair values.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion describes the material federal income tax
consequences of the Reorganization. The discussion is based upon the Code, U.S.
Treasury Regulations promulgated thereunder, and judicial and administrative
interpretations thereof, all as in effect on the date of this Proxy
Statement/Prospectus. These laws and interpretations are subject to change at
any time (possibly with retroactive effect), and the relevant facts may differ
at the Effective Time. The discussion does not address the effects of any state,
local or foreign tax laws.
New Belk has received an opinion (the "Tax Opinion") from its counsel, King
& Spalding, that, based upon its review of this Proxy Statement/Prospectus, the
Reorganization Agreement, certain other facts and documents which it has
considered relevant, and certain representations made to it by New Belk and each
of the Belk Companies, the Reorganization will have the federal income tax
consequences set forth below:
(i) each Merger (other than the Belk-Simpson Merger) will qualify as a
reorganization under Section 368(a) of the Code;
(ii) the Belk-Simpson Merger will qualify as a transaction described
in Section 351(a) of the Code;
(iii) no gain or loss will be recognized by an Existing Belk
Shareholder upon the exchange in a Merger of Belk Companies Common Stock
for the New Belk Class A Common Stock;
(iv) the tax basis of the New Belk Class A Common Stock received in a
Merger by an Existing Belk Shareholder will be the same as the tax basis of
the Belk Companies Common Stock exchanged for such New Belk Class A Common
Stock; and
(v) the holding period of the New Belk Class A Common Stock received
in a Merger by an Existing Belk Shareholder will include the holding period
of such Shareholder in the Belk Companies Common Stock exchanged for such
New Belk Class A Common Stock, provided that the Belk Companies Common
Stock is held as a capital asset at the Effective Time.
In rendering the Tax Opinion, counsel has relied upon certain written
representations as to factual matters made by appropriate officers of New Belk
and of each of the Belk Companies. Such representations
29
<PAGE> 38
are customary for opinions of this type; the Tax Opinion cannot be relied upon,
however, if any such representation is, or later becomes, inaccurate. No ruling
from the Internal Revenue Service (the "IRS") with respect to the tax
consequences of the Reorganization has been, or will be, requested, and the Tax
Opinion is not binding upon the IRS or the courts.
The foregoing discussion of the tax consequences of the Reorganization
applies only to an Existing Belk Shareholder who holds Belk Companies Common
Stock as a capital asset, and may not apply to special situations, such as
Existing Belk Shareholders, if any, who received their Belk Companies Common
Stock upon the exercise of employee stock options or otherwise as compensation
and Existing Belk Shareholders that are insurance companies, securities dealers,
financial institutions or foreign persons.
Shares of New Belk Class A Common Stock may be converted into shares of New
Belk Class B Common Stock under the circumstances described below in "-- Certain
Conversion Requirements and Transfer Restrictions." A holder of New Belk Class A
Common Stock will not recognize any income, gain or loss upon conversion of New
Belk Class A Common Stock into New Belk Class B Common Stock. Such holder's tax
basis in the New Belk Class B Common Stock received upon conversion will be the
same as such holder's adjusted tax basis in the New Belk Class A Common Stock
surrendered for conversion, and the holding period for the New Belk Class B
Common Stock received upon conversion generally will include the holding period
of the New Belk Class A Common Stock so converted.
THE DISCUSSION SET FORTH ABOVE DOES NOT ADDRESS THE STATE, LOCAL OR FOREIGN
TAX ASPECTS OF THE REORGANIZATION. THE DISCUSSION IS BASED ON CURRENTLY EXISTING
PROVISIONS OF THE CODE, EXISTING AND PROPOSED TREASURY REGULATIONS THEREUNDER
AND CURRENT ADMINISTRATIVE RULINGS AND COURT DECISIONS. ALL OF THE FOREGOING ARE
SUBJECT TO CHANGE AND ANY SUCH CHANGE COULD AFFECT THE CONTINUING VALIDITY OF
THIS DISCUSSION. EACH EXISTING BELK SHAREHOLDER SHOULD CONSULT HIS OR HER OWN
TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE REORGANIZATION
TO HIM OR HER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN
TAX LAWS.
CERTAIN CONVERSION REQUIREMENTS AND TRANSFER RESTRICTIONS
The shares of New Belk Class A Common Stock to be issued to the Existing
Belk Shareholders in connection with the Reorganization are convertible into
shares of New Belk Class B Common Stock, in whole or in part, at any time and
from time to time at the option of the holder, on the basis of one share of New
Belk Class B Common Stock for each share of New Belk Class A Common Stock
converted. Shares of New Belk Class B Common Stock are identical to shares of
New Belk Class A Common Stock in all respects, with the exception that holders
of New Belk Class B Common Stock are entitled to one vote per share on all
matters which are submitted to the New Belk Stockholders for their vote or
approval while holders of New Belk Class A Common Stock are entitled to 10 votes
per share on all such matters. The holders of both classes of New Belk Common
Stock are entitled to vote and will vote together as a single class on all
matters presented to the New Belk Stockholders for their vote or approval except
as otherwise required by Delaware law. See "Description of New Belk Capital
Stock."
Shares of New Belk Class A Common Stock may be owned only by a Class A
Permitted Holder. Upon a transfer of a share of New Belk Class A Common Stock to
any person other than a Class A Permitted Holder, such share of New Belk Class A
Common Stock so transferred will be automatically converted into one share of
New Belk Class B Common Stock. A "Class A Permitted Holder" includes only the
following persons: (i) each person who was, on November 25, 1997, a holder of
record of any share of Belk Company Common Stock (a "Record Holder") and his or
her estate, guardian or conservator, (ii) each spouse of a Record Holder and his
or her estate, guardian or conservator, (iii) each descendant of a Record Holder
and his or her estate, guardian or conservator, (iv) each spouse of a descendant
of a Record Holder and his or her estate, guardian or conservator (the Record
Holder and the spouse, descendants and spouses of descendants of the Record
Holder, and their respective estates, guardians and conservators being
collectively referred to as a "Record Holder Family Group"), (v) each Record
Holder Entity (as defined herein), (vi) each Record
30
<PAGE> 39
Holder Trust (as defined herein) and (vii) each Permitted Charitable Beneficiary
(as defined herein). The term "Record Holder Entity" means any corporation,
partnership, unincorporated association, firm, joint venture or other legal
entity controlled by one or more members of a Record Holder Family Group. The
term "Record Holder Trust" means any trust the primary beneficiaries of which
are one or more members of a Record Holder Family Group and Permitted Charitable
Beneficiaries. The term "Permitted Charitable Beneficiary" means any
organization described in Section 501(c)(3) of the Code, but only with respect
to shares of Class A Common Stock or interests therein, including future
interests, which such organization receives by gift, grant, bequest, devise or
similar gratuitous transfer from one or more Class A Permitted Holders. For this
purpose, the primary beneficiaries of a trust will be deemed to be one or more
members of a Record Holder Family Group and Permitted Charitable Beneficiaries
if, under the maximum exercise of discretion by the trustees of such trust in
favor of persons who are not members of the Record Holder Family Group and
Permitted Charitable Beneficiaries, the value of the interest of such persons in
the trust, computed actuarially, is 50% or less. The factors and methods
prescribed in Section 7520 of the Code, for use in ascertaining the value of
certain interests shall be used in determining a beneficiary's actuarial
interest in a trust for this purpose. The actuarial value of the interest in a
trust of any person in whose favor a testamentary power of appointment may be
exercised will be deemed to be zero. Shares of New Belk Class A Common Stock
held by a New Belk Stockholder who is a Class A Permitted Holder will also
automatically convert into New Belk Class B Common Stock in the event such New
Belk Stockholder no longer meets the requirements of a Class A Permitted Holder
set forth above.
New Belk may place legends on certificates representing shares of New Belk
Class A Common Stock that are to be issued to Existing Belk Shareholders in the
Reorganization to reflect the transfer restrictions and conversion requirements
applicable to such shares.
RESALES OF NEW BELK CLASS A COMMON STOCK
Shares of New Belk Class A Common Stock to be issued to the Existing Belk
Shareholders in connection with the Reorganization will be freely transferable
under the Securities Act (but will still be subject to compliance with other
applicable conversion requirements and transfer restrictions), except for shares
issued to any Existing Belk Shareholder who, at the time of the Reorganization,
may be deemed to be an "affiliate" of New Belk within the meaning of Rule 145.
In general, affiliates of New Belk include the executive officers and directors
of, and any other person or entity who controls, is controlled by or is under
common control with, New Belk. Rule 145 imposes, among other things, certain
restrictions upon the resale of securities received by affiliates in connection
with certain reclassifications, mergers, consolidations or asset transfers.
These restrictions will consist of volume and manner of sale restrictions on the
resale of New Belk Class A Common Stock issued to such persons or entities.
Shares of New Belk Class B Common Stock will also be freely transferable under
the Securities Act, except for those restrictions on transferability under Rule
145 applicable to New Belk Class B Common Stock owned by New Belk Stockholders
who are affiliates of New Belk. New Belk may place legends on certificates
representing shares of New Belk Common Stock that are to be issued to such
Existing Belk Shareholders in the Reorganization to reflect the restrictions on
transferability under Rule 145 applicable to affiliates of New Belk. See
"Description of New Belk Capital Stock -- New Belk Common Stock."
DISSENTERS' RIGHTS OF APPRAISAL
Each Existing Belk Shareholder is entitled to dissent from the Merger of
any Belk Company in which such Existing Belk Shareholder owns shares of common
stock and exercise Applicable State Law Appraisal Rights in conjunction with
such Merger. A person having a beneficial interest in shares of Belk Companies
Common Stock held of record in the name of another person, such as a broker or
nominee, must act promptly to cause the record holder to follow the steps
required by the Applicable State Law Appraisal Rights properly and in a timely
manner to perfect whatever dissenters' rights of appraisal the beneficial owner
may have.
The Prospectus Supplement for each Belk Company contains a summary of the
Applicable State Law Appraisal Rights for the Existing Belk Shareholders of such
Belk Company. In addition, the full text of the Applicable State Law Appraisal
Rights applicable to each Belk Company is set forth in Annex B to the
31
<PAGE> 40
applicable Prospectus Supplement for such Belk Company. Any shareholder who
wishes to exercise such dissenters' rights of appraisal or wishes to preserve
the right to do so should review such summary and Annex B of the Prospectus
Supplement for the applicable Belk Company carefully. Any Existing Belk
Shareholder exercising Applicable State Law Appraisal Rights may receive a court
determination of fair value of the shares of Belk Companies Common Stock such
Existing Belk Shareholder owns in such Belk Companies that is more than, less
than, or equal to the value of the shares of New Belk Class A Common Stock
received in exchange for such shares of Belk Companies Common Stock.
A failure to timely and properly comply with the procedure specified may
result in the loss of Applicable State Law Appraisal Rights. It is a condition
to the obligation of New Belk to consummate the Merger with each Belk Company
and the Reorganization as a whole that no Existing Belk Shareholder exercise his
Applicable State Law Appraisal Rights. The exercise of Applicable State Law
Appraisal Rights by any Existing Belk Shareholder will have the effect of (i)
requiring New Belk to waive the condition that no Existing Belk Shareholder
exercise his Applicable State Law Appraisal Rights or (ii) allowing New Belk to
terminate the Reorganization Agreement. See "The Reorganization -- Terms of the
Reorganization Agreement."
REGULATORY APPROVALS REQUIRED
Under the Reorganization Agreement, the obligations of New Belk and the
Belk Companies to consummate the Reorganization are conditioned upon receipt of
all required regulatory approvals. Under the HSR Act, and the rules promulgated
thereunder by the FTC, the Reorganization may not be consummated unless
notification has been given and certain information has been furnished to the
FTC and the Antitrust Division and the waiting period has expired or been
terminated. Pursuant to the HSR Act, on December 19, 1997, John M. Belk and
certain Belk Companies filed a Notification and Report Form with the FTC and the
Antitrust Division for review in connection with the Reorganization. The 30-day
waiting period under the HSR Act applicable to the Reorganization was terminated
early by action of the FTC on January 2, 1998. The requirements of the HSR Act
will be satisfied if the Reorganization is consummated by January 2, 1999. There
can be no assurance that the Reorganization will not be investigated or opposed
by the FTC or the Antitrust Division, or that at any time before the
consummation of the Reorganization, the FTC, the Antitrust Division, states or
private parties will not take action under the antitrust laws challenging the
consummation of the Reorganization.
DETERMINATION OF APPLICABLE EXCHANGE RATIOS
The Applicable Exchange Ratios for the Mergers have been calculated to take
into account the different financial and operating characteristics of each Belk
Company. Although the Belk Companies operate similar businesses, with
coordination from BSS, the Belk Companies are separate legal entities governed
by separate Boards of Directors. Over time, the Boards of Directors of the Belk
Companies have made their own decisions regarding their respective businesses,
including decisions regarding store operations, capital structures, investments
in other Belk Companies and other securities, capital expenditures, the level of
distributions made to its equity owners and the retention of cash in the
businesses. As a result of these decisions, the Belk Companies generally have
different financial and operating characteristics that make it unlikely that
using a single method of determining the value of each of the Belk Companies for
purposes of calculating the Applicable Exchange Ratios would be fair to all of
the Existing Belk Shareholders. In addition, a number of the Belk Companies own
equity interests in other Belk Companies. As a result of these investments, the
value of each Belk Company consists not only of the value of its retail
department store operations and other directly held assets but also the value of
its equity interests in other Belk Companies. To determine exchange ratios for
the Mergers that would take into account the different financial and operating
characteristics of each of the Belk Companies and the cross investments among
the Belk Companies, BSS developed a methodology to determine the Applicable
Exchange Ratios based upon the Net Relative Value of each Belk Company. The
Applicable Exchange Ratios based upon the Net Relative Value of each Belk
Company were determined in accordance with the following steps:
32
<PAGE> 41
- STEP ONE: CALCULATE THE RELATIVE OPERATING VALUE OF EACH BELK COMPANY BY
APPLYING DESIGNATED MULTIPLES TO ADJUSTED SALES, ADJUSTED EBITDA,
ADJUSTED EBIT, ADJUSTED NET INCOME OR ADJUSTED BOOK EQUITY. Determine
the highest of the following five values for each Belk Company with
continuing operations: (i) adjusted sales during the fiscal year ended
February 1, 1997 (the "Measurement Period") multiplied by six-tenths
(0.6), less net debt (defined as total debt less cash) at the end of the
Measurement Period; (ii) adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven (7), less net debt at the end of the Measurement
Period; (iii) adjusted earnings before interest and taxes ("EBIT") during
the Measurement Period multiplied by ten (10), less net debt at the end
of the Measurement Period; (iv) adjusted net income during the
Measurement Period multiplied by fifteen (15); and (v) adjusted book
equity multiplied by one (1) (collectively, for each Belk Company, the
"Relative Operating Value").
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------ ---------------- ---------------- ---------------- ----------------
Adjusted Adjusted Adjusted
Sales EBITDA multiplied EBIT Adjusted
Relative = multiplied by 0.6 or by 7 or multiplied by 10 or Net Income or
Operating less net debt less net debt less net debt multiplied by 15
Value
---------------- ---------------- ---------------- ----------------
----------------------------------------------------------------------------------------------
Choose Largest Number
- ------------ ----------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
- ------------ ----------------
Adjusted Book
Relative Equity
Operating = multiplied by 1
Value
----------------
----------------------------------------------------------------------------------------------
Choose Largest Number
- ------------ ----------------------------------------------------------------------------------------------
</TABLE>
The Relative Operating Value for each Belk Company with discontinued
operations is the adjusted book equity multiplied by one (the "Adjusted Book
Equity Valuation Formula").
- STEP TWO: DETERMINE TOTAL RELATIVE VALUE TO BE ALLOCATED TO THE EXISTING
BELK SHAREHOLDERS OF EACH BELK COMPANY BY ADDING TO STEP ONE THE RELATIVE
VALUE OF EACH BELK COMPANY'S OWNERSHIP IN OTHER BELK COMPANIES. Add to
the amount determined in Step One the product of (i) the percent
ownership interest held in other Belk Companies times (ii) the
corresponding total relative value (defined as Step One plus Step Two for
each Belk Company) of those Belk Companies (for each Belk Company, the
"Total Relative Value").
- STEP THREE: DETERMINE NET RELATIVE VALUE BY SUBTRACTING FROM STEP TWO
THE RELATIVE VALUE THAT OTHER BELK COMPANIES OWN IN EACH BELK
COMPANY. Subtract from the amount derived from Steps One and Two the
product of (i) each Belk Company's Total Relative Value times (ii) the
percent ownership interest held in such Belk Company by other Belk
Companies (for each Belk Company, the "Net Relative Value").
<TABLE>
<CAPTION>
---------------------------- ---------------------------- ----------------------------
STEP ONE STEP TWO STEP THREE
---------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
----------------
Relative Value of Relative Value of
direct operations ownership in other Relative Value of other
Net Relative = (Relative + Belk Companies - Belk Companies'
Value Operating Value) ownership in
--------------------------- ---------------------------
such Belk Company
----------------------------------------------------------
Total Relative Value
---------------- ----------------------------------------------------------
---------------------------
</TABLE>
- STEP FOUR: CALCULATE THE OWNERSHIP PERCENTAGE OF EACH BELK COMPANY'S
EXISTING BELK SHAREHOLDERS IN NEW BELK. Divide the Net Relative Value by
the sum of the Net Relative Value amounts determined for each of the Belk
Companies (for each Belk Company, the "Ownership Percentage").
<TABLE>
<S> <C> <C>
---------------------------
Belk Company's (Net Relative Value of such Belk Company )
Existing Belk
Shareholders' = ------------------------------------------------------------
Ownership Percentage (Aggregate of the Net Relative Values of all of the Belk
in New Belk Companies)
---------------------------
</TABLE>
33
<PAGE> 42
- STEP FIVE: CALCULATE THE NUMBER OF SHARES OF NEW BELK CLASS A COMMON
STOCK ALLOCATED TO EACH BELK COMPANY'S EXISTING BELK
SHAREHOLDERS. Multiply the Ownership Percentage of each Belk Company's
Existing Belk Shareholders and 59,998,834, the number of shares of New
Belk Class A Common Stock issued to the Existing Belk Shareholders in the
Reorganization.
<TABLE>
<S> <C> <C> <C> <C>
-------------------------------- = --------------------------------------- X --------------------------------
Number of shares of New Belk Ownership Percentage 59,998,834
Class A Common Stock
allocated to each Belk
Company's Existing Belk
Shareholders
-------------------------------- --------------------------------------- --------------------------------
</TABLE>
- STEP SIX: CALCULATE THE APPLICABLE EXCHANGE RATIO FOR EACH BELK
COMPANY. Divide the number of outstanding shares of common stock of each
Belk Company by the number of shares of New Belk Class A Common Stock
allocated to each Belk Company's Existing Belk Shareholders.
<TABLE>
<S> <C> <C> <C> <C>
-------------------------------- --------------------------------------- --------------------------------
Number of shares Number of outstanding
Applicable of New Belk Class A Common shares of common stock of
Exchange = Stock allocated to Belk / such Belk Company
Ratio Company's Existing Belk held by Existing
Shareholders Belk Shareholders
-------------------------------- --------------------------------------- --------------------------------
</TABLE>
The Prospectus Supplement for each Belk Company describes the calculation
of the Applicable Exchange Ratio for the Merger of that Belk Company using the
steps set forth above.
The multiples used in each of the five valuation formulas were selected by
BSS after consultation with Goldman Sachs. Management is aware that the
multiples that would be used in a fair market value appraisal of an individual
Belk Company might be different than the multiples used in the Valuation Process
and that the multiples that would be used in such a fair market value appraisal
could change from time to time in response to market conditions and other
factors. If the objective of the Valuation Process was to determine the fair
market value of any individual Belk Company, the absolute value of each multiple
would be important to the Valuation Process and the Valuation Process would have
to take into account any change in a multiple during the Valuation Process in
response to market conditions or other factors. The objective of the Valuation
Process, however, is not to calculate the fair market value of each Belk Company
but to calculate a value for each Belk Company that is fair relative to the
value of each other Belk Company. Therefore, what is important to the Valuation
Process is not the absolute value of each multiple or whether the Valuation
Process takes into account changes in the multiples in response to market
conditions, but the value of each multiple relative to the other four multiples.
Management believes that each multiple bears an appropriate relationship to each
other multiple so that, regardless of market conditions, the Valuation Process
will result in a value for each Belk Company that is fair relative to the value
of each other Belk Company.
The table below sets forth for each Belk Company the Ownership Percentage
in New Belk of each Belk Company's Existing Belk Shareholders and the Applicable
Exchange Ratio for each Belk Company. The information set forth below was
calculated based on the financial statements of each of the Belk Companies for
the fiscal year ended February 1, 1997 (the "Fiscal 1997 Financials") in each
case as prepared by BSS, and, as a result, the Applicable Exchange Ratios do not
take into account the results of operation of any Belk Company since February 1,
1997. Certain financial information from the Fiscal 1997 Financials which has
been used to calculate the Applicable Exchange Ratios has been adjusted to take
into account unusual items and to reflect only the direct operating expenses of
each Belk Company. In addition, certain financial information from the Fiscal
1997 Financials for Belk-Simpson has been adjusted to reflect the values
attributed to the assets of Belk-Simpson for purposes of the Belk-Simpson Plan
of Reorganization and the amount paid to shareholders of Belk-Simpson to
purchase shares tendered in the Belk-Simpson Reorganization. See "The
Reorganization -- Belk-Simpson Reorganization". The adjustments for each Belk
Company are described in the Prospectus Supplement applicable to such Belk
Company. In addition, the calculations assume consummation of all of the Mergers
and the Reorganization and the consummation of the Belk-Simpson Plan of
Reorganization. If the Reorganization is consummated with less than all of the
Belk Companies participating in the Reorganization, the Ownership Percentage and
Applicable Exchange Ratios set forth below will be different depending on the
Belk Companies that participate in the Reorganization.
34
<PAGE> 43
<TABLE>
<CAPTION>
OWNERSHIP
PERCENTAGE OF APPLICABLE
BELK COMPANY NEW BELK EXCHANGE RATIO
------------ ------------- --------------
<S> <C> <C>
Belk-Simpson Company of Paragould, Arkansas, Inc. .......... 0.04% 74.2871
Belk Department Store of Stuttgart, Ark., Inc. ............. 0.13 5.5909
Belk-Lindsey Stores, Inc. .................................. 2.67 5.7075
Belk's Department Store of Albany, Georgia.................. 0.27 22.9234
Belk of Americus, Ga., Inc. ................................ 0.04 13.2397
Belk of Athens, Ga., Inc. .................................. 0.49 57.4570
Belk-Simpson Co., of Bainbridge, Ga., Inc. ................. 0.21 51.9882
Belk of Canton, Ga., Inc. .................................. 0.09 29.6482
Belk-Rhodes Company, of Carrollton, Ga. .................... 0.66 31.6405
Belk's Department Store of Cartersville, Georgia,
Incorporated.............................................. 0.22 31.3247
Belk of Cornelia, Ga., Inc. ................................ 0.21 37.1405
Belk of Covington, Ga., Inc. ............................... 0.23 35.3644
Belk of Dalton, Ga., Inc. .................................. 0.43 53.0073
Belk-Matthews Company of Dublin, Georgia.................... 0.48 59.7949
Belk of Hartwell, Ga., Inc. ................................ 0.08 27.4770
Belk of LaGrange, Ga., Inc. ................................ 1.19 0.3852
Belk of Lawrenceville, Ga., Inc. ........................... 0.24 32.1911
Belk-Matthews Company of Macon, Georgia..................... 1.00 100.2971
Belk-Matthews Company of Milledgeville, Ga., Inc. .......... 0.44 37.1091
Belk of Monroe, Ga., Inc. .................................. 0.08 16.8755
Belk of Newnan, Ga., Inc. .................................. 0.08 18.5978
Belk-Rhodes Company, (Rome, Georgia)........................ 0.47 27.9775
Belk of Statesboro, Ga., Inc. .............................. 0.00 24.9140
Belk of Thomaston, Ga., Inc. ............................... 0.88 0.4196
Belk of Toccoa, Ga., Inc. .................................. 0.21 30.4628
Belk-Matthews Company, Vidalia, Georgia, Inc. .............. 0.36 51.5862
Belk of Washington, Ga., Inc. .............................. 0.05 27.4037
Belk of Waycross, Ga., Inc. ................................ 1.61 15.6819
Belk-Simpson Company of Corbin, Kentucky, Incorporated...... 0.47 107.7259
Belk-Simpson Company of Harlan, Kentucky, Incorporated...... 0.34 128.0566
Belk of Miss., Inc. ........................................ 1.29 9.2238
Belk Department Store of Ahoskie, N.C., Inc. ............... 0.22 52.3994
Belk's Department Store of Albemarle, North Carolina,
Incorporated.............................................. 0.14 37.8995
Belk of Asheboro, N.C., Inc. ............................... 0.65 112.9320
Belk's Department Store of Asheville, North Carolina,
Incorporated.............................................. 0.38 19.5744
Belk-Matthews Company....................................... 0.05 28.0294
Belk's Department Store of Boone, North Carolina,
Incorporated.............................................. 0.66 141.8032
Belk's Department Store of Brevard, N.C., Incorporated...... 0.25 39.2748
Belk-Beck Company of Burlington, North Carolina, Inc. ...... 0.80 108.1051
Belk Brothers Company....................................... 16.01 96.5480
Belk Enterprises, Inc. ..................................... 26.39 18.4129
Belk-Matthews Company of Cherryville, N.C., Incorporated.... 0.04 27.9259
Belk Department Store of Clinton, N.C., Inc. ............... 0.68 110.8714
Belk's Department Store of Dunn, North Carolina,
Incorporated.............................................. 1.03 69.7358
Belk Department Store of Eden, N.C., Inc. .................. 0.16 75.1865
Belk Department Store of Elkin, N.C., Inc. ................. 0.07 46.7109
</TABLE>
35
<PAGE> 44
<TABLE>
<CAPTION>
OWNERSHIP
PERCENTAGE OF APPLICABLE
BELK COMPANY NEW BELK EXCHANGE RATIO
------------ ------------- --------------
<S> <C> <C>
Belk Department Store of Forest City, N.C., Inc. ........... 0.45 35.8890
Hudson-Belk Co. of Fuquay-Varina, N.C., Inc. ............... 0.35 86.6147
Matthews-Belk Company....................................... 2.43 36.3001
Belk Department Store of Greenville, N.C., Inc. ............ 1.52 157.6685
Belk-Simpson Company of Hendersonville, N.C.,
Incorporated.............................................. 0.67 190.2252
Belk Department Store of Hickory, N.C., Inc. ............... 1.61 177.2478
Belk-Beck Co. of High Point, N.C., Inc. .................... 0.37 36.7519
Belk's Department Store of Jacksonville, N.C., Inc. ........ 1.92 114.5736
Belk's Department Store of Lenoir, North Carolina,
Incorporated.............................................. 0.41 38.0445
Belk Department Store of Lincolnton, N.C., Inc. ............ 0.41 228.1762
Belk Brothers of Monroe, North Carolina, Incorporated....... 0.99 146.3169
Belk's Department Store of Morehead City, N.C., Inc. ....... 0.70 90.4245
Belk's Department Store of Mount Airy, North Carolina,
Incorporated.............................................. 0.12 29.8170
Belk's Department Store of New Bern, N.C., Incorporated..... 0.32 82.0225
Hudson-Belk Company......................................... 4.77 37.2679
Belk Department Store of Reidsville, N.C., Inc. ............ 0.13 81.9355
Belk's Department Store of Rockingham, N.C., Incorporated... 0.18 27.6691
Belk-Harry Company.......................................... 0.48 25.8812
Belk Department Store of Shelby, N.C., Inc. ................ 0.93 44.5304
Belk of Siler City, N.C., Inc. ............................. 0.00 4.9094
Belk Department Store of Waynesville, N.C., Inc. ........... 0.26 60.4876
Belk Department Store of Wilkesboro, N.C., Inc. ............ 0.20 72.8152
Belk's Department Store, Incorporated of Aiken, South
Carolina.................................................. 0.14 44.8296
Gallant-Belk Company........................................ 1.99 77.2144
Belk's Department Store of Batesburg, S.C., Inc. ........... 0.06 49.0796
Belk-Simpson Company, Incorporated of Beaufort, South
Carolina.................................................. 0.52 148.8005
Belk's Department Store of Camden, S.C., Incorporated....... 0.82 82.4755
Belk Department Store of Charleston, S.C., Inc. ............ 1.57 67.0008
Belk's Department Store of Conway, S.C., Incorporated....... 0.12 41.2258
Belk's Department Store of Florence, S.C., Incorporated..... 1.13 110.9298
Belk's Department Store of Gaffney, South Carolina,
Incorporated.............................................. 0.08 24.6844
Belk of Georgetown, S.C., Inc. ............................. 0.16 51.7662
Belk-Simpson Company, Greenville, South Carolina............ 1.87 62.9390
Belk Department Store of Greenwood, S.C., Inc. ............. 0.41 128.1062
Belk's Department Store of Hartsville, S.C., Incorporated... 0.15 104.4982
Belk's Department Store, Incorporated, of Lake City, South
Carolina.................................................. 0.06 24.3005
Belk's Department Store of Lancaster, S.C., Inc. ........... 0.97 60.4443
Belk's Department Store of Laurens, South Carolina,
Incorporated.............................................. 0.31 40.5055
Belk of Orangeburg, S.C., Inc. ............................. 0.70 89.8055
Belk of Seneca, S.C., Inc. ................................. 0.24 42.1339
Belk of Spartanburg, S.C., Inc. ............................ 0.77 91.7760
Belk's Department Store of Union, S.C., Incorporated ....... 0.03 19.4979
Belk of Walterboro, S.C., Inc. ............................. 0.10 103.0058
Belk's Department Store of Winnsboro, S.C., Incorporated.... 0.06 26.8012
Parks-Belk Company of Clarksville, Tennessee................ 0.24 39.5467
Belk Department Store of Greenville, Texas, Inc. ........... 0.02 65.6983
</TABLE>
36
<PAGE> 45
<TABLE>
<CAPTION>
OWNERSHIP
PERCENTAGE OF APPLICABLE
BELK COMPANY NEW BELK EXCHANGE RATIO
------------ ------------- --------------
<S> <C> <C>
Belk's Department Store of Paris, Texas, Inc. .............. 0.05 67.1993
Parks-Belk Company, Incorporated............................ 0.92 28.1936
Belk of Danville, Va., Inc. ................................ 1.11 139.6428
Belk of Lynchburg, Va., Inc. ............................... 0.03 37.0503
Belk Stores of Virginia, Inc. .............................. 0.53 93.1655
Belk of Roanoke, Va., Inc. ................................. 0.03 21.2573
Belk of South Boston, Va., Inc. ............................ 0.03 77.4054
Belk of Dawson, Ga., Inc. .................................. 0.05 28.7701
Belk of Elberton, Ga., Inc. ................................ 0.04 29.2525
Belk of Thomson, Ga., Inc. ................................. 0.07 27.2683
Belk Department Store of Edenton, N.C., Inc. ............... 0.08 33.8123
Belk of Thomasville, N.C., Inc. ............................ 0.09 19.8693
Belk's Department Store of Chesterfield, S.C.,
Incorporated.............................................. 0.05 17.9679
Belk's Department Store of Columbia, South Carolina,
Incorporated.............................................. 0.15 7.3168
Belk Finance Company........................................ 2.42 1,210.7396
Belk-Simpson Realty Company................................. 0.04 30.2193
Belk of Lawrenceville, Va., Inc. ........................... 0.03 377.3850
Belk Realty of Radford, Va., Inc. .......................... 0.00 74.5076
Belk Realty of Staunton, Va., Inc. ......................... 0.01 7.5527
Belk Outlet Center, Inc. ................................... 0.00 49.4728
</TABLE>
The number of shares and percentage of New Belk Class A Common Stock to be
allocated to each Existing Belk Shareholder are set forth on Annex C to this
Proxy Statement/Prospectus.
In connection with the Reorganization, all shares of common stock of any of
the Belk Companies owned by other Belk Companies will be canceled, except that
shares of common stock of Belk Department Store of Camden, S.C., Incorporated,
Parks-Belk Company of Clarksville, Tennessee and Belk-Simpson Realty Company
owned by Belk-Simpson will not be canceled, but will be converted in the
Belk-Simpson Merger into a total of 166,230.7 shares of New Belk Class A Common
Stock. In addition, Belk-Simpson's member interest in TAGS will be converted in
the Belk-Simpson Merger into 79,811.3 shares of New Belk Class A Common Stock
(thus giving Belk-Simpson a total of 246,042 shares of New Belk Class A Common
Stock to be issued in the Belk-Simpson Merger). Because Belk-Simpson will be a
wholly owned subsidiary of New Belk, the ownership of New Belk Class A Common
Stock by Belk-Simpson will have no impact on other New Belk Stockholders. In
addition, Delaware law will prohibit Belk-Simpson from exercising voting rights
with respect to its New Belk Class A Common Stock.
On March 3, 1998, Belk Lindsey Stores, Inc. ("Belk-Lindsey") redeemed
50,000 shares of common stock of Belk Lindsey owned by the Estate of E.C.
Lindsey for an aggregate price of $3.5 million. New Belk will issue 285,375
shares of New Belk Class A Common Stock to Belk-Lindsey in the Reorganization,
which shares will then be cancelled upon consummation of the Reorganization and
will not be outstanding.
FAIRNESS OPINION
Willamette, an independent financial advisory firm with substantial retail
industry experience, was engaged to render an opinion as to (i) the
reasonableness of the Valuation Process and (ii) the fairness, from a financial
point of view, of the Valuation Process to the Existing Belk Shareholders. The
Fairness Opinion is addressed to the Belk Companies and their Boards of
Directors.
The full text of the Fairness Opinion, which contains a description of the
assumptions and qualifications applicable to the review and analysis, is set
forth in Annex D and should be read in its entirety. The summary of the Fairness
Opinion set forth below does not purport to be a complete description of the
analyses
37
<PAGE> 46
performed, or the matters considered, by Willamette in rendering its opinion.
Willamette believes that its analyses and the description set forth below must
be considered as a whole and that selecting portions of such description or
analyses, without considering all factors and analyses, would create an
incomplete view of the processes underlying the Fairness Opinion. In rendering
its Fairness Opinion, Willamette applied its judgment to a variety of complex
analyses and assumptions which are not readily susceptible to description beyond
that set forth herein. The fact that any specific analysis is referred to in the
summary is not meant to indicate that such analysis was given greater weight
than any other analysis.
The Fairness Opinion assumes that all Belk Companies participate in the
Reorganization and does not attempt to address the fairness of the allocations
of New Belk Class A Common Stock that result under possible combinations
involving less than all of the Belk Companies.
Although Willamette was advised that certain assumptions were appropriate
(described more fully below), no conditions or limitations were imposed on the
scope of the investigation by Willamette or the methods and procedures to be
followed by Willamette in rendering the Fairness Opinion. Management of BSS
considered the qualifications and experience of one financial advisory firm
other than Willamette. After interviewing Willamette, however, management of BSS
determined that Willamette had the experience and qualifications necessary to
render the Fairness Opinion.
Qualifications to Fairness Opinion. The Fairness Opinion addresses the
reasonableness of the Valuation Process and the fairness, from a financial point
of view, of the Valuation Process to the Existing Belk Shareholders, but it does
not address whether the actual consideration to be received by each of the
Existing Belk Shareholders in the Reorganization is fair from a financial point
of view. Willamette was not requested to and did not (a) select the method of
determining the Applicable Exchange Ratios; (b) make any recommendations to the
Existing Belk Shareholders or the Belk Companies with respect to whether to
approve or reject the Reorganization; or (c) express any opinion as to (i) the
impact of the Reorganization with respect to any Existing Belk Shareholder in
any Belk Company who does not participate in the Reorganization, (ii) the tax
consequences of the Reorganization for Existing Belk Shareholders or for New
Belk, (iii) the proposed capital structure of New Belk or its impact on the
financial performance of New Belk, (iv) whether or not alternative methods of
determining the relative amounts of New Belk Class A Common Stock to be issued
would have also provided fair results or results substantially similar to those
achieved using the Valuation Process or (v) the fairness or advisability of
alternatives to the Reorganization.
Further, Willamette did not express any opinion as to the fairness of any
terms of the Reorganization, other than as described in the Fairness Opinion,
including, without limitation: (a) the fairness of Reorganization Expenses borne
by BSS or (b) the value of the New Belk Class A Common Stock to be issued in the
Reorganization. See "-- Assumptions."
In connection with the Fairness Opinion, Willamette did not perform an
independent appraisal of the assets and liabilities of any of the Belk
Companies.
Experience of Willamette. Since its founding in 1969, Willamette has
provided information, research, investment banking, consulting and valuation
services to clients throughout the United States, including over 50 companies
engaged in the management and operation of retail businesses. The investment
banking activities of Willamette include financial advisory services, asset and
security valuations, industry and company research and analysis, litigation
support and expert witness services, and due diligence investigations in
connection with both publicly registered and privately placed securities
transactions.
Willamette, as part of its investment banking business, is regularly
engaged in the valuation of businesses and their securities in connection with
mergers, acquisitions and reorganizations and for estate, tax, corporate and
other purposes. Willamette has performed valuation services for other retail
businesses like the businesses operated by the Belk Companies. Willamette was
selected because of its experience in providing similar services to retail
businesses and other parties in connection with transactions comparable to the
Reorganization.
Summary of Materials Considered and Investigation Undertaken. Willamette's
analysis of the Reorganization involved a review and analysis of the following
information, which Willamette represented was a
38
<PAGE> 47
reasonable and adequate basis for its opinion: (i) general economic history and
outlook factors; (ii) the retailing business industry history and outlook
factors; (iii) financial market historical trends and outlook factors; (iv)
financial and operational data regarding each of the Belk Companies for the
previous five years and the outlook for each company; and (v) transactions of
stock in companies in the same and similar lines of business over the pervious
five years.
Assumptions. In rendering its opinion, Willamette relied, without
independent verification, on the accuracy and completeness in all material
respects of all financial and other information that was furnished or otherwise
communicated to Willamette. Willamette also relied on assurances that: (a) the
calculations made to determine the Applicable Exchange Ratios were accurate and
consistent with the methodologies described herein; (b) any financial
projections or pro forma statements or adjustments provided to Willamette
(including the budgets and projections, the estimated liquidation and going
concern values and the pro forma budgets and projections related to the Belk
Companies) were in the judgment of BSS reasonably prepared or adjusted on bases
consistent with actual historical experience or reflecting the best currently
available estimates and good faith judgments; (c) no material changes have
occurred in the information reviewed between the date the information was
provided and the date of the Fairness Opinion; and (d) BSS is not aware of any
information or facts regarding the Belk Companies or New Belk that would cause
the information supplied to Willamette to be incomplete or misleading in any
material respect. Willamette stated that nothing came to its attention that
would lead it to believe any of the foregoing is inaccurate, incomplete or
misleading in any material respect.
Analysis. The following paragraphs summarize the material quantitative and
qualitative analyses performed by Willamette in arriving at the opinion
delivered to the Belk Companies Boards of Directors.
Historical Financial Position. In rendering its opinion, Willamette
reviewed and analyzed the historical and current financial condition of the Belk
companies which included (i) an assessment of the Belk Companies' recent
financial statements for the previous five fiscal years; (ii) an analysis of the
Belk Companies revenue, growth and operating performance trends; and (iii) an
assessment of the Belk Companies historical margin fluctuations.
Analysis of Certain Publicly Traded Companies. Using publicly available
information, Willamette reviewed the stock prices, market multiples,
profitability and certain other characteristics for certain companies in the
retail department store industry. The companies included in the analysis were
Hills Stores Company, J. C. Penney Company, Inc., Dayton Hudson Corporation,
Carson Pirie Scott & Company, Kohl's Corporation, Pamida Holdings Corporation,
Dillard Department Stores, Inc., Nordstrom, Inc., May Department Stores Company,
Mercantile Stores Company, Inc., Stein Mart, Inc., and Proffitt's, Inc.
Willamette determined that the range of market multiples based upon the public
companies' latest twelve months sales, latest twelve months EBIT, latest twelve
months EBITDA, latest twelve months net income, and latest twelve months book
equity, were 0.21x to 1.36x for sales, 7.2x to 16.7x for EBIT. 4.3x to 13.6x for
EBITDA, 11.8x to 27.9x for net income, and 0.77x to 4.15x for book equity. In
Willamette's analysis of the Exchange Ratio calculations, it was noted that the
selected multiples applied to the Belk Companies of 0.6x sales, 10x EBIT, 7x
EBITDA, 15x net income, and 1.0x book equity, were deemed within a reasonable
range of multiples as compared to the ranges of multiples of the publicly traded
companies.
Analysis of the Relative Valuation Process. In rendering its opinion,
Willamette reviewed the financial models and calculations provided in the
determination of the Applicable Exchange Ratio by BSS, assisted by its financial
advisor. Willamette noted that the objective of the Valuation Process was not to
calculate the fair market value of each Belk Company but to calculate a relative
value for each Belk Company that is fair relative to the value of each other
Belk Company. Due to the complexity of and differences among the Belk Companies
organizational structures, financial positions and cross ownership interests,
Willamette determined that the selection and assignment of the highest value as
provided by the five valuation formulas was a reasonable method of selecting the
relative operating value of each Belk Company in order to determine the
Applicable Exchange Ratio. In addition, Willamette examined the relative
operating values of certain Belk Companies that were determined on a basis other
than the highest value produced by the five valuation formulas and, because of
the special circumstances relating to such Belk Companies, determined that the
method of determining the relative values of such Belk Companies was reasonable
and fair.
39
<PAGE> 48
Allocation of Relative Value Due to Cross Ownership. Willamette examined
the cross ownership among the Belk Company and agreed with the determination of
BSS and its financial advisor that the relative value of the cross ownership
interests should be adjusted as contemplated by the Valuation Process to add to
the relative operating value of each Belk Company the relative value of that
Belk Company's ownership in other Belk Companies and to subtract from the
resulting total relative value of each Belk Company the relative value that
other Belk Companies own in that Belk Company. Willamette reviewed the financial
model that was designed to make these adjustments. The review consisted of
analyzing and questioning the basis for each input assumption to the model,
analyzing the mathematical calculations that the model was designed to follow,
and reviewing the outputs of the model. On the basis of such review, Willamette
determined that the method of adjusting total relative value to reflect the
cross ownership values in the Valuation Process was reasonable and fair.
Relative Control Factors. As part of its analysis, Willamette reviewed the
valuation model assumptions with regard to relative control factors. No
individual shareholding, group of shareholdings or individual Belk Company was
assigned a premium or discount relative to any other shareholding, group of
shareholdings or individual Belk Company because of any differences in the
ability to control or influence Belk Companies corporate policies. Willamette
determined that this assumption was reasonable and fair for the purposes of this
transaction.
Relative Marketability Factors. As part of its analysis, Willamette
reviewed the valuation model assumptions with regard to relative marketability
factors. No individual shareholding, group of shareholdings or individual Belk
Company was assigned a premium or discount relative to any other shareholding,
group of shareholdings or individual Belk Company because of any existing
differences in the salability of the stock of any Belk Companies. Willamette
determined that this assumption was fair for the purposes of this transaction.
Relevant Market and Economic Factors. In rendering its opinion, Willamette
considered, among other factors, the condition of the U.S. stock markets,
particularly in the retail department store sector, and the current level of
economic activity.
No company used in the analysis of publicly traded companies summarized
above is identical to the Belk Companies or the Merger. Accordingly,
Willamette's analyses took into account differences in the financial and
operating characteristics of the Belk Companies and other factors that would
affect the public trading value.
While the foregoing summary describes all analyses and factors that
Willamette deemed material in its presentation to the Belk Companies Boards of
Directors, it is not a comprehensive description of all analyses and factors
considered by Willamette. The preparation of a fairness opinion is a complex
process involving various determinations as to the most appropriate and relevant
methods of financial analysis and the applications of these methods to the
particular circumstances, and therefore such an opinion is not readily
susceptible to summary description. Willamette believes that its analyses must
be considered as a whole and that selecting portions of its analyses and of the
factors considered by it, without considering all analyses and factors, would
create an incomplete view of the evaluation process underlying the Willamette
Opinion. In arriving at its fairness determination, Willamette considered the
results of all such analyses. Willamette did not separately consider to what
extent any one of the analyses supported or did not support the Fairness Opinion
or otherwise assign relative weights to the factors considered. In performing
its analyses, Willamette considered general economic, market and financial
conditions and other matters, many of which are beyond the control of the Belk
Companies. The analyses performed by Willamette are not necessarily indicative
of actual values or future results, which may be significantly more or less
favorable than those suggested by such analyses. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty. Additionally,
analyses relating to the value of a business do not purport to be appraisals to
reflect the prices at which the business actually may be sold. Furthermore, no
opinion is being expressed as to the prices at which shares of New Belk Common
Stock may trade at any future time.
Conclusions. Willamette concluded that, based upon and subject to its
analysis and assumptions and limiting conditions, and as of the date of the
Fairness Opinion, the Valuation Process is reasonable and is fair, from a
financial point of view, to the Existing Belk Shareholders.
40
<PAGE> 49
Compensation and Material Relationships. Willamette has been paid a fee of
$150,000 by BSS for assisting in evaluating the reasonableness of the
methodologies used to determine the Applicable Exchange Ratios and delivering
the Fairness Opinion. In addition, Willamette will be reimbursed for all
reasonable out-of-pocket expenses, including legal fees, and will be indemnified
against certain liabilities, including certain liabilities under the securities
laws. The fee arrangement was negotiated between BSS and Willamette. Payment of
the fee to Willamette is not dependent upon completion of the Reorganization or
the opinion expressed in the Fairness Opinion.
BSS has also engaged Willamette to render an opinion, as of the Effective
Time, of the aggregate fair market value of the New Belk Class A Common Stock
issued in the Reorganization. For such services, Willamette will be paid a fee
of $25,000, in addition to reimbursement for all reasonable out-of-pocket
expenses. Such opinion will support the accounting for the Reorganization, but
is not addressed to the Existing Belk Shareholders or any of the Belk Companies
and therefore will not be included as an exhibit to this Proxy
Statement/Prospectus. See "The Reorganization -- Accounting Treatment."
Willamette was also previously retained by the estate of Thomas M. Belk to
arrive at an independent professional appraisal opinion of the fair market value
of certain minority interests in the Belk Companies owned or taxable in the
estate as of Thomas M. Belk's death on January 25, 1997. For such services, the
estate has paid Willamette a fee of $80,000, plus reasonable out-of-pocket
expenses.
Apart from Willamette's assistance with the Reorganization and the matters
discussed above, Willamette has not rendered any consulting or related services
to BSS, the other members of the Boards of Directors of the Belk Companies, the
Belk Companies or any of their affiliates.
NEW BELK
New Belk is a Delaware corporation organized in November 1997. New Belk has
not conducted any substantial business activities to date, other than those
incident to its formation, its execution of the Reorganization Agreement and
related agreements and its participation in the preparation of this Proxy
Statement/Prospectus. New Belk will be the surviving corporation in the
Reorganization. Accordingly, the business of New Belk following the
Reorganization will be the business currently conducted by the Belk Companies.
See "Business of New Belk."
CAPITALIZATION
The following table sets forth the capitalization of the Belk Companies on
a combined basis as of November 1, 1997 and the pro forma capitalization of New
Belk after giving effect to the Reorganization. This table should be read in
conjunction with the audited historical combined financial statements and the
unaudited pro forma combined condensed financial statements included elsewhere
in this Proxy Statement/Prospectus, including the notes thereto.
<TABLE>
<CAPTION>
AS OF NOVEMBER 1, 1997
------------------------
HISTORICAL PRO FORMA
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Borrowings.................................................. $ 429,919 $ 440,893
Total Shareholders' Equity.................................. 679,615 755,208
Total Capitalization........................................ 1,109,534 1,196,101
</TABLE>
41
<PAGE> 50
UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
are based upon the financial statements of the Belk Companies, combined and
adjusted to give effect to the Reorganization. The following unaudited pro forma
combined condensed statements of income for the year ended February 1, 1997 and
for the nine months ended November 1, 1997 give effect to the Reorganization as
if it had occurred at the beginning of the first period presented. The following
unaudited pro forma combined condensed balance sheet at November 1, 1997 gives
effect to the Reorganization as if it had occurred on such date. These unaudited
pro forma combined condensed financial statements should be read in conjunction
with the audited historical combined financial statements and unaudited interim
combined financial statements, including the notes thereto, included elsewhere
in this Proxy Statement/Prospectus.
The unaudited pro forma combined condensed financial statements are not
necessarily indicative of the results of operations or financial position of New
Belk that would have occurred had the Reorganization occurred at the beginning
of the first period presented or on the date indicated, nor are they necessarily
indicative of the future operating results or financial position of New Belk.
The unaudited pro forma adjustments are based upon information set forth in
this Proxy Statement/Prospectus and certain assumptions included in the notes to
be unaudited pro forma combined condensed financial statements. Management
believes that the pro forma assumptions are reasonable under the circumstances.
In addition, as of the date of this Proxy Statement/Prospectus, management
believes that the unaudited pro forma combined condensed financial statements
reflect the impact on the operations and liquidity of New Belk of all material
events or changes expected to result from the Reorganization.
The Reorganization is reflected in the unaudited pro forma combined
condensed financial statements as a purchase business combination in accordance
with the provisions of Accounting Principles Board Opinion Number 16, and the
Commission's Staff Accounting Bulletin Number 97. Belk Enterprises, Inc. is
deemed to be the acquiring corporation because its shareholders will receive a
larger portion of the voting rights in the combined corporation than any other
Belk company.
The unaudited pro forma combined condensed financial statements include
adjustments to reflect the acquisition of the Belk-Simpson retail operations
(see The Reorganization -- Belk-Simpson Reorganization). Belk-Simpson is
included in the historical financial statements of the Belk Companies as a 37%
equity investment. The unaudited pro forma combined condensed financial
statements reflect 100% of Belk-Simpson retail operations and the divestiture of
its investment assets.
The unaudited pro forma combined statement of income for the year ended
February 1, 1997 includes adjustments to reflect the operations of the Leggett
Companies as if they had been acquired at the beginning of the year. The
historical financial statements of the Belk Companies for the year ended
February 1, 1997 already include the operations of the Leggett Companies
subsequent to the November 1, 1996 acquisition.
42
<PAGE> 51
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
YEAR ENDED FEBRUARY 1, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------
THE BELK LEGGETT
COMPANIES ACQUISITION (1) THE BELK
FOR THE YEAR FOR THE NINE LEGGETT COMPANIES THE BELK
ENDED MONTHS ENDED ACQUISITION INCLUDING (2) COMPANIES
FEBRUARY 1, NOVEMBER 1, PRO FORMA LEGGETT BELK-SIMPSON PRO FORMA
1997 1996 ADJUSTMENTS ACQUISITION ADJUSTMENTS ADJUSTMENTS
------------ --------------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues................. $1,772,613 $218,291 $ -- $1,990,904 $69,332 $ --
Cost of goods sold
(including occupancy
and buying expenses)... 1,205,687 148,351 -- 1,354,038 46,108 --
Selling, general and
administrative
expenses............... 470,018 69,393 415(3) 539,826 20,827 2,166(6)
---------- -------- ------- ---------- ------- -------
Income from operations... 96,908 547 (415) 97,040 2,397 (2,166)
Interest expense......... (27,554) (2,905) (4,646)(4) (35,105) (541) --
Interest Income.......... 4,873 132 -- 5,005 42 --
Gain (loss) on sale of
property and
equipment.............. 21,328 (73) -- 21,255 16 --
Gain on sale of
investments............ 1,882 -- -- 1,882 -- --
Other income (expense),
net.................... 1,816 (4,746) 3,078(3) 148 89 --
---------- -------- ------- ---------- ------- -------
Income (loss) from
continuing operations
before income taxes and
equity in earnings of
unconsolidated
entities............... 99,253 (7,045) (1,983) 90,225 2,003 (2,166)
Income taxes............. 38,802 (374) (2,338)(5) 36,090 781 (846)(5)
---------- -------- ------- ---------- ------- -------
Income (loss) from
continuing operations
before equity in
earnings of
unconsolidated
entities............... 60,451 (6,671) 355 54,135 1,222 (1,320)
Equity in earnings of
unconsolidated
entities, net of income
taxes.................. 4,046 -- -- 4,046 (974) --
---------- -------- ------- ---------- ------- -------
Income (loss) from
continuing
operations............. $ 64,497 $ (6,671) $ 355 $ 58,181 $ 248 $(1,320)
========== ======== ======= ========== ======= =======
Income from continuing
operations per share...
Pro forma weighted
average shares
outstanding............
<CAPTION>
COMBINED
PRO FORMA
-----------
<S> <C>
Revenues................. $ 2,060,236
Cost of goods sold
(including occupancy
and buying expenses)... 1,400,146
Selling, general and
administrative
expenses............... 562,819
-----------
Income from operations... 97,271
Interest expense......... (35,646)
Interest Income.......... 5,047
Gain (loss) on sale of
property and
equipment.............. 21,271
Gain on sale of
investments............ 1,882
Other income (expense),
net.................... 237
-----------
Income (loss) from
continuing operations
before income taxes and
equity in earnings of
unconsolidated
entities............... 90,062
Income taxes............. 36,025
-----------
Income (loss) from
continuing operations
before equity in
earnings of
unconsolidated
entities............... 54,037
Equity in earnings of
unconsolidated
entities, net of income
taxes.................. 3,072
-----------
Income (loss) from
continuing
operations............. $ 57,109
===========
Income from continuing
operations per share... $ .96
===========
Pro forma weighted
average shares
outstanding............ 59,713,460
===========
</TABLE>
- ---------------
(1) The Leggett Acquisition (as defined herein) includes the operations of the
Leggett companies acquired during the year ended February 1, 1997. The
transaction was accounted for as a purchase acquisition for accounting
purposes. The Leggett Acquisition statement of income reflects operations
from February 4, 1996 to the date of acquisition. The combined pro forma
assumes the Leggett purchase occurred on February 4, 1996 and includes 12
months of operations of the Leggett stores.
(2) Adjustments to reflect Belk-Simpson as if the retail operations of
Belk-Simpson had been acquired by the Belk Companies on February 4, 1996.
43
<PAGE> 52
<TABLE>
<CAPTION>
LEGGETT THE BELK
ACQUISITION COMPANIES
PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTMENTS
----------- -----------
<S> <C> <C>
(3) Adjustments to selling, general and administrative
expense and other income (expense) consist of the
following:
To record amortization of goodwill from the Leggett
Acquisition. Goodwill is being amortized over a period
of 15 years............................................ $ 857 $ --
To record the increase in depreciation expense related
to the allocation of the fair market values to fixed
assets. The average remaining life for fixed assets is
25 years............................................... 73 --
To record the increase in amortization expense related
to the allocation of the fair market values to
leasehold improvements. The average remaining life for
leasehold improvements is 4.5 years.................... 1,656 --
To eliminate one time expenses related to the Leggett
Acquisition............................................ (5,249) --
------- --------
$(2,663) $ --
======= ========
(4) To record the pro forma nine month increase in interest
expense related to debt acquired to fund the Leggett
Acquisition. The debt includes a bridge loan note of
$48,111 with an interest rate of 7.18% (LIBOR plus 180)
and Stockholder Promissory Notes of $46,982 with
interest rates of 5.6%................................. $(4,646) $ --
======= ========
(5) Adjustment to reflect income taxes based upon the pro
forma pre-tax income as if the Belk Companies had been
subject to federal and state income taxes at a pro
forma effective tax rate of 40%........................ $(2,338) $ (846)
======= ========
(6) Adjustments to selling, general and administrative
expense consist of the following:
To record the pro forma increase in depreciation
related to the allocation of fair market values to
fixed assets based on the estimated fair market value
of the combined Belk Companies of $820 million. The
allocation to fixed assets resulted in a write-up of
$52,719 to be depreciated over the average remaining
life for fixed assets of 23 years...................... $ -- $ 2,292
To record the pro forma decrease in amortization
related to the allocation of fair market values to
leasehold improvements based on the estimated fair
market value of the combined Belk Companies of $820
million. The allocation to leasehold improvements
resulted in a write down of $1,257 to be amortized over
the average remaining life of leasehold improvements of
10 years............................................... -- (126)
------- --------
$ -- $ 2,166
======= ========
</TABLE>
44
<PAGE> 53
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
NINE MONTHS ENDED NOVEMBER 1, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THE BELK
(1) COMPANIES
BELK-SIMPSON PRO FORMA
HISTORICAL COMBINED ADJUSTMENTS ADJUSTMENTS COMBINED
------------------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Revenues............................. $1,342,918 $45,399 -- $1,388,317
Cost of goods sold (including
occupancy and buying expenses)..... 907,654 30,360 -- 938,014
Selling, general and administrative
expenses........................... 380,793 14,127 $ 1,625(2) 396,545
---------- ------- ------- ----------
Income from operations............... 54,471 912 (1,625) 53,758
Interest expense..................... (27,472) (454) -- (27,926)
Interest income...................... 2,559 -- -- 2,559
Gain on sale of property and
equipment.......................... (177) (1) -- (178)
Gain (loss) on sale of investments... 416 -- -- 416
Other income (expense), net.......... (335) 100 -- (235)
---------- ------- ------- ----------
Income from continuing operations
before income taxes and equity in
earnings of unconsolidated
entities........................... 29,462 557 (1,625) 28,394
Income taxes......................... 11,528 217 (388)(3) 11,357
---------- ------- ------- ----------
Income from continuing operations
before equity in earnings of
unconsolidated entities............ 17,934 340 (1,237) 17,037
Equity in earnings of unconsolidated
entities, net of income taxes...... 442 (442) -- --
---------- ------- ------- ----------
Income (loss) from continuing
operations......................... $ 18,376 $ (102) $(1,237) $ 17,037
========== ======= ======= ==========
Income from continuing operations per
share.............................. $ .29
==========
Pro forma weighted average shares
outstanding........................ 59,713,460
==========
</TABLE>
- ---------------
(1) Adjustments to reflect Belk-Simpson as if the retail operations of
Belk-Simpson had been acquired by the Belk Companies on February 4, 1996
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
-----------
<S> <C>
(2) Adjustments to selling, general and administrative
expense consist of the following:
To record the pro forma increase in depreciation related
to the allocation of fair market values to fixed assets
based on the estimated fair market value of the combined
Belk Companies of $820 million. The allocation to fixed
assets resulted in a write-up of $52,719 to be
depreciated over the average remaining life for fixed
assets of 23 years...................................... $ 1,719
To record the pro forma decrease in amortization related
to the allocation of fair market values to leasehold
improvements based on the estimated fair market value of
the combined Belk Companies of $820 million. The
allocation to leasehold improvements resulted in a write
down of $1,257 to be amortized over the average
remaining life of leasehold improvements of 10 years.... (94)
-------
$ 1,625
=======
(3) Adjustment to reflect income taxes based upon the pro
forma pre-tax income as if the Belk Companies had been
subject to federal and state income taxes at a pro forma
effective tax rate of 40%. ............................. $ (388)
=======
</TABLE>
45
<PAGE> 54
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF NOVEMBER 1, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
-------------------------------------------------
THE BELK
(1) COMPANIES BELK
BELK-SIMPSON PRO FORMA COMPANIES
HISTORICAL COMBINED ADJUSTMENTS ADJUSTMENTS COMBINED
------------------- ------------ ----------- -------------------
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents........ $ 18,063 $ 18,771 -- $ 36,834
Accounts receivable, net......... 325,954 12,537 -- 338,491
Merchandise inventory............ 527,687 19,471 -- 547,158
Other current assets............. 45,427 (6,424) $ 2,303(2) 41,306
---------- -------- -------- ----------
Total current assets............... 917,131 44,355 2,303 963,789
Investments........................ 72,496 (34,500) -- 37,996
Property and equipment, net........ 396,743 24,671 51,462(3) 472,876
Other assets....................... 49,627 892 (1,093)(4) 49,426
---------- -------- -------- ----------
Total assets....................... $1,435,997 $ 35,418 $ 52,672 $1,524,087
========== ======== ======== ==========
Current Liabilities:
Accounts payable................. $ 159,337 $ 4,899 $ 3,657(5) $ 167,893
Accrued expenses................. 67,013 2,354 -- 69,367
Accrued income taxes............. -- 24,787 -- 24,787
Lines of credit and notes
payable....................... 186,766 10,974 -- 197,740
Current installment of long-term
debt and capital lease
obligations................... 34,559 -- -- 34,559
---------- -------- -------- ----------
Total current liabilities.......... 447,675 43,014 3,657 494,346
Deferred income taxes.............. 38,277 976 (29,897)(6) 9,356
Long-term debt and capital lease
obligations, excluding current
installments..................... 208,594 -- -- 208,594
Deferred compensation and other
non-current liabilities.......... 50,672 (5,253) -- 45,419
---------- -------- -------- ----------
Total liabilities.................. 745,218 38,737 (26,240) 757,715
---------- -------- -------- ----------
Deferred income.................... 11,164 -- -- 11,164
---------- -------- -------- ----------
Stockholders' Equity:
Common stock..................... 70,838 1,413 -- 72,251
Paid in capital.................. 470 -- 49,015(7) 49,485
Net unrealized gain(loss) on
investments................... 27,112 (13,967) -- 13,145
Retained earnings................ 581,195 9,235 29,897(8) 620,327
---------- -------- -------- ----------
Total stockholders' equity......... 679,615 (3,319) 78,912 755,208
---------- -------- -------- ----------
$1,435,997 $ 35,418 $ 52,672 $1,524,087
========== ======== ======== ==========
</TABLE>
46
<PAGE> 55
NOTES TO PRO FORMA COMBINED CONDENSED BALANCE SHEET
(1) Adjustments to reflect Belk-Simpson as if the retail operations had been
acquired on November 1, 1997.
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
-----------
<S> <C> <C>
(2) To reduce the deferred tax assets valuation reserve to
recognize net operating losses and other carryforwards that
will be available after the Reorganization.................. $2,303
========
(3) Adjustment to reflect the Reorganization accounted for under
the purchase method. Amount represents the estimated fair
market value in excess of historical cost amounts, which has
been allocated to property and equipment.................... $51,462
========
(4) To reclass capitalized Reorganization costs incurred through
November 1, 1997............................................ $(1,093)
========
(5) To record the anticipated costs incurred in connection with
the Reorganization. The costs are estimated to be $4,750,000
of which $1,093,000 was paid at November 1, 1997. .......... $3,657
========
(6) To eliminate the deferred tax liability related to the gain
on the sale of BAC.......................................... $(29,897)
========
(7) To reduce deferred tax assets valuation reserve to recognize
net operating loss and other carryforwards that will be
available after the Reorganization.......................... $2,303
Adjustment to reflect the Reorganization accounted for under
the purchase method. Amount represents the estimated fair
market value in excess of historical cost amounts, which has
been allocated to property and equipment.................... 46,712
--------
$49,015
========
(8) To eliminate the deferred tax liability related to the gain
on the sale of BAC.......................................... $29,897
========
</TABLE>
47
<PAGE> 56
SELECTED HISTORICAL COMBINED AND UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL INFORMATION
The selected historical combined financial information of the Belk
Companies presented below under the captions "Selected Statement of Income Data"
and "Selected Balance Sheet Data" for, and as of the end of, each of the years
in the five-year period ended February 1, 1997, has been derived from the
historical combined financial statements of the Belk Companies. The historical
combined financial statements as of February 3, 1996 and February 1, 1997 and
for each of the years in the three-year period ended February 1, 1997 have been
audited by KPMG Peat Marwick LLP, independent certified public accountants. Such
historical combined financial statements, and the report thereon, are included
elsewhere in this Proxy Statement/Prospectus. The summary historical combined
information of the Belk Companies presented below for the nine-month periods
ended November 2, 1996 and November 1, 1997, and as of November 1, 1997 has been
derived from the unaudited historical combined financial statements of the Belk
Companies included elsewhere in this Proxy Statement/Prospectus. The unaudited
interim data reflects, in the judgment of management, all adjustments
(consisting of only normal recurring accruals) necessary for a fair presentation
of the results for such interim periods. Results of operations for unaudited
interim periods are not necessarily indicative of results which may be expected
for any interim or annual period. The information presented below under the
caption "Selected Operating Data" is unaudited.
The following summary unaudited combined pro forma financial information of
New Belk has been derived from, or prepared on a basis consistent with, the
unaudited pro forma combined condensed financial statements included elsewhere
in this Proxy Statement/Prospectus. The pro forma information gives effect to
the Reorganization as if it had occurred at the beginning of the first period
presented. This data is presented for illustrative purposes only and is not
indicative of the combined results of operations or financial position that
would have occurred if the Reorganization had been consummated at the beginning
of each period presented or on the dates indicated, nor is it necessarily
indicative of the future operating results or financial position of New Belk.
48
<PAGE> 57
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------------------------------------------------------------------
FISCAL YEAR ENDED NINE MONTHS ENDED
------------------------------------------------------------------- -------------------------
FEBRUARY 2, FEBRUARY 1, JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1993(1) 1994(1) 1995(1) 1996(1) 1997(1)(2) 1996(1) 1997(1)
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED STATEMENT OF
INCOME DATA:
Revenues............. $1,661,942 $1,674,373 $1,694,422 $1,685,470 $1,772,613 $1,138,615 $1,342,918
Cost of goods sold... 1,131,154 1,151,942 1,151,713 1,149,270 1,205,687 774,294 907,654
Depreciation and
amortization....... 41,740 44,104 46,762 50,832 54,198 47,908 39,608
Income from
continuing
operations......... 54,348 40,715 46,893 42,518 64,497 22,613 18,376
Income from
discontinued
operations(4)...... 1,445 1,687 1,731 1,298 36,873 (3,567) (5,143)
Net income........... 55,793 53,923 48,624 43,816 101,370 19,046 13,233
Income from
continuing
operations per
share.............. n/a n/a n/a n/a n/a n/a n/a
Average number of
shares
outstanding........ n/a n/a n/a n/a n/a n/a n/a
SELECTED BALANCE
SHEET DATA:
Accounts receivable,
net................ 275,141 274,011 262,986 263,161 335,914 312,450 325,954
Merchandise
inventories........ 347,619 356,000 349,610 365,902 425,415 528,589 527,687
Working capital...... 479,788 498,845 514,228 423,543 442,753 354,097 469,456
Total assets......... 1,152,706 1,152,071 1,159,735 1,260,979 1,358,900 1,524,065 1,435,997
Short-term debt...... 21,206 20,711 11,000 116,327 187,272 316,864 186,766
Long-term debt....... 267,609 240,923 203,742 169,264 207,496 345,452 231,841
Capitalized lease
obligations........ 12,268 11,487 10,708 9,177 8,514 8,683 11,312
Shareholders'
equity............. 635,705 672,498 717,284 748,706 672,016 590,580 679,615
Book value per
share.............. n/a n/a n/a n/a n/a n/a n/a
SELECTED OPERATING
DATA:
Number of stores at
end of period...... 227 225 221 216 250 253 225(5)
Comparable store net
revenue increases
(decreases)........ 2.7% 4.7% 2.4% (2.3)% 2.3% 2.0% 1.7%
<CAPTION>
PRO FORMA
---------------------------
FISCAL NINE
YEAR MONTHS
ENDED ENDED
------------- -----------
FEBRUARY 1, NOVEMBER 1,
1997(1)(2)(3) 1997(1)(3)
------------- -----------
<S> <C> <C>
SELECTED STATEMENT OF
INCOME DATA:
Revenues............. $ 2,060,236 $ 1,388,317
Cost of goods sold... 1,400,146 938,014
Depreciation and
amortization....... 67,337 43,517
Income from
continuing
operations......... 57,109 17,037
Income from
discontinued
operations(4)...... n/a n/a
Net income........... n/a n/a
Income from
continuing
operations per
share.............. .96 .29
Average number of
shares
outstanding........ 59,713,460 59,713,460
SELECTED BALANCE
SHEET DATA:
Accounts receivable,
net................ n/a 338,491
Merchandise
inventories........ n/a 547,158
Working capital...... n/a 469,443
Total assets......... n/a 1,524,087
Short-term debt...... n/a 197,740
Long-term debt....... n/a 231,841
Capitalized lease
obligations........ n/a 11,312
Shareholders'
equity............. n/a 755,208
Book value per
share.............. n/a 12.65
SELECTED OPERATING
DATA:
Number of stores at
end of period...... 250 225(5)
Comparable store net
revenue increases
(decreases)........ 2.2% 1.3%
</TABLE>
- ---------------
All years include 52 weeks (364 days) except that the fiscal year ended February
3, 1996 includes 368 days and the fiscal year ended February 2, 1993 includes
371 days.
(1) The historical financial information includes financial information for
Belk-Simpson on an equity basis. The pro forma financial information
includes the financial information of Belk-Simpson on a consolidated basis.
(2) In November 1996, Belk of Virginia, Inc. acquired a controlling interest in
various corporations that owned and operated 42 Leggett stores. The
historical financial information for the fiscal year ended February 1, 1997
includes only three months of financial information for the acquired Leggett
stores. The pro forma financial information for the fiscal year ended
February 1, 1997 includes a full fiscal year of financial information for
the Leggett stores.
(3) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock expected to be outstanding upon
consummation of the Reorganization, which includes the one share of New Belk
Class A Common Stock issued in connection with the formation of New Belk,
but excludes the 246,042 shares of New Belk Class A Common Stock which will
be acquired by Belk-Simpson in the Belk-Simpson Merger and the 285,375
shares of New Belk Class A Common Stock which will be acquired by
Belk-Lindsey Stores, Inc. in the Reorganization that will be cancelled upon
consummation of the Reorganization. See "Determination of Applicable
Exchange Ratios."
(4) Income from discontinued operations represents the operating results and
gain on the sale of BAC, which owned and operated a mall in Charlotte, North
Carolina and the operating results of TAGS, which owned and operated outlet
stores.
(5) Excludes 13 stores operated as TAGS Stores (as defined herein) closed in
December 1997.
49
<PAGE> 58
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF THE BELK COMPANIES
The following is a discussion of the historical combined financial
condition and results of operations of the Belk Companies for each of the fiscal
years ended January 31, 1995, February 3, 1996, and February 1, 1997 and for
each of the nine-month periods ended November 2, 1996 and November 1, 1997 which
should be read in conjunction with the historical combined financial statements,
including the notes thereto, included elsewhere in this Proxy
Statement/Prospectus.
GENERAL
Acquisitions. The Belk Companies acquired a controlling interest in
various corporations, which together operated 42 Leggett stores, in November
1996 (the "Leggett Acquisition") for $92.0 million. Under the purchase method of
accounting, the assets, liabilities and results of operations associated with
the Leggett Acquisition have been included in the Belk Companies' financial
position and results of operation for the 1997 fiscal year since the date of
acquisition. Due to the significant impact on the Belk Companies' operations
associated with the Leggett Acquisition, the Belk Companies' historical results
of operations and period-to-period comparisons for the fiscal years ended
February 3, 1996 and February 1, 1997 and for the nine-month periods ended
November 2, 1996 and November 1, 1997 may not be meaningful or indicative of
future results.
Discontinued Operations. In November 1996, the Belk Companies sold their
investment in a company that owned a retail mall to an unrelated third party. In
October 1997, the Belk Companies announced the closing of the TAGS outlet stores
(the "TAGS Stores"), which are operated by TAGS Stores, LLC ("TAGS").
Accordingly, the Belk Companies' continuing operations for the fiscal years
ended February 1, 1997 and February 3, 1996 and the nine-month periods ended
November 1, 1997 and November 2, 1996 have been reclassified to report
separately the operating results of the discontinued operations.
Certain Components of Net Income. Revenues include sales from retail
operations and leased departments. Cost of goods sold include cost of
merchandise, buying, and occupancy expense. Selling, general and administrative
expense ("SG&A") includes payroll, advertising, credit and depreciation expense.
50
<PAGE> 59
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship to revenues of certain items in the Belk Companies' combined
statements of income and other pertinent financial data.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
----------------------------------------- --------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995(1) 1996(1) 1997(1) 1996 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues......................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold............... 68.0 68.2 68.0 68.0 67.6
Selling, general and
administrative expense......... 26.6 27.6 26.5 29.5 28.4
Income from operations........... 5.5 4.2 5.5 2.5 4.0
Interest expense................. 1.3 1.2 1.6 1.6 2.0
Income taxes..................... 1.7 1.3 2.2 1.2 0.8
Income from continuing
operations..................... 2.8 2.5 3.6 2.0 1.4
Discontinued operations.......... 0.1 0.1 2.1 (0.4) (0.4)
Net income....................... 2.9 2.6 5.7 1.7 1.0
Gross square footage (in
thousands)..................... 14,312 14,269 14,754 N/A N/A
Store revenues per gross sq.
ft............................. $ 118 $ 118 $ 120 N/A N/A
Comparable stores revenues
increase (decrease)............ 2.4% (2.3)% 2.3% 2.0% 1.7%
Number of stores
Opened......................... 7 6 5 4 4
Acquired....................... 0 0 42 42 0
Closed......................... (11) (11) (13) (9) (29)(2)
Total -- end of period........... 221 216 250 253 225
</TABLE>
- ---------------
(1) The fiscal years ended January 31, 1995, February 3, 1996 and February 1,
1997 consisted of 364, 368 and 365 days, respectively.
(2) Includes 13 TAGS Stores that were closed in December 1997.
COMPARISON OF NINE MONTHS ENDED NOVEMBER 1, 1997 AND NOVEMBER 2, 1996
Revenues. The Belk Companies' revenues for the nine months ended November
1, 1997 increased 17.9%, or $204.3 million, to $1.34 billion from $1.14 billion
over the same period in 1996. This increase resulted primarily from the Leggett
Acquisition, which contributed $195.5 million in revenues during the nine months
ended November 1, 1997. Revenues for the nine months ended November 2, 1996 do
not include revenues from the 42 acquired Leggett retail department stores.
Comparable store revenues for the nine months ended November 1, 1997 also
increased 1.7% compared to the same period in 1996. These increases were
partially offset by a decrease in revenues of $4.9 million due to the net
closing of 12 stores in the first nine months of fiscal year 1998 and five
stores in the first nine months of fiscal year 1997.
Cost of Goods Sold. As a percentage of revenues, cost of goods sold
decreased to 67.6% for the nine months ended November 1, 1997 as compared to
68.0% in the comparable period in 1996 due to improved inventory management,
which resulted in fewer markdowns. Cost of goods sold increased 17.2% or $133.4
million from $774.3 million for the nine months ended November 1, 1997 to $907.7
million in the comparable period in 1996, primarily due to the higher revenue
volume associated with the Leggett Acquisition. The cost of goods sold of the
acquired Leggett stores for the nine months ended November 1, 1997 was $133.4
million. Excluding the impact of the Leggett Acquisition, cost of goods sold was
constant at $774.3 million for the nine months ended November 1, 1997 and
November 2, 1996.
51
<PAGE> 60
Selling, General and Administrative Expenses. As a percentage of revenues,
SG&A decreased to 28.4% for the nine months ended November 1, 1997 as compared
to 29.5% in the comparable period in 1996. SG&A increased 13.5%, or $45.2
million, to $380.8 million for the nine months ended November 1, 1997 as
compared to $335.6 million during the same period in 1996. The Leggett
Acquisition resulted in additional SG&A of $56.0 million for the nine months
ended November 1, 1997. Excluding the impact of the Leggett Acquisition, SG&A
decreased 3.2% or $10.8 million. This decrease is attributable to decreases in
non-selling payroll expense realized through efficiencies implemented in the
retail department stores, employee insurance and advertising expense.
During the nine months ended November 1, 1997 and November 2, 1996, bad
debt expense, net of recovery, associated with the issuance of credit on the
Belk proprietary credit card was $9.1 million and $5.3 million, respectively.
Although bad debt expense increased $3.8 million due to increased Belk
proprietary credit card sales volume and industry-wide increases in personal
bankruptcies, the increase was partially offset by an increase in finance charge
income of $1.5 million. During the nine months ended November 1, 1997 and
November 2, 1996, finance charge income on the outstanding Belk proprietary
credit card receivables was $27.6 million and $26.1 million, respectively.
The Belk Center, Inc. (the "Belk Center") provides the Belk Companies with
accounts receivable management and collection services. Amounts paid by the Belk
Companies to the Belk Center for its services for the nine months ended November
1, 1997 and November 2, 1996 were $14.2 million and $14.2 million, respectively.
Interest Expense. As a percentage of revenues, interest expense increased
to 2.0% for the nine months ended November 1, 1997 as compared to 1.6% in the
comparable period in 1996. Interest expense increased 51.0%, or $9.3 million, to
$27.5 million for the nine months ended November 1, 1997 as compared to $18.2
million for the same period in 1996. The increase resulted primarily from higher
average outstanding borrowings and higher effective interest rates needed to
fund the Belk Companies' capital expenditures, the Leggett Acquisition and
repurchases of common stock. Of the $9.3 million increase in interest expense,
$4.9 million and $1.8 million, respectively, of the increase were attributable
to interest expense on borrowings to finance the Leggett Acquisition and the
repurchase of common stock. Additionally, $1.0 million in amortized pre-paid
loan expense and $0.7 million in interest rate swap expense were incurred, with
the remaining increase due to the increase in average borrowings.
Gain (Loss) on Sale of Property and Equipment. Gain (loss) on sales of
property and equipment was ($0.2) million for the nine months ended November 1,
1997 as compared to $19.8 million for the same period in 1996. The nine months
ended November 2, 1996 included a $18.9 million gain on the sale of property and
fixtures of three stores in Florida. Management does not anticipate that future
sales of store assets, if any, will result in a gain of this magnitude.
Discontinued Operations. The Belk Companies recognized an after-tax loss
from operations of a retail mall joint venture of $2.8 million for the nine
months ended November 2, 1996. This loss is included in discontinued operations
as a result of selling the company that owned a retail mall.
During the fiscal year ended February 1, 1997, the Belk Companies converted
certain Belk clearance center stores to discount outlet stores and opened two
new store locations under the TAGS name. On September 17, 1997, management
decided to close the TAGS Stores. The TAGS Stores were closed in December 1997
after liquidating the stores' inventory.
The operating results for the TAGS Stores subsequent to conversion to the
TAGS discount outlet format have been presented as discontinued operations. The
Belk Companies recognized a loss on disposal of $5.1 million for the nine months
ended November 1, 1997, which was composed of a $1.3 million after-tax loss on
operations and a $3.8 million after-tax loss on disposal of assets. In addition,
a $1.2 million loss on operations of the TAGS Stores was recognized for the nine
months ended November 2, 1996.
Net Income. Net income decreased $5.8 million from 1.7% of revenues for
the nine months ended November 2, 1996 to 1.0% of revenues for the nine months
ended November 1, 1997. This decrease is primarily attributable to the increase
in interest expense. The increase in interest expense was partially offset
52
<PAGE> 61
by an increase in income from operations which resulted from a decrease of 0.4%
and 1.1% in cost of goods sold and SG&A, respectively, as a percentage of
revenues.
COMPARISON OF FISCAL YEARS ENDED FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
Revenues. The Belk Companies' revenues in fiscal year 1997 increased 5.2%,
or $87.1 million, over fiscal year 1996 from $1.69 billion to $1.77 billion. The
increase resulted primarily from the Leggett Acquisition. On a pro forma basis,
assuming the Leggett store revenues were included for the entire fiscal year
1997, revenues would have increased $218.3 million or 12.3%. On a comparable
store basis, revenues increased 2.3% compared to the first 52 weeks of fiscal
year 1996. These increases were partially offset by a decrease in revenues of
$30.4 million due to the net closing of 8 stores in fiscal year 1997 and 5
stores in fiscal year 1996.
Cost of Goods Sold. As a percentage of revenues, cost of goods sold
decreased to 68.0% in fiscal year 1997 as compared to 68.2% in fiscal year 1996
due to improved inventory management, which resulted in fewer markdowns. Cost of
goods sold increased 4.9%, or $56.4 million, from $1.15 billion in fiscal year
1996 to $1.20 billion in fiscal year 1997, primarily due to higher revenues
associated with the Leggett Acquisition. The Leggett stores' cost of goods sold
for the three month period included in the fiscal year ended February 1, 1997
was $73.9 million. Excluding the impact of the Leggett Acquisition, cost of
goods sold decreased 1.5%, or $17.5 million, from fiscal year 1996 to fiscal
year 1997. This decrease was primarily a result of the closing of 13 stores
offset by the opening of 5 new stores.
Selling, General and Administrative Expenses. SG&A increased 1.0%, or $4.6
million, from fiscal year 1996 to fiscal year 1997. The Leggett Acquisition
resulted in additional SG&A of $25.6 million for fiscal year 1997. Excluding the
impact of the Leggett Acquisition, SG&A decreased 4.5%, or $21.0 million. This
decrease was attributable to decreases in payroll and supply expense realized
through efficiencies implemented in the retail department stores. During fiscal
years 1997 and 1996, bad debt expense, net of recovery, associated with the
issuance of credit on the Belk proprietary credit card was $10.8 million and
$5.4 million, respectively. Although bad debt expense increased $5.4 million due
to increased Belk proprietary credit card sales volume and industry-wide
increases in personal bankruptcies, the increase was substantially offset by an
increase in finance charge income of $4.5 million. During fiscal years 1997 and
1996, finance charge income on the outstanding Belk proprietary credit card
receivables was $37.5 million and $33.0 million, respectively.
The Belk Center provides the Belk Companies with accounts receivable
management and collection services. Amounts paid by the Belk Companies to the
Belk Center for its services during fiscal years 1997 and 1996 were $19.9
million and $20.6 million, respectively.
Interest Expense. As a percentage of revenues, interest expense increased
to 1.6% for fiscal year 1997 as compared to 1.2% in fiscal year 1996. Interest
expense increased 32.0%, or $6.7 million, to $27.6 million in fiscal year 1997
from $20.9 million in fiscal year 1996. The increase resulted primarily from
higher average outstanding borrowings and higher effective interest rates needed
to fund the Belk Companies' capital expenditures, the Leggett Acquisition and
repurchase of common stock. The $6.7 million increase in interest expense was
attributable to interest expense on borrowings to finance the Leggett
Acquisition and the repurchase of Belk Companies Common Stock. Average
outstanding borrowings increased by $65 million and effective interest rates
increased 50 basis points.
Gain on Sale of Property and Equipment. Gain on sale of property and
equipment was $21.3 million in fiscal year 1997, as compared to $5.2 million in
fiscal year 1996, resulting principally from gains on the sale of property and
fixtures of three stores in Florida.
Discontinued Operations. The Belk Companies recognized a gain on the sale
of a company that owned a retail mall of $37.9 million in fiscal year 1997,
which was composed of a $3.6 million after-tax loss on operations and a $41.5
million after-tax gain on disposal of assets. In fiscal year 1996, the after-tax
income from the retail mall operation was $1.3 million. The Belk Companies
recognized an after-tax loss on the discontinued operations of the TAGS Stores
of $1.0 million for the fiscal year ended February 1, 1997.
Net Income. Net income increased $57.6 million to 5.7% of revenues in
fiscal year 1997 compared to 2.6% of revenues in fiscal year 1996. This increase
was primarily attributable to the gain on the sale of a
53
<PAGE> 62
company that owned a retail mall of $41.5 million and the gain on sale of
property and fixtures of three stores in Florida stores of $21.3 million. Net
income contributed by the Leggett Acquisition was $3.1 million in fiscal year
1997.
COMPARISON OF FISCAL YEARS ENDED FEBRUARY 1, 1996 AND JANUARY 31, 1995
Revenues. The Belk Companies' revenues remained substantially flat at
$1.69 billion in fiscal year 1996 as compared to fiscal year 1995. Adjusting for
the impact of the four additional days in fiscal year 1996, comparable store
revenues decreased 2.3% and were experienced by most of the geographical regions
equally in both the Spring and Fall selling seasons. This decrease was partially
offset by an increase in revenues from 24 new, expanded and remodeled stores,
net of decreases resulting from 22 closed stores.
Cost of Goods Sold. Cost of goods sold was constant at $1.2 billion in
fiscal year 1996 compared to fiscal year 1995. As a percentage of revenues, cost
of goods sold increased from 68.0% in fiscal year 1995 to 68.2% in fiscal year
1996. This increase is attributable to an increase in merchandise costs as a
result of increased markdowns, but was partially offset by a decrease in
distribution costs.
Selling, General and Administrative Expenses. As a percentage of revenues,
SG&A increased from 26.6% in fiscal year 1995 to 27.6% in fiscal year 1996. SG&A
increased 3.3%, or $15.0 million, from $450.4 million in fiscal year 1995 to
$465.4 million in fiscal year 1996. This increase was primarily attributable to
increased advertising, computer software and credit expense which increased in
part due to an increase in Belk proprietary credit card promotions and third
party bank card fees. These increases were partially offset by a decrease in
non-selling payroll. During fiscal years 1996 and 1995, bad debt expense, net of
recovery, associated with the issuance of credit on the Belk proprietary credit
card was $5.4 million and $5.3 million, respectively. During fiscal years 1996
and 1995, finance charge income on the outstanding Belk proprietary credit card
receivables was $33.0 million and $35.8 million, respectively.
The Belk Center provides the Belk Companies with accounts receivable
management and collection services. Amounts paid by the Belk Companies to the
Belk Center for its services during fiscal years 1996 and 1995 were $20.6 and
$19.7, respectively.
Gain on Sale of Property and Equipment. Gain on sale of property and
equipment was $5.2 million in fiscal year 1996, as compared to $0.6 million in
fiscal year 1995. In fiscal year 1996, a gain on the sale of property and
fixtures of two South Carolina stores was recognized in the amount of $5.7
million.
Net Income. Net income decreased $4.8 million to 2.6% of revenues in
fiscal year 1996 compared to 2.9% of revenues in fiscal year 1995. This decrease
was primarily attributable to a decrease in income from operations which
resulted from an increase of 0.2% and 1.0% in cost of goods sold and SG&A,
respectively, as a percentage of revenues.
SEASONALITY AND QUARTERLY FLUCTUATIONS
The Belk Companies have historically experienced and expect to continue to
experience seasonal fluctuations in their revenues, operating income and net
income. The highest revenue period for the Belk Companies is the fourth quarter,
which includes the Christmas selling season. A disproportionate amount of the
Belk Companies' revenues and a substantial amount of the Belk Companies'
operating and net income are realized during the fourth quarter. If for any
reason the Belk Companies' revenues were below seasonal norms during the fourth
quarter, the Belk Companies' annual results of operations could be adversely
affected. The Belk Companies' inventory levels generally reach their highest in
anticipation of increased revenues during these months.
54
<PAGE> 63
The following table illustrates the seasonality of revenues by quarter as a
percentage of the full year for the fiscal years indicated.
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
First quarter.......................................... 21.9% 21.5% 21.6%
Second quarter......................................... 21.8% 22.2% 22.1%
Third quarter.......................................... 23.4% 23.4% 23.5%
Fourth quarter......................................... 32.9% 32.9% 32.8%
</TABLE>
The Belk Companies' quarterly results of operations could also fluctuate
significantly as a result of a variety of factors, including the timing of new
store openings.
LIQUIDITY AND CAPITAL RESOURCES
The Belk Companies' primary sources of liquidity are cash on hand, cash
flow from operations, and borrowings under credit facilities.
During the nine months ended November 1, 1997, net cash provided by
operations was $1.2 million, compared to net cash used by operations of $34.7
million during the same period in 1996. Such increase was attributable to an
increase in net income (excluding the gain on sale of property and equipment for
the nine months ended November 2, 1996) and an increase in accounts payable,
offset by an additional investment in inventory.
In fiscal year 1997, the Belk Companies had sufficient cash flows from
operations and their credit facilities to fund their working capital needs,
capital expenditures, the Leggett Acquisition and repurchase of common stock.
Net cash provided by operations was $117.9 million, $60.4 million, and $67.3
million for the 1995, 1996, and 1997 fiscal years, respectively. In fiscal year
1995, cash flows from operations of $117.9 million included $48.6 million in net
income accompanied by an increase of $12.5 million in accounts payable and a
decrease of $11.0 million in accounts receivable from customers. The decrease in
cash provided from operations in fiscal year 1996 as compared to fiscal year
1995 was attributable to changes in working capital needs, primarily a decrease
in accounts payable of $8.2 million combined with an additional investment in
inventory of $16.3 million. The increase in cash provided from operations in
fiscal year 1997 was attributable to increased net income, which resulted from
the sale of property and fixtures and a company that owned a retail mall, offset
partially by the increase in accounts receivable from customers. Accounts
receivable from customers increased 27.6% from February 3, 1996 to February 1,
1997 resulting in a decrease in cash provided from operations of $32.7 million.
The Belk Companies have promoted the Belk proprietary credit card through
targeted marketing campaigns and active solicitation efforts on the store sales
floor in order to attract new customers and generate additional sales from
existing customers to increase the active proprietary credit card account base.
While these efforts have been successful in increasing credit card sales volume
significantly, cash provided from operations has been negatively impacted.
Investing activities included capital expenditures, primarily for new,
relocated and remodeled stores; purchases and sales of equity investments;
purchases and sales of property and equipment related to store openings and
closings; and the acquisition of a company that indirectly owned a 50% interest
in a retail mall and the Leggett Acquisition. The Belk Companies operated 221,
216 and 250 department stores, respectively, for the 1995, 1996 and 1997 fiscal
years. Stores have been strategically opened and closed to allow the Belk
Companies to focus on their most productive and profitable markets. New Belk
will continue to open new stores in new and existing markets, and to expand and
renovate existing store facilities in order to increase revenues and market
share.
Capital expenditures, primarily for new and remodeled stores, amounted to
$54.9 million in the nine months ended November 1, 1997 and $53.7 million in the
comparable period in 1996. Capital expenditures amounted to $34.3 million, $50.3
million, and $62.4 million for the 1995, 1996 and 1997 fiscal years,
respectively. While it is difficult to predict future capital expenditure needs
for the Belk Companies, capital expenditures over the next three fiscal years
are expected to average between $60 and $90 million per year, excluding any
acquisitions.
55
<PAGE> 64
Financing activities included repurchases of common stock and payments or
additional borrowings on credit facilities. During the fiscal year ended
February 1, 1997, the Belk Companies repurchased common stock from several major
shareholders for an aggregate of $169.3 million. The repurchases contributed an
increase of $108.5 million in credit facilities from fiscal year 1996 to fiscal
year 1997. In addition, stockholders' equity decreased from $748.7 million at
February 3, 1996, to $672.0 million at February 1, 1997. This decrease of $76.7
million was due primarily to a decrease of $169.3 million resulting from the
stock repurchases, offset partially by net income of $101.4 million for the
fiscal year ended February 1, 1997.
The Belk Companies have from time to time purchased stock of Belk Companies
from individual shareholders. See "Certain Relationships and
Transactions -- Certain Transactions with Management and Business Relationships
Between the Belk Companies." Such purchases were made generally to provide a
source of liquidity for Existing Belk Stockholders who desired to sell shares of
Belk Companies Common Stock.
New Belk entered into an agreement dated February 27, 1998 (the "Hanahan
Agreement") with Mary E.S. Hanahan ("Mrs. Hanahan"), who is the owner of Belk
Companies Common Stock of Belk's Department Store of Albemarle, North Carolina,
Incorporated, Belk-Simpson Co., of Bainbridge, Ga., Inc., Belk-Simpson Company,
Incorporated of Beaufort, South Carolina, Belk's Department Store of Camden,
S.C., Incorporated, Belk Department Store of Charleston, S.C., Inc., Belk
Brothers Company, Belk Enterprises, Inc., Belk Department Store of Clinton,
N.C., Inc., Belk-Simpson Company of Corbin, Kentucky, Incorporated, Belk's
Department Store of Dunn, North Carolina, Incorporated, Belk-Simpson Company of
Harlan, Kentucky, Incorporated, Belk Department Store of Hickory, N.C., Inc.,
Belk-Simpson Realty Company and Belk's Department Store of Laurens, South
Carolina, Incorporated. In the Hanahan Agreement, New Belk agreed that, at the
election of Mrs. Hanahan at any time prior to December 31, 1999, New Belk would
purchase all of the shares of New Belk Common Stock received by Mrs. Hanahan in
the Reorganization for an aggregate purchase price of $3.85 million. If Mrs.
Hanahan elects to require New Belk to purchase her New Belk Common Stock, New
Belk expects to fund the purchase of these shares with cash from operations. New
Belk has no other plans or agreements in place to purchase New Belk Common Stock
following the Reorganization.
The Belk Companies total indebtedness at November 1, 1997 was $429.9
million, compared to $671.0 million at November 2, 1996. The $429.9 million
indebtedness at November 1, 1997 is comprised of $221.3 million of current
maturities of long-term debt and short-term borrowings and $208.6 million of
long-term debt. Of the $429.9 million of total indebtedness, $378.3 million was
variable rate debt based on LIBOR and the secondary 90-day CD rate, and $51.6
million was fixed-rate. The Belk Companies have entered into interest rate swap
agreements with various financial institutions to manage the exposure to changes
in interest rates on its LIBOR based indebtedness. The amount of indebtedness
covered by the interest rate swaps was $125.0 million at November 1, 1997.
Subsequent to November 1, 1997, the Belk Companies entered into an additional
$50.0 million in interest rate swaps. The amount of indebtedness covered by the
interest rate swaps is $175.0 million for 1998, $150.0 million for 1999, $75.0
million for 2000 and 2001, and $50.0 million through 2007.
During November, 1997, the Belk Companies obtained a $164.0 million credit
line from a bank consortium to fund seasonal borrowing requirements. This
facility replaced individual seasonal lines with single banks for individual
Belk Companies.
For the fiscal year ending January 31, 1999, New Belk's cash requirements
will be for working capital, capital expenditures, technology, reorganization
expenses and debt service. Management plans to open four new stores and remodel,
expand or relocate nine existing stores in fiscal year 1998, which would add
approximately 341,000 additional square feet of selling space, a 2% increase
over fiscal year 1997. Management presently anticipates funding these
expenditures from operations and credit facilities.
In addition, New Belk intends to enter into an accounts receivable
securitization program whereby it will sell an undivided interest in the Belk
proprietary credit card receivables through a special purpose limited liability
company. The program will be funded by commercial paper and will initially be
limited to $40 million
56
<PAGE> 65
with the potential to reach $250 million by the end of the fiscal year ended
January 30, 1999. Net proceeds received under the program will be used to reduce
indebtedness.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share" which is
effective for the Belk Companies on January 31, 1998. SFAS No. 128 simplifies
the standards for computing earnings per share previously found in Accounting
Principles Board Opinion No. 15 and establishes new standards for computing and
presenting earnings per share. Application of SFAS No. 128 is not expected to
have a significant effect on New Belk.
In February 1997, the Financial Accounting Standards Board issued SFAS No.
129, "Disclosure of Information about Capital Structure" which establishes
standards for disclosing information about an entity's capital structure.
Application of SFAS No. 129 is not expected to have a significant effect on New
Belk.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" which establishes standards for reporting
comprehensive income and its components in the financial statements.
Comprehensive income is defined as the change in equity of a business enterprise
during a period from transactions and other events and circumstances from
nonowner sources. It includes all changes in equity during a period except those
resulting from investments by owners and distributions to owners. For New Belk,
this disclosure will consist primarily of changes in the unrealized gains and
losses from FAS 115 and will be effective for the first quarter of the fiscal
year ending January 30, 1999.
IMPACT OF INFLATION
While it is difficult to determine the precise effects of inflation,
management of BSS does not believe inflation had a material impact on the
combined financial statements for the periods presented.
YEAR 2000 ISSUES
In January 1996, the Belk Companies began converting their computer systems
to be Year 2000 compliant (e.g. to recognize the difference between '99 and '00
as one year instead of negative 99 years). At November 1, 1997, approximately
40% of the Belk Companies' systems were compliant, with all systems expected to
be compliant by the end of the fiscal year ending January 30, 1999. The total
cost of the project is estimated to be $5.5 million and is being funded through
operating cash flows. The Belk Companies are expensing all costs associated with
these system changes. As of November 1, 1997, $1.8 million had been expensed.
BUSINESS OF NEW BELK
BUSINESS OVERVIEW
The Belk Companies operate the largest privately-owned department store
business in the United States, with total revenues of approximately $2.1 billion
on a pro forma combined basis for the fiscal year ended February 1, 1997. The
Belk Companies and the Surviving Belk Subsidiaries operate 223 retail department
stores in 13 states in the southeastern United States. Belk stores sell top
national brands of fashion apparel, shoes and accessories for men, women and
children, as well as cosmetics, home furnishings, housewares, gifts and other
types of merchandise. Belk stores also offer customers exclusive private label
brands, such as Andhurst, Heiress, Home Accents, J. Khakis, Kim Rogers,
Maryann's Boutique, Meeting Street, Saddlebred, Sweetbriar and 24/Seven. Larger
Belk stores include hair salons, restaurants, optical centers and other
amenities. Belk stores attempt to provide customers with the convenience of
one-stop shopping, with a large merchandise mix and extensive offerings of
brands, styles, assortments and sizes.
Although the Belk Companies operate 48 Belk stores that exceed 100,000
square feet in size, most Belk stores range in size from 50,000 to 80,000 square
feet. In addition to department stores, the Belk Companies operate two stores
that sell limited selections of cosmetics, hosiery and accessories for women
under the "Belk
57
<PAGE> 66
Express" store name. The Companies also operated several discount outlet centers
under the TAGS name. These stores were closed during the fiscal year ended
January 31, 1998.
Most of the Belk stores are anchor tenants in major regional malls and
shopping centers, primarily in medium and smaller markets. The Belk stores
occupy in the aggregate approximately 17 million square feet of space.
Management of the Belk stores is organized into separate and independent
regional operating groups, with each group headed by an executive vice
president. Each group supervises a number of stores and maintains an
administrative office in the market served by the group. Group offices provide
overall management and support for the Belk stores in their regions. Support
services include merchandising, advertising and sales promotion, human
resources, accounting, training, operations and systems support.
BSS coordinates the Belk stores operations on a company-wide basis by
providing services to the Belk Companies and Belk stores such as merchandising,
marketing, advertising and sales promotion, human resources, public relations,
accounting, store planning, credit operations, legal assistance, distribution
and purchasing.
BUSINESS STRATEGY
New Belk's business strategy will be to increase shareholder value by
focusing on increasing sales volume, market share, productivity and operating
earnings. Management of New Belk believes that the consolidation of the Belk
Companies will also allow New Belk to consolidate and reduce certain operating
and administrative expenses. Key elements of New Belk's business strategy
include (i) expanding and remodeling existing stores to provide more attractive
store environments, (ii) lowering New Belk's cost structure, (iii) reinforcing
the Belk stores' position as a fashion leader within their markets, (iv)
generating additional sales from existing customers and (v) focusing on customer
service to encourage repeat customers.
Store Expansion and Renovation. New Belk will continue the ongoing program
of the Belk Companies to expand and renovate existing store facilities to ensure
that all stores provide customers with an exciting shopping environment that is
modern, attractive, comfortable and convenient. The Belk Companies have invested
approximately $215 million over the past five years in building new stores and
expanding and renovating existing stores.
Lower Cost Structure. The Belk Companies have implemented a plan in recent
years to significantly lower their cost structure and improve operational
efficiency. This plan has resulted in improved store profitability and has
enabled Belk stores to provide more competitive pricing and value to customers.
New Belk will continue to implement this plan in the Belk stores. New Belk will
also continue to improve profitability by implementing new management
information systems and sales support re-engineering programs. Management also
believes that the Reorganization will lead to lower administrative costs and
other expenses associated with its current organizational structure.
Fashion Leadership. New Belk intends to capitalize on and expand the
dominant position of most of its stores as the leading distributor and provider
in its markets of top national "mega-brand" fashion merchandise. New Belk will
also seek to maintain high inventory levels of basic and advertised merchandise
and to aggressively develop and grow New Belk's private brand business.
Sales Growth From Existing Customers. Management believes that New Belk
can increase the sales and earnings of the Belk Companies by generating
additional sales from existing customers. New Belk intends to target top
customers who generate significant sales through a new program which provides
special benefits to customers who make extensive use of Belk credit programs.
New Belk will also seek to grow sales from existing customers by focusing the
efforts of Belk associates on increasing the number of units per transaction,
approaching customers promptly and recognizing them by name and aggressively
promoting the use of Belk credit programs.
Customer Focus and Customer Service. Management intends to respond
aggressively to changing customer shopping and service needs through effective
communication with customers and consumer research. New Belk will also seek to
maximize customer convenience through effective inventory management that
ensures consistently high inventory levels of basic and advertised merchandise,
effective store layout,
58
<PAGE> 67
merchandise signage and visual display, and quick and efficient transactions at
the point of sale. New Belk will also strive to continue to attract and retain
well-qualified associates who provide a high level of friendly, personal service
to enhance the customer's shopping experience.
GROWTH STRATEGY
New Belk intends to open new stores in new and existing markets in order to
increase sales, market share and customer loyalty. As the consolidation of the
department store industry continues, New Belk will seek out and consider retail
acquisitions that offer opportunities and growth into contiguous markets.
Management of New Belk believes the greatest opportunities for growth are in
existing Belk markets where the Belk name and reputation are well known.
Although New Belk will take advantage of opportunities to expand into large
markets, New Belk will focus its expansion in medium sized markets, where there
is little department store competition, with store units in the 50,000 to
80,000-square-foot size range.
In determining where to open new stores, New Belk management will evaluate
demographic information such as income and education levels, age and occupation,
availability of prime real estate locations, existing and potential competitors
and the number of Belk stores in the same or contiguous market areas. Management
will also analyze store and market sales and income data and seek to identify
economies of scale available in advertising, distribution and other expenses as
part of its process for determining new store sites and markets for expansion.
Using this strategy, the Belk Companies opened five new stores in 1996 with a
combined size of more than 214,000 square feet of space. In 1997, the Belk
Companies opened five new Belk stores with a combined size of more than 400,000
square feet of space.
New store locations in 1997 included:
<TABLE>
<CAPTION>
LOCATION SIZE (IN SQ. FT.) DATE OF OPENING
- -------- ----------------- ----------------
<S> <C> <C>
Greensboro, N.C., Friendly Shopping Center.................. 140,000 April 9, 1997
Carrollton, Ga., Carrollton Center.......................... 70,000 July 30, 1997
Cartersville, Ga., Main Street Shopping Center.............. 60,000 July 30, 1997
Prattville, Ala., Premier Place............................. 51,000 August 6, 1997
Easley, S.C., Town and Country Plaza........................ 90,000 October 15, 1997
</TABLE>
Eight new Belk stores are scheduled for completion in 1998. They include:
<TABLE>
<CAPTION>
APPROXIMATE
DATE OF
SCHEDULED EXPECTED SIZE
LOCATION COMPLETION (IN SQ. FT.) NEW OR EXISTING MARKET
- -------- ------------- ----------------- ----------------------
<S> <C> <C> <C>
Canton, Ga............................ February 1998 60,000 New
Smithfield, NC........................ February 1998 59,000 Existing
Suffolk, Va........................... May 1998 46,000 New
Cookeville, TN........................ July 1998 60,000 New
Garner, NC............................ August 1998 46,000 New
Cayce, SC............................. August 1998 49,000 New
Douglas, Ga........................... October 1998 45,000 Existing
Simpsonville, SC...................... October 1998 51,000 New
</TABLE>
MERCHANDISING
Belk stores feature quality name brand and private label merchandise in
moderate to upper-middle price ranges, providing fashion, selection and value to
customers. The merchandise mix is targeted to middle and upper-income customers
shopping for their families and homes, and includes a wide selection of fashion
apparel, accessories and shoes for men, women and children, cosmetics, home
furnishings, housewares, gift and guild, jewelry, candy and other types of
department store merchandise.
Belk stores offer complete assortments of desirable national brands
advertised within the store by attractive store displays. Most Belk stores are
the leading sellers in their markets of such top national "mega-
59
<PAGE> 68
brands" as Estee Lauder, Clinique, Lancome, Jones New York, Liz Claiborne, Tommy
Hilfiger, Polo Ralph Lauren, Calvin Klein, Pendleton, Lee, Levi, Nike, Reebok,
Bali and others. The Belk Companies have enjoyed excellent long-time
relationships with many top apparel and cosmetics suppliers and often enter into
arrangements to distribute apparel, accessories and cosmetics on an exclusive
basis. This enhances the Belk stores' image as a fashion leader and enables Belk
stores to offer customers exclusive and original styles that are not generally
available in other stores in their markets.
Belk stores also offer a number of exclusive private label brands which
provide customers with merchandise which is comparable in quality and style with
national "mega-brands" at substantial savings. Management of New Belk will seek
to increase private brand sales because private brand sales typically have
higher margins.
New Belk intends to keep fresh seasonal inventory in stock at stores
throughout the year and to maintain inventory levels that provide optimum
in-stock positions. Belk stores place special emphasis on maintaining high
levels of inventory of advertised and basic items to ensure that consumers may
buy the merchandise they want. To maintain adequate inventories of basic
merchandise, the Belk Companies have developed an automated inventory system
that alerts suppliers when inventories need to be replenished. This system helps
ensure that Belk stores can meet customers' basic needs.
The Belk Companies use state-of-the-art merchandise information systems to
assist management in quickly identifying sales trends, managing markdowns and
monitoring merchandise mix and inventory levels. The stores also use a uniform
product code bar coded scanning system to speed sales transactions and ensure
accuracy.
MARKETING
General. New Belk's primary marketing strategy will involve direct
communications with customers through personal contact and the use of
multi-faceted advertising, marketing and sales promotion programs. The strategy
is expected to encompass extensive mass media print and broadcast advertising,
direct mailings to charge customers, comprehensive store visual merchandising
and signing, in-store special events (e.g., fashion shows, trunk shows,
celebrity and designer appearances) and magazine and billboard advertising. The
Belk Companies expense advertising costs as incurred, net of reimbursement by
suppliers.
Major sales promotions and sales events will be planned and implemented
throughout the year. New Belk is expected to produce advertising circulars
during the year which will be distributed to millions of customers via newspaper
inserts or direct mailings, and the cost of many of these mailings is funded in
part or in whole by suppliers. New Belk intends to use creative advertising that
effectively communicates New Belk's merchandise offerings and fashion image to
store customers in a variety of media.
In addition, the Belk Companies are testing a "one-to-one" relationship
marketing program which will enable New Belk to communicate and advertise with
customers more effectively based on the customer's individual merchandise needs
and shopping preferences. The program will also enable New Belk to target more
effectively direct mail sales promotions and communications to charge customers
based on market data, shopping patterns and purchasing behavior. The program is
expected to substantially reduce the cost and increase the return on direct mail
advertising to charge customers. The program is expected to be implemented in
all Belk stores beginning in the Spring of 1998.
New Belk will carefully monitor marketing and sales promotion efforts and
media mix to ensure that customers are being reached effectively and efficiently
and that stores generate the maximum return possible on their advertising
expenditures. Marketing and sales promotions initiatives by the Belk Companies
for fiscal year 1997 included the following:
- implementation of an electronic ad service system that allows stores
throughout a market to obtain the latest merchandise advertisements and
photos electronically;
- increased use of direct mail and other targeted marketing vehicles to
boost sales of key national "mega-brands;" and
60
<PAGE> 69
- implementation of improved visual display standards in all stores with
emphasis on the creation of high impact merchandising for key suppliers
and merchandise lines.
Proprietary Credit Card. Management of New Belk believes it can increase
sales by generating additional sales from existing Belk charge customers. There
were a total of 1.9 million active Belk charge customers in fiscal year 1998,
which included 90,000 customers who live outside of existing market areas. Belk
credit sales for fiscal year 1998 were 38.6% of total sales, compared to 37.2%
for the same period last year.
New Belk intends to increase the frequency of use of the Belk charge cards
by existing Belk charge customers as well as increase the number of new Belk
cardholders through targeted marketing campaigns and active solicitation efforts
within Belk stores. A new affinity program for top Belk charge customers called
"BelkSelects" was introduced in fiscal year 1997 to attract profitable new
customers, increase sales from existing customers and increase the active Belk
credit card account base. The program offers a number of special benefits and
services, such as free deluxe gift wrapping and free basic alterations, to
charge customers who have made Belk charge purchases totaling $800 or more in
the past 12 months. Approximately 293,000 Belk charge customers qualified for
the program initially and received new BelkSelects cards, and an additional
70,000 Belk charge customers have qualified for the program during fiscal year
1998.
BUYING
The Belk Companies' highly qualified and experienced buyers and merchants
carefully monitor the merchandise mix of the Belk stores to maximize sales and
profitability. The planning process involves a continuing review of merchandise
needs by department and demand center, as well as on an individual store basis.
Historically, Belk stores have remained in touch with their customers and
markets through their use of a decentralized buying process. The Belk Companies
have evolved from individual store buying to a more efficient buying process
conducted by group buyers located in regional offices. These buyers work
together with corporate buyers at BSS and local store personnel to ensure that
each Belk store gets the merchandise needed to meet the needs of local
customers.
The Belk Companies are currently conducting a pilot test of a new
merchandise procurement process called Transforming the Merchandise Process
("TMP"). This process is designed to capitalize on the Belk Companies' ability
to tailor merchandise assortments to individual store locations and still take
advantage of the collective buying clout of over two hundred stores. TMP uses a
team approach which brings group buyers and corporate buyers at BSS in each
merchandise category together to develop strategies for creating merchandising
assortments that generate profitable sales volume.
STORE LOCATIONS AND OPERATIONS
As of March 2, 1998, the Belk Companies and the Surviving Belk Subsidiaries
operated a total of 223 retail stores in the following states:
Alabama -- 3
Arkansas -- 2
Florida -- 17
Georgia -- 42
Kentucky -- 4
Maryland -- 2
Mississippi -- 1
North Carolina -- 79
South Carolina -- 39
Tennessee -- 3
Texas -- 2
Virginia -- 27
West Virginia -- 2
Belk stores are located in regional malls (122), strip shopping centers
(92) and as freestanding units (9). Approximately 89% of the gross square feet
of the typical Belk store is devoted to selling space to ensure maximum
operating efficiencies. A majority of the stores are either new or have
undergone renovations within the past ten years. The new and renovated stores
feature the latest in retail design, including attractive exteriors and
interiors. The interiors are designed to create an exciting, comfortable and
convenient shopping environment for customers. They include the latest lighting
and merchandise fixturing, as well as quality
61
<PAGE> 70
decorative floor and wall coverings and other special decor. The store layout is
designed for ease of shopping and store signing is used to help customers
identify and locate merchandise.
As of March 2, 1998, the Belk Companies owned 66 stores, leased 148 stores
under operating leases, and owned 9 stores under ground leases. The typical
operating lease has an initial term of between 15 and 20 years, with four
renewal periods of five years each, exercisable at the particular Belk Company's
option. The typical ground lease has an initial term of 20 years, with four
renewal periods of five years each, exercisable at the particular Belk Company's
option.
The Belk Companies also own or lease the following distribution centers,
regional group offices and headquarters facilities:
<TABLE>
<CAPTION>
BELK PROPERTY LOCATION OWN/LEASE
- ------------- --------------- ---------
<S> <C> <C>
Hudson Group Office........................................ Raleigh, NC Lease
Howard Group Office........................................ Fayetteville, Lease
NC
Kerr Group Office.......................................... Norcross, GA Lease
Kuhne/Greiner Group Office................................. Greenville, SC Own
Matthews Group Office...................................... Gastonia, NC Own
Nipper Group Office........................................ Summerville, SC Own
Pennell Group Office....................................... Charlotte, NC Own
Stovall Group Office....................................... Richmond, VA Lease
Belk Stores Services -- LakePointe......................... Charlotte, NC Own
Howard Group Distribution Center........................... Fayetteville, Lease
NC
Hudson Group Distribution Center........................... Morrisville, NC Own
Huffstetler Group Distribution Center...................... Greensboro, NC Lease
Kuhne/Greiner Group Distribution Center.................... Mauldin, SC Lease
Nipper Group Distribution Center........................... Summerville, SC Lease
</TABLE>
SYSTEMS AND TECHNOLOGY
Management of New Belk believes that investments in technology and
information systems are necessary in order to drive sales growth, improve
operating efficiency and support its overall business strategy. The Belk
Companies now use a number of systems designed to capture information, including
a merchandise tracking system, a point of sale system and a data warehouse
system that will help buyers improve their merchandise decisions by giving them
timely merchandise and sales information. New systems that will be implemented
in the future include (i) a merchandise planning system that will help improve
the quality of merchandise plans, assortments and inventory timing and flow and
(ii) a price management system that will give buyers and store associates more
control over the pricing of merchandise. Management has also implemented a
system wide review in order to modify the Belk Companies management information
systems and other information systems to recognize all calendar data after
December 31, 1999.
NON-RETAIL BUSINESSES
General. Several of the Belk Companies and the Surviving Belk Subsidiaries
(including those that New Belk does not intend to merge into itself after
consummation of the Reorganization) do not operate retail department stores, but
instead operate business that indirectly or directly support the operations of
the retail department stores. The non-retail businesses include (i) real estate
operations, (ii) financing operations, (iii) equipment maintenance operations,
(iv) advertising, (v) equipment leasing, (vi) importing and (vii) insurance
services. None of the non-retail businesses are material to the Belk Companies'
operations as a whole. The financing operations, operated by Belk Finance
Company ("Belk Finance"), and the equipment maintenance services, operated by
UES, however, are important to the Belk Companies' operations because, absent
those services, the Belk Companies would be required to purchase those services
from third parties.
62
<PAGE> 71
Belk Finance. Belk Finance provides financing services to the Belk
Companies and Surviving Belk Subsidiaries by handling cash investments from Belk
Companies and providing loans to Belk Companies. Belk Finance, as one of the
Belk Companies, will merge with and into New Belk. See "Certain Relationships
and Transactions -- Certain Transactions with Management and Business
Relationships Between the Belk Companies."
UES. UES, a wholly owned subsidiary of Belk of Lawrenceville, Va., Inc.,
provides equipment maintenance services, primarily on cash registers, but also
on other equipment. UES provides such services to the Belk Companies pursuant to
contracts with BSS. See "Certain Relationships and Transactions -- Certain
Transactions with Management and Business Relationships Between the Belk
Companies."
Discount Operations. During the fiscal year ended February 1, 1997 and the
fiscal year ended January 31, 1998, The Belk Companies converted certain Belk
clearance center stores to discount outlet stores operated under the TAGS name.
The TAGS Stores sold irregular, close-out, excess and out-of-season merchandise
purchased from third-party vendors. The TAGS Stores were designed to have
significantly lower gross margins and lower payroll costs than Belk retail
department stores, with check-out counters in the front of the store and fewer
sales associates. In October 1997, the Belk Companies announced the closing of
the TAGS Stores. The TAGS Stores were closed in December 1997 and the remaining
assets are currently undergoing liquidation.
One of the regional operating groups, located in Gainesville, Florida, also
operates three small clearance centers that are used to liquidate merchandise
transferred from retail department stores in the regional operating group after
the merchandise is no longer saleable in the retail department stores. New Belk
will operate these stores after consummation of the Reorganization.
INDUSTRY AND COMPETITION
The Belk Companies operate retail department stores in the highly
competitive and dynamic retail apparel industry. Management of New Belk believes
that the principal competitive factors for retail department store operations
include merchandise selection, quality, value, customer service and convenience.
New Belk believes its stores are strong competitors in all of these areas. New
Belk's primary competitors are traditional department stores, mass
merchandisers, national apparel chains, designer boutiques, individual specialty
apparel stores and direct marketing firms including Federated Department Stores,
Inc., The May Department Stores Company, Dillard's, Inc., Proffitt's, Inc., J.C.
Penney Company, Inc., Wal Mart Stores, Inc. and Sears, Roebuck & Co.
TRADEMARKS AND SERVICE MARKS
BSS owns all of the principal trademarks and service marks now used by the
Belk Companies in their businesses, including "Belk" and "All for You." These
marks are registered with the United States Patent and Trademark Office. The
term of each of these registrations is generally ten years, and they are
generally renewable indefinitely for additional ten year periods so long as they
are in use at the time of renewal. Most of the trademarks, trade names and
service marks employed by the Belk Companies in their businesses are used in the
Belk Companies' private label program. New Belk intends to vigorously protect
its trademarks and service marks and initiate appropriate legal action whenever
necessary.
EMPLOYEES
As of January 31, 1998, the Belk Companies had approximately 22,000
full-time and part-time employees. Because of the seasonal nature of the retail
business, the number of employees is highest during the holiday shopping period
in November and December. The Belk Companies as a whole consider their relations
with employees to be good. None of the employees of the Belk Companies is
represented by unions or subject to collective bargaining agreements.
63
<PAGE> 72
LEGAL PROCEEDINGS
The Belk Companies are engaged in various legal actions which are
incidental to their business. Management of New Belk believes that none of the
various actions and proceedings involving the Belk Companies will have a
material adverse effect on New Belk's financial condition or results of
operations.
64
<PAGE> 73
MANAGEMENT
DIRECTORS
Upon consummation of the Reorganization, the New Belk Board will consist of
ten members. Pursuant to the New Belk Certificate, the New Belk Board will be
divided into three classes as nearly equal in number as possible, with staggered
three year terms. Prior to the annual meeting of New Belk Stockholders in 1998,
the New Belk Board will nominate persons for election as Class I, Class II and
Class III directors, with Class I directors to serve a one-year term that will
expire at the annual meeting of New Belk Stockholders in 1999, Class II
directors to serve a two-year term that will expire at the annual meeting of New
Belk Stockholders in 2000 and Class III directors to serve a three-year term
that will expire at the annual meeting of New Belk Stockholders in 2001. At the
expiration of the term of office of each class of directors elected at the
annual meeting of New Belk Stockholders in 1998, the nominees for election as
directors within each class will be elected for a three-year term.
Set forth below is information with respect to the directors of New Belk.
The following table sets forth information as to the persons who are expected to
serve as directors of New Belk following the Reorganization until the annual
meeting of New Belk Stockholders in 1998.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
John M. Belk................ 77 Chairman of the Board and Chief Executive Officer
Sarah Belk Gambrell......... 79 Director
Thomas M. Belk, Jr.......... 42 Director, President
H. W. McKay Belk............ 41 Director, President
John R. Belk................ 39 Director, President
David B. Cannon............. 60 Director
J. Kirk Glenn, Jr........... 55 Director
Karl G. Hudson, Jr.......... 78 Director
John A. Kuhne............... 54 Director
B. Frank Matthews, II....... 70 Director, Executive Vice President
</TABLE>
John M Belk. Mr. Belk is Chairman of the Board of BSS and most of the Belk
Companies. Mr. Belk has been Chief Executive Officer of BSS and most of the Belk
Companies for more than forty years. Mr. Belk was Mayor of the City of Charlotte
from June 1969 until December 1977. Mr. Belk is a Director emeritus of Wachovia
Corporation and Quantum Chemical Corporation and serves on the Boards of
Directors of Lowe's Companies, Coca-Cola Bottling Co. Consolidated, Inc. and
PMC, Inc. and has served on the Board of Directors of Chaparral Steel Company.
He is a past Chairman of the National Retail Federation. He is on the Board of
Trustees of Union Theological Seminary, the Board of Visitors of the University
of North Carolina at Charlotte, the North Carolina Council on Management and
Development and the Business Partnership Foundation of the University of South
Carolina, Columbia. Mr. Belk is the brother of Sarah Belk Gambrell and the uncle
of Thomas M. Belk, Jr., H.W. McKay Belk and John R. Belk.
Sarah Belk Gambrell. Mrs. Gambrell serves as a director of many the Belk
Companies and has served as Vice Chairman and President of various Belk
Companies for many years. She has served as Trustee of the Presbyterian School
of Christian Education in Richmond, Virginia, Princeton Theological Seminary,
Warren Wilson College and Johnson C. Smith University. She is a member of the
Board of Visitors of the UNC Cancer Center at Chapel Hill, North Carolina, and
she serves on the Boards of the North Carolina Community Foundation, Inc, the
Foundation for Good Business, the Florence Crittenton Home, the Queens College
Friends of Music, the Parkinson's Disease Foundation in New York City, the
Parkinson's Association of Mecklenburg County, North Carolina and the National
Board of the YWCA. Mrs. Gambrell is the sister of John M. Belk and the aunt of
Thomas M. Belk, Jr., H.W. McKay Belk and John R. Belk.
65
<PAGE> 74
Thomas M. Belk, Jr. Mr. Belk has been Vice Chairman of BSS and President
of most of the Belk Companies since March 1997. Mr. Belk also serves on the
Boards of Directors of most of the Belk Companies. Mr. Belk has been employed in
the Belk retail organization since 1981. From February 1991 to February 1992,
Mr. Belk was employed by BSS as Vice President, Real Estate and Store Planning.
From February 1992 to March 1997, Mr. Belk was employed by BSS as Senior Vice
President -- Human Resources and Operations, Long Range Planning. Mr. Belk
serves on the Boards of Advisors of the Wachovia Bank, N.A., Kenan Flagler
Business School at UNC-Chapel Hill and the University of North Carolina at
Charlotte Foundation. He serves on the Boards of Directors of the Mecklenburg
County Council of Boy Scouts of America, the Charlotte Metropolitan YMCA,
Charlotte Country Day School, American Humanics, Inc., Research Triangle
Foundation of North Carolina, Presbyterian Hospital Foundation and Foundation
for the Carolinas. Mr. Belk is the brother of H.W. McKay Belk and John R. Belk
and the nephew of John M. Belk and Sarah Belk Gambrell.
H.W. McKay Belk. Mr. Belk has been Vice Chairman of most of the Belk
Companies and President and Chief Merchandising Officer of BSS since March 1997.
Mr. Belk has been employed in the Belk retail organization since June 1979. From
January 1992 to September 1995, he was employed by BSS as Senior Vice President,
Merchandising. From September 1995 to March 1997, Mr. Belk was employed by BSS
as President, Merchandising and Sales Promotion. Mr. Belk is Vice Chairman of
many of the Belk Companies. Mr. Belk serves on the Boards of Directors of
Charlotte Chamber of Commerce, Coca-Cola Consolidated Bottling Co. and the
Charlotte Latin School. Mr. Belk also serves as a member of the Boards of
Central Charlotte YMCA, Crossnore Schools and the Leighton Ford Ministries. Mr.
Belk is the brother of Thomas M. Belk, Jr. and John R. Belk and the nephew of
John M. Belk and Sarah Belk Gambrell.
John R. Belk. Mr. Belk has been Vice Chairman of most of the Belk
Companies and President and Chief Operating Officer of BSS since March 1997. Mr.
Belk has been employed in the Belk retail organization since 1986. From February
1992 to March 1993, he was Senior Vice President, Systems and Control. From
March 1993 to March 1997, Mr. Belk was employed by BSS as Senior Vice President,
Operations. Mr. Belk serves on the Boards of Directors of Alltel Corporation,
First Union National Bank, N.A., Ruddick Corporation and Presbyterian Health
Services Corp. He also serves on the Boards of Central YMCA, St. Andrews
Presbyterian College and United Way of Central Carolinas. Mr. Belk is the
brother of Thomas M. Belk, Jr. and H.W. McKay Belk and the nephew of John M.
Belk and Sarah Belk Gambrell.
David B. Cannon. Mr. Cannon has been employed in the Belk store
organization since 1960 and has served as a director of a number of the Belk
Companies. Mr. Cannon has served as Vice President and Manager of Belk
Department Store of Gaffney, South Carolina, Incorporated since 1968. He is a
past President of the Cherokee County Chamber of Commerce.
J. Kirk Glenn, Jr. Mr. Glenn has served on the Boards of Directors of a
number of the Belk Companies since 1986 and on the Board of Directors of BSS
since 1996. Mr. Glenn is the Chairman and Manager of Quality Oil Company, LLC
and is a Director of Reliable Tank Line, Limited Partnership in Winston-Salem,
North Carolina. He also serves on the Boards of Directors of Crisis Control
Ministry, Special Children's School, Village Tavern, Inc. and Winston-Salem
Business, Inc. Mr. Glenn is on the Forsyth County Advisory Board of Wachovia
Bank, N.A.
Karl G. Hudson, Jr. Mr. Hudson was employed in the Belk store organization
from 1933 until his retirement in 1989. During that time, he served in many
positions in the organization, including Executive Vice President and
Supervising Partner and as a director of the Hudson-Belk Company from 1972 until
1989. He also served as Executive Vice President and Supervising Partner and as
a director of the Belk-Hudson group of stores in Alabama and Mississippi from
1974 until 1989. Mr. Hudson has also served as a director of a number of the
Belk Companies and on numerous management committees of BSS. Mr. Hudson has
served as a member of the Boards of Directors of Carolina Power & Light Company,
the Durham Corporation and First Corp. He has also served on the Boards of
Davidson College, St. Andrews College, Peace College and Union Theological
Seminary, the Downtown Raleigh Development Corp., the United Fund and the
Raleigh Merchant's Bureau.
John A. Kuhne. Mr. Kuhne serves as President and as a director of a number
of the Belk Companies, including Belk-Simpson. Mr. Kuhne has served as the
President of Belk-Simpson since 1983. He is currently
66
<PAGE> 75
Vice-Chairman of the Board of Directors of Summit Financial Corporation and is a
past trustee of Presbyterian College and Furman University.
B. Frank Matthews, II. Mr. Matthews has been employed by the Belk store
organization since 1937, and has served as Executive Vice President and
Supervising Partner of the Belk-Matthews group since 1971. Mr. Matthews has
served on numerous committees of BSS, and he currently serves as Chairman of the
Employee Benefits Committee of the Board of Directors of BSS. Mr. Matthews has
served as Chairman of the Board of Directors and director of the Gastonia
Federal Savings & Loan Association, director of the Public Service Co. of North
Carolina, Inc., President of the Garrison Foundation, Inc. and a member of the
Board of Trustees of Myers-Ti-Caro Foundation, Inc. Mr. Matthews has also served
as president of the Gastonia Downtown Development Corporation, the Gaston County
United Way and the Gastonia Merchant's Association. He has been a director of
the Gastonia Chamber of Commerce, the Gastonia YMCA, the Gastonia Industrial
Diversification Commission, the Gastonia Kiwanis Club, Davidson College and
Chatham Hall.
COMMITTEES OF THE NEW BELK BOARD OF DIRECTORS
Executive Committee. Promptly following the Reorganization, the New Belk
Board will establish an Executive Committee. The Executive Committee is expected
to be composed of Messrs. John M. Belk, Thomas M. Belk, Jr., H.W. McKay Belk and
John R. Belk and is expected to act in circumstances where it is not feasible or
is impractical to obtain full Board action or as otherwise directed by the New
Belk Board. The Executive Committee will possess all of the powers of the New
Belk Board, except the power to authorize the issuance of stock, approve
mergers, declare dividends and certain other powers specifically reserved under
the Delaware General Corporation Law ("DGCL") to the New Belk Board.
Audit Committee. Promptly following the Reorganization, the New Belk Board
will establish an Audit Committee. The Audit Committee is expected to be
composed of Messrs. Karl G. Hudson, Jr., B. Frank Matthews, II, J. Kirk Glenn,
Jr., John A. Kuhne and John R. Belk. The Audit Committee will be established to
make recommendations concerning the engagement of independent public
accountants, review with the independent public accountants the plans and
results of the audit engagement, approve professional services provided by the
independent public accountants, review the independence of the independent
public accountants, consider the range of audit and non-audit fees and review
the adequacy of New Belk's internal accounting controls.
COMPENSATION OF DIRECTORS
New Belk intends to pay its directors fees for their services as directors.
Directors are expected to receive annual compensation of $20,000, a meeting fee
of $1,000 for each Board of Directors meeting attended and reimbursement of
expenses incurred in attending meetings.
DIRECTORS AND OFFICERS INSURANCE
New Belk intends to obtain a directors and officers liability insurance
policy with coverage of $3 million per loss and an aggregate limit of $3 million
for all losses within each one year policy period with a $250,000 retention. The
directors and officers liability insurance will insure (i) the officers and
directors of New Belk against any claim arising out of an alleged wrongful act
by such persons while acting as directors and officers of New Belk and (ii) New
Belk to the extent that it has indemnified the directors and officers for such
loss.
67
<PAGE> 76
EXECUTIVE OFFICERS
Set forth below are the names and titles of certain of the persons who, in
addition to those directors who are also expected to serve as executive officers
of New Belk identified under "-- Directors," are expected to serve as executive
officers of New Belk following the Reorganization.
<TABLE>
<CAPTION>
NAME AGE OFFICE
- ---- --- ------
<S> <C> <C>
James M. Berry.............. 67 Executive Vice President, Finance
Ralph A. Pitts.............. 44 Executive Vice President, General Counsel
Fred W. Asher............... 57 Executive Vice President, Systems
William L. Wilson........... 50 Executive Vice President, Real Estate and Store Planning
Bill R. Walton.............. 49 Senior Vice President, Treasurer and Controller
</TABLE>
James M. Berry. Mr. Berry will serve as Executive Vice President, Finance
of New Belk. Mr. Berry has been Executive Vice President, Finance of BSS since
1995. From 1992 to 1995, he was retired. From 1988 to 1992, Mr. Berry was Vice
Chairman for NationsBank, Texas, NA, a banking company. Mr. Berry currently
serves as a member of the Board of Directors of NationsBank Houston
(Vice-Chairman), NationsBank, Texas, N.A., Williams-Sonoma Corporation, Houston
Casualty Company, The Museum of Fine Arts, The Houston Museum of National
Science, Central Houston, Inc., the Metropolitan Board of the YMCA of the
Greater Houston Area, The Greater Houston Partnership and Junior Achievement of
Southeast Texas.
Ralph A. Pitts. Mr. Pitts will serve as Executive Vice President and
General Counsel for New Belk. Mr. Pitts has been General Counsel of BSS since
1995. From 1985 to 1995, he was a partner in the law firm of King & Spalding in
Atlanta, Georgia.
Fred W. Asher. Mr. Asher will serve as Executive Vice President, Systems
of New Belk. Mr. Asher has been Executive Vice President, Systems of BSS since
1995. From 1990 to 1995, he was Vice President and Chief Information Officer,
Management Information Systems for Dayton Hudson Corporation, a large department
store retailer located in the midwest.
William L. Wilson. Mr. Wilson will serve as Executive Vice President, Real
Estate and Store Planning for New Belk. Mr. Wilson has been Executive Vice
President, Real Estate of BSS since 1992. From 1989 to 1992, he was Senior Vice
President, Real Estate for BSS.
Bill R. Walton. Mr. Walton will serve as Senior Vice President, Treasurer
and Controller of New Belk. Mr. Walton has been the Senior Vice President and
Controller of BSS since 1992. He also became the Treasurer of BSS in 1997. From
1987 to 1992, he was the Vice President and Controller for BSS. Mr. Walton is a
Certified Public Accountant.
68
<PAGE> 77
EXECUTIVE COMPENSATION
The following table sets forth certain summary information with respect to
the compensation that was paid in fiscal year 1998 by BSS to Mr. John M. Belk
and the four other persons who were the most highly compensated executive
officers of New Belk at the end of fiscal year 1998 and whose annual salary and
bonus compensation for fiscal year 1998 exceeded $100,000 (collectively, the
"Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(2)(3)
-------------------------------
FISCAL ALL OTHER
NAME AND PRINCIPAL POSITION(1) YEAR(4) SALARY BONUS COMPENSATION
- ------------------------------ ------- -------- -------- ------------
<S> <C> <C> <C> <C>
John M. Belk, Chairman......................... 1998 $500,000 $180,000 $165,092(5)
Ralph A. Pitts, Executive Vice President and
General Counsel.............................. 1998 387,000 50,000 11,250(6)
Thomas M. Belk, Jr., President................. 1998 350,000 125,000 10,578(6)
H.W. McKay Belk, President..................... 1998 350,000 125,000 10,578(6)
John R. Belk, President........................ 1998 350,000 125,000 10,578(6)
</TABLE>
- ---------------
(1) The principal position given for each of the Named Executive Officers is the
principal position held as of January 31, 1998 at BSS.
(2) All amounts reflect compensation paid by BSS unless otherwise indicated.
(3) Does not include retirement benefits under the Supplemental Pension Plan (as
defined herein) or the Pension Plan (as defined herein) (except for payments
to John M. Belk). See "-- Supplemental Pension Plan" and "-- Pension Plan."
(4) Fiscal year 1998 is the year ended January 31, 1998.
(5) Reflects (i) the value of insurance premiums paid by certain of the Belk
Companies in the amount of $20,000 with respect to a split-dollar life
insurance policy for the benefit of Mr. John M. Belk and his wife, Mrs.
Claudia W. Belk, (ii) $8,773 of benefits paid by BSS under the Belk Profit
Sharing Plan (as defined herein), (iii) $36,982 of benefits paid by BSS
under the Pension Plan (as defined herein) and (iv) $99,337 of above-market
interest earned by Mr. Belk in fiscal year 1998 on compensation deferred in
prior fiscal years pursuant to the Deferred Compensation Plan (as defined
herein).
(6) Reflects benefits paid by BSS under the Belk Profit Sharing Plan. See
"-- Belk Profit Sharing Plan."
PENSION PLAN
BSS maintains a pension plan (the "Pension Plan") which covers
substantially all of the employees of BSS and the Belk Companies. Benefits are
based primarily on years of service and the employees' compensation, subject to
limitations under the Code. The compensation covered by the Pension Plan for an
employee will be an amount equal to (a) the total cash compensation paid to such
employee by his employer through his payroll account during the plan year and
reported on his Form W-2; plus (b) all elective pre-tax contributions made for
him under any defined contribution plan sponsored by his employer; plus (c) all
pre-tax medical premiums paid on his behalf under Section 125 of the Code; and
excluding (d) all taxable fringe benefits reported on his Form W-2. BSS' policy
is to fund the plan to satisfy the requirements of the Employee Retirement
Income Security Act of 1974 ("ERISA"). Generally, an employee is entitled upon
retirement to annual payments for each year of service in accordance with a set
formula comprised of both a basic benefit (specified dollar amount) and a
supplemental benefit. Current annual payments of $36,982 are made to Mr. John M.
Belk and the estimated benefits payable upon retirement at normal retirement age
for each other Named Executive Officer as of January 31, 1998 are $57,392,
$66,088, $66,670 and $67,650 for Messrs. Ralph A. Pitts, Thomas M. Belk, Jr.,
H.W. McKay Belk and John R. Belk, respectively.
69
<PAGE> 78
SUPPLEMENTAL PENSION PLAN
BSS maintains a supplemental executive retirement plan (the "Supplemental
Pension Plan") which covers a select group of management and highly compensated
employees (the "Covered Employees"). The following table sets forth estimated
annual benefits payable upon retirement with regard to the Supplemental Plan.
<TABLE>
<CAPTION>
YEARS OF SERVICE(1)
--------------------------------------------------------
REMUNERATION(2) 15 20 25 30 35
- --------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$300,000............................ $ 75,000 $112,500 $150,000 $187,500 $225,000
350,000............................ 87,500 131,250 175,000 218,750 262,500
400,000............................ 100,000 150,000 200,000 250,000 300,000
500,000............................ 125,000 187,500 250,000 315,800 375,000
600,000............................ 150,000 225,000 300,000 375,000 450,000
750,000............................ 187,500 281,250 375,000 468,750 562,500
</TABLE>
- ---------------
(1) Mr. John M. Belk has the maximum of 35 credited years of service; Mr. Ralph
Pitts has an estimated two credited years of service; Mr. Thomas M. Belk,
Jr. has an estimated 17 credited years of service; Mr. H.W. McKay Belk has
an estimated 19 credited years of services; and Mr. John R. Belk has an
estimated 13 credited years of service.
(2) The compensation covered by the Supplemental Pension Plan incudes base
salary and any bonus received. For each of the Named Executive Officers, the
current compensation covered by the Supplemental Pension Plan does not
differ by more than 10% from the amount listed in the "Salary" column of the
Summary Compensation table.
The Supplemental Pension Plan is maintained primarily for the purpose of
providing supplemental retirement benefits for the Covered Employees. The
Covered Employees have a nonforfeitable right to receive a supplemental pension
upon five years of service in the covered position. Generally, the amount of the
supplemental pension to which a Covered Employee is entitled is an annual amount
computed in the form of a single life annuity equal to 2.5% of his Average Final
Earnings for each year of service (in excess of five) up to a maximum of 35
years, reduced by any amounts received due to the Pension Plan and Primary
Social Security Benefits. "Average Final Earnings" for purposes of the
Supplemental Pension Plan is the average of the Covered Employee's salary for
the highest five years of the last ten years of credited service.
BELK PROFIT SHARING PLAN
BSS maintained a profit sharing plan until December 31, 1997, when it was
terminated and its participants' account balances were transferred to a 401(k)
savings plan (the "Belk 401(k) Savings Plan" or "Plan"), which was adopted by
BSS as of January 1, 1998. The former profit sharing plan and the Belk 401(k)
Savings Plan are substantially identical with respect to participation, vesting
and benefits. All employees of BSS (including officers and directors who are
employees) may participate in the Plan after one year of service (1,000 hours)
with any of the Belk Companies. Participating employees may make pre-tax and
after-tax contributions, subject to limitations under the Code, of a percentage
(not to exceed 10%) of their total compensation and such amounts (and the
earnings thereon) are fully vested at all times. As part of the Plan, BSS makes
contributions of (a) 1 1/2% of annual compensation towards a "Fully Vested
Employer Contributions Account," which contributions are fully vested (including
the earnings thereon); and (b) 100% "matching" of participating employees'
contributions, up to 6% of annual compensation towards a "Basic Employer
Contributions Account," which contributions become fully vested after five years
of service (including the earnings thereon) or upon the employee's death, total
disability or retirement.
DEFERRED COMPENSATION PLAN
The Belk Companies maintain a deferred compensation plan (the "Deferred
Compensation Plan") which is administered by BSS. Members of senior management
of the Belk Companies whose annual
70
<PAGE> 79
compensation from the Belk Company that employs them exceeds $80,000 may
participate in the Deferred Compensation Plan. Participants in the Deferred
Compensation Plan may elect to defer a portion of their regular compensation
subject to certain limitations prescribed by the Deferred Compensation Plan.
Eligible employees may enroll in the Deferred Compensation Plan every four
years. The Belk Company that employs the participant is required to pay interest
on the participant's deferred compensation at various rates between 9% and 15%
per annum. Each participant defines the repayment schedule for deferred amounts
and earnings thereon. No portion of the compensation paid to or earned by any of
the Named Executive Officers during fiscal year 1998 was deferred pursuant to
the Deferred Compensation Plan.
LIMITATION OF LIABILITY AND INDEMNIFICATION
New Belk's officers and directors will be indemnified against certain
liabilities under the DGCL, the New Belk Certificate, the New Belk Bylaws and
certain indemnification agreements to be entered into with New Belk. The New
Belk Certificate requires New Belk to indemnify its directors and officers to
the fullest extent permitted from time to time by the laws of Delaware. As
permitted by the DGCL, the New Belk Certificate provides that a director will
not be personally liable for monetary damages resulting from breaches of his
fiduciary duty (except that the New Belk Certificate does not eliminate
liability for breaches of the duty of loyalty, acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
violations under Section 174 of the DGCL or for any transaction from which the
director derived an improper personal benefit).
New Belk believes that these provisions are necessary to attract and retain
qualified persons as directors and officers.
71
<PAGE> 80
CERTAIN RELATIONSHIPS AND TRANSACTIONS
GENERAL
The Belk Companies have historically been managed as a private family
business owned primarily by members of the Belk family and local partner
families and, as such, members of the Belk family and other members of
management and their affiliates have entered into various transactions during
the last three fiscal years with various Belk Companies and Surviving Belk
Subsidiaries. In addition, various Belk Companies and Surviving Belk
Subsidiaries have entered into transactions during the last three fiscal years
in the ordinary course of business with various other Belk Companies. New Belk
believes that all such transactions were on terms no less favorable to the Belk
Companies and Surviving Belk Subsidiaries than terms available from unrelated
parties for comparable transactions. Mr. John M. Belk and his immediate family
collectively beneficially own, directly and indirectly, over 10% of each of the
Belk Companies and Surviving Belk Subsidiaries that are parties to the
transactions described below.
CERTAIN TRANSACTIONS WITH MANAGEMENT AND BUSINESS RELATIONSHIPS BETWEEN THE BELK
COMPANIES
Hudson-Belk Company is a party to a Lease Agreement dated March 13, 1969
with PMC, Inc. ("PMC"), pursuant to which PMC leased to Hudson-Belk Company the
building which was used by Hudson-Belk Company as the site of the Belk store in
Smithfield, North Carolina (the "PMC Lease"). The PMC Lease expired in January
1998. Total rent paid by Hudson-Belk Company in calendar years 1995, 1996 and
1997 was $143,112, $147,307 and $155,853, respectively. Hudson-Belk Company
agreed in December 1997 to extend the PMC Lease until March 31, 1998. Pursuant
to this extension, Hudson-Belk Company has paid PMC a total of approximately
$16,994. Mr. Karl G. Hudson, Jr. and his immediate family beneficially own
approximately 12% of the voting stock of PMC. Mr. Hudson serves as a director of
PMC and is expected to serve as a member of the Board of Directors of New Belk.
Mr. John M. Belk also serves as a director of PMC and owns approximately 1.5% of
the voting stock of PMC. Mr. Belk is expected to serve as Chairman of the New
Belk Board and as an executive officer of New Belk.
UES, a wholly-owned subsidiary of Belk of Lawrenceville, Va., Inc., is a
party to certain contracts (the "UES Contracts") with BSS and the Belk
Companies, pursuant to which UES provides equipment maintenance services on cash
registers and other equipment for the Belk Companies. The UES Contracts are of
varying terms, but are generally renewable on an annual basis. The aggregate
amounts paid by BSS and the Belk Companies to UES during fiscal years 1996, 1997
and 1998 were $2,397,000, $2,356,000 and $2,350,000, respectively, and the
aggregate amount expected to be paid by BSS and the Belk Companies to UES during
fiscal year 1999 is $2,100,000.
Belk Center provides accounts receivable management and collection services
to the Belk Companies. Each Belk Company receiving such services pays Belk
Center transaction fees to reimburse Belk Center for the costs that it incurs in
providing such services. The aggregate amounts paid by the Belk Companies to
Belk Center during fiscal years 1996, 1997 and 1998 were $20.6 million, $19.9
million and $19.9 million, respectively, and the aggregate amount expected to be
paid by the Belk Companies to Belk Center during fiscal year 1999 is $20.9
million.
Belk International is a North Carolina nonprofit corporation whose members
are the Belk Companies. Belk International imports merchandise from non-U.S.
sources for the Belk Companies. Belk International charges the Belk Companies
prices for such merchandise that include only the direct costs incurred by Belk
International to acquire such merchandise and an allocated portion of the
administrative costs incurred by Belk International in acquiring such
merchandise and selling it to the Belk Companies. The aggregate amounts paid by
the Belk Companies to Belk International during fiscal years 1996, 1997 and 1998
were $18.8 million, $16.7 million and $11.5 million, respectively, and the
aggregate amount expected to be paid by the Belk Companies to Belk International
during fiscal year 1999 is $24.2 million.
BSS is a North Carolina corporation whose shareholders are Belk Companies.
BSS provides various administrative services to the Belk Companies, including
accounts payable and payroll services, merchandise buying, sales promotion, real
estate management, store planning, employee benefits, training, loss prevention
and management information services and legal, tax and accounting services. Each
Belk Company pays BSS
72
<PAGE> 81
annually a pro rata portion of the budgeted operating expenses of BSS for each
fiscal year based upon each Belk Company's sales as a percentage of total sales
of all of the Belk Companies for the twelve-month period ending prior to the
approval of the BSS annual budget. BSS also charges each Belk Company a
transaction fee for certain types of transactions, such as accounts payable,
payroll and management information services, and is reimbursed by the Belk
Companies for certain out-of-pocket expenses incurred by BSS on their behalf.
The aggregate amounts paid by the Belk Companies to BSS during fiscal years
1996, 1997 and 1998 were $76.9 million, $71.6 million and $76.0 million,
respectively, and the aggregate amount expected to be paid by the Belk Companies
to BSS during fiscal year 1999 is $75.7 million (excluding the Reorganization
Expenses).
Within the past three fiscal years, a number of the Belk Companies have
made loans to other Belk Companies (collectively, the "Intercompany Loans") and
have guaranteed loans made by third party lenders to other Belk Companies
(collectively, the "Guaranteed Loans"). The Intercompany Loans generally bear
interest at 30 day LIBOR plus approximately 70 basis points and are due on
demand. The proceeds of the Intercompany Loans have been used generally to
finance working capital needs and to pay other operating expenses of the Belk
Companies. The Guaranteed Loans bear interest at rates ranging from 30 to 90 day
LIBOR plus 80 to 180 basis points and mature at times ranging from three to
seven years. The proceeds of the Guaranteed Loans have been used to refinance
existing debt, purchase stock in other Belk Companies and for capital
improvements. The aggregate principal amount of Intercompany Loans outstanding
as of November 1, 1997 was approximately $141 million. The aggregate principal
amount of Guaranteed Loans outstanding at November 1, 1997 was approximately
$153 million.
On November 21, 1996, Sarah Belk Gambrell sold an aggregate of 3,610.33
shares of common stock of the corporations that owned and operated the 42
Leggett stores acquired in the Leggett Acquisition to Belk of Virginia, Inc.
("Belk of Virginia"). Mrs. Gambrell received an aggregate of approximately $3.2
million from Belk of Virginia in exchange for such shares. Mrs. Gambrell is
expected to serve as a member of the New Belk Board.
On November 21, 1996, the immediate family of Thomas M. Belk, Jr. sold an
aggregate of 1,009 shares of common stock of the corporations that owned and
operated the 42 Leggett stores acquired in the Leggett Acquisition to Belk of
Virginia. Mr. Belk and his immediate family received an aggregate of
approximately $982,000 in exchange for such shares. Mr. Belk is expected to
serve as a member of the New Belk Board and as an executive officer of New Belk.
On November 21, 1996, the immediate family of H.W. McKay Belk sold an
aggregate of 1,104 shares of common stock of the corporations that owned and
operated the 42 Leggett stores acquired in the Leggett Acquisition to Belk of
Virginia. Mr. Belk and his immediate family received an aggregate of
approximately $999,000 in exchange for such shares. Mr. Belk is expected to
serve as a member of the New Belk Board and as an executive officer of New Belk.
On November 21, 1996, John R. Belk and his immediate family sold an
aggregate of 878 shares of common stock of the corporations that owned and
operated the 42 Leggett stores acquired in the Leggett Acquisition to Belk of
Virginia. Mr. Belk and his immediate family received an aggregate of
approximately $838,000 in exchange for such shares. Mr. Belk is expected to
serve as a member of the New Belk Board and as an executive officer of New Belk.
Within the last three fiscal years, the Belk Companies have from time to
time purchased stock of other Belk Companies from individual shareholders. Such
purchases were made generally to provide a source of liquidity for Existing Belk
Shareholders who desired to sell shares of Belk Companies Common Stock. All of
such equity interests of the Belk Companies in other Belk Companies (other than
shares of common stock owned in any of the Belk Companies by Belk-Simpson) will
be canceled in the Reorganization.
Within the last three fiscal years, certain Belk Companies have from time
to time merged with other Belk Companies. Such mergers were accomplished in
order to consolidate the Belk store organization's market share in certain
markets, enable Belk Companies that otherwise would not be able to maintain
store operations because of their financial condition to do so and enable Belk
Companies to consolidate capital in order to renovate existing stores or enter
new markets, among other reasons.
73
<PAGE> 82
INDEBTEDNESS OF MANAGEMENT
Belk Finance Company agreed to purchase loans made by Wachovia Bank, N.A.
on April 23, 1996 to Mr. Thomas M. Belk, Jr. (the "Tim Belk Loan") and by
NationsBank, N.A. on April 19, 1996 to Mr. H.W. McKay Belk (the "McKay Belk
Loan"), both in the amount of $800,000 from such banks in the event of default
on such loans. Both the Tim Belk Loan and the McKay Belk Loan were made to
finance the acquisition by Mr. Thomas M. Belk, Jr. and Mr. H.W. McKay Belk of
stock in various Belk Companies. Each Loan bears interest at the prime rate as
established by the Federal Reserve Bank, less 0.5% per annum, payable quarterly,
and matures on May 1, 1998. On November 1, 1997, the McKay Belk Loan was
outstanding in the principal amount of $197,166. The Tim Belk Loan was repaid in
full as of December 18, 1997 and Belk Finance Company was released from its
repurchase obligation in connection with such repayment. Mr. Thomas M. Belk, Jr.
and Mr. H.W. McKay Belk currently serve as members of the Boards of Directors
and as executive officers of most of the Belk Companies and are expected to
serve as members of the New Belk Board and as executive officers of New Belk.
Belk Finance Company agreed to purchase a loan made by Wachovia Bank, N.A.
on August 1, 1997 to Brothers Investment Company (the "Brothers Investment
Loan") in the amount of $5 million from such bank in the event of a default on
such loan. The Brothers Investment Loan was made to refinance accumulated debt
of Brothers Investment Company. The Brothers Investment Loan bears interest at
the prime rate as established by the Federal Reserve Bank, less 0.5% per annum,
payable quarterly, and matures on August 1, 1998. On November 1, 1997, the
Brothers Investment Loan was outstanding in the principal amount of $5 million.
John M. Belk, who currently serves as Chairman of the Board of all of the Belk
Companies and is expected to serve as Chairman of the New Belk Board and as an
executive officer of New Belk, owns 50% of Brothers Investment Company and is a
director of Brothers Investment Company. The estate of Thomas M. Belk, of which
John M. Belk is a co-executor, owns the remaining 50% of Brothers Investment
Company.
74
<PAGE> 83
SECURITY OWNERSHIP
Security Ownership of New Belk. The following table sets forth, based on
the number of shares of Belk Companies' Common Stock beneficially owned as of
December 31, 1997, and the number of shares of New Belk Class A Common Stock
expected to be outstanding after consummation of the Reorganization, the
beneficial ownership of New Belk Class A Common Stock, by (i) each person who is
expected to be the beneficial owner of more than 5% of the New Belk Class A
Common Stock; (ii) the Chief Executive Officer of New Belk and the other Named
Executive Officers; (iii) each director of New Belk; and (iv) all executive
officers and directors of New Belk as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
-------------------------------------------------------------------
SHARES OF NEW BELK CLASS A PERCENT OF TOTAL NEW BELK CLASS A
COMMON STOCK BENEFICIALLY OWNED COMMON STOCK OUTSTANDING
BENEFICIAL OWNERS AFTER THE REORGANIZATION AFTER THE REORGANIZATION(1)
- ----------------- ------------------------------- ---------------------------------
<S> <C> <C>
John M. Belk(2)(3)(4)(5)(6)(7)(8)(9)... 18,383,653 30.8%
(Director and Executive Officer)
Thomas M. Belk, Jr.(3)(6)(7)(10)....... 7,213,605 12.1%
(Director and Executive Officer)
H. W. McKay Belk(3)(6)(7)(11).......... 6,984,133 11.7%
(Director and Executive Officer)
John R. Belk(3)(6)(7)(12).............. 6,985,397 11.7%
(Director and Executive Officer)
Sarah Belk Gambrell(8)(9).............. 11,784,023 19.7%
(Director)
David Belk Cannon(17).................. 2,537,354 4.2%
(Director)
James K. Glenn, Jr.(15)(16)............ 2,642,469 4.4%
(Director)
Karl G. Hudson, Jr..................... 5,451 *
(Director)
B. Frank Matthews, II(18)(19)(20)...... 554,556 *
(Director)
John A. Kuhne(21)...................... 311,636 *
(Director)
James M. Berry......................... 0 *
(Executive Officer)
Ralph A. Pitts......................... 0 *
(Executive Officer)
Fred W. Asher.......................... 0 *
(Executive Officer)
William L. Wilson...................... 0 *
(Executive Officer)
Bill R. Walton......................... 0 *
(Executive Officer)
Leroy Robinson(3)(6)(7)................ 5,634,737 9.4%
Katherine McKay Belk(3)(6)(7)(14)...... 7,048,110 11.8%
Katherine Belk Morris(3)(6)(7)(13)..... 7,036,713 11.8%
All Directors and Executive Officers as
a group (15 persons)................. 37,921,601 63.5%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H.W. McKay Belk, John R. Belk,
Leroy Robinson, Katherine McKay Belk, Katherine Belk Morris, James M. Berry,
Ralph A. Pitts, Fred W. Asher, William L. Wilson and Bill R. Walton, 2801 West
Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk Gambrell, 300 Cherokee Road,
Charlotte, N.C. 28207; David Belk Cannon, 1607 W. Floyd Baker Blvd., Gaffney,
S.C. 29341; James K. Glenn, Jr., P. O. Box
75
<PAGE> 84
2736, Winston-Salem, N.C. 27102; Karl G. Hudson, Jr., 2416 White Oak Road,
Raleigh, N.C. 27609; B. Frank Matthews, II, 2240 Remount Road, Gastonia, N.C.
28054; John A. Kuhne, 14 South Main Street, Greenville, S.C. 29601.
(1) Calculated on the basis of 59,713,460 shares of New Belk Class A Common
Stock expected to be outstanding after consummation of the Reorganization
(which excludes 246,174 shares of New Belk Class A Common Stock that will
be acquired by Belk-Simpson in the Belk-Simpson Merger). See "Determination
of Applicable Exchange Ratios."
(2) Includes 2,079,910 shares held by Montgomery Investment Company, of which
John M. Belk is the majority shareholder.
(3) Includes 1,484,374 shares held by Brothers Investment Company, which
corporation is equally owned by John M. Belk and the Estate of Thomas M.
Belk. Voting and investment power is shared by John M. Belk, Katherine
McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W. McKay Belk,
John R. Belk and Leroy Robinson.
(4) Includes 15,448 shares held by Mary Claudia, Inc., of which John M. Belk is
the majority shareholder.
(5) Represents 6,555 shares held by Claudia Watkins Belk Grantor Trust dated
2/23/96, 21,862 shares held by Claudia W. Belk, Tr. u/a f/b/o Mary Claudia
Belk, and 102,070 shares of Mary Claudia Belk Irrevocable Trust dated
1/4/94. Claudia W. Belk, Trustee, is John M. Belk's wife.
(6) Includes 444,212 shares held by Milburn Investment Company, of which the
Estate of Thomas M. Belk is the sole shareholder. Voting and investment
power is shared by the Executors of the Estate of Thomas M. Belk, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(7) Includes 3,706,151 shares held by Thomas M. Belk, Trustee dated September
15, 1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(8) Includes 1,140,080 shares held in several trusts established by the will of
W. H. Belk for the benefit of his children. Voting and investment power of
the trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk,
Sarah Belk Gambrell and Henderson Belk. Voting and investment power of the
trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson Belk is
shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk and W. H. Belk,
Jr.
(9) Includes 1,436,385 shares held in several trusts established by the will of
Mary I. Belk for the benefit of her children. Voting and investment power
of the trusts for John M. Belk and Thomas M. Belk is shared by John M.
Belk, Sarah Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and
investment power of the trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and
Henderson Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson
Belk, W. H. Belk, Jr. and Irwin Belk.
(10) Includes 226,521 shares held by Thomas M. Belk, Jr. as custodian for his
minor children, 207,855 shares held as custodian for the minor children of
his brother, H. W. McKay Belk and 23,459 shares held by his spouse, Sarah
F. Belk.
(11) Includes 227,877 shares held by H. W. McKay Belk as custodian for his minor
children and 24,970 shares held by his spouse, Nina F. Belk.
(12) Includes 191,333 shares held by John R. Belk as custodian for his minor
children and 21,523 shares held by his spouse, Kimberly D. Belk.
(13) Includes 228,701 shares held by Katherine Belk Morris as custodian for her
minor children and 24,970 shares held by her spouse, Charles Walker Morris.
(14) Includes 494,812 shares held by Katherine M. Belk as custodian for her
minor grandchildren.
(15) Includes 871 shares held by his spouse, Madlon C. Glenn.
(16) Includes 1,501,410 shares held by James K. Glenn, Jr., Trustee under Will
of Daisy Belk Mattox, 195,685 shares held by John Belk Stevens Trust U/W
ITEM III, Section C f/b/o James Kirk Glenn, Jr., et al and 391,897 shares
held by John Belk Stevens Trust U/W ITEM III, Section B f/b/o Mary S.
76
<PAGE> 85
Whelchel and 391,897 shares held by John Belk Stevens Trust u/w Item III,
Section A f/b/o Sara S. Glenn. Voting and investment power is vested in
James K. Glenn, Jr., the Trustee of each trust.
(17) Includes 651,254 shares held by Residuary Trust u/w Mrs. Henry Belk Cannon.
The Trustees, David Belk Cannon and John C. Daughtridge, have voting and
investment power with respect to such shares.
(18) Includes 166,707 shares held by First Union National Bank of N.C., B. Frank
Matthews, II and Annabelle Z. Royster, Co-Trustees under the Will of J. H.
Matthews, Jr. The Trustees named have voting and investment power with
respect to such shares.
(19) Includes 78,539 shares held by Robinson Investment Company. B. Frank
Matthews, II and his sister, Elizabeth M. Welton, share voting and
investment power with respect to such shares.
(20) Includes 81,787 shares held by his spouse, Betty C. Matthews.
(21) Includes 289,876 shares held by his spouse, Lucy S. Kuhne.
Security Ownership of Belk Companies. The Prospectus Supplement for each
Belk Company sets forth information concerning the beneficial ownership of such
Belk Company's common stock as of December 31, 1997, including (i) each person
who is the beneficial owner of more than 5% of the outstanding shares of common
stock of such Belk Company; (ii) the chief executive officer and the four other
most highly compensated officers of such Belk Company; (iii) each director of
such Belk Company; and (iv) all executive officers and directors of such Belk
Company as a group.
77
<PAGE> 86
DESCRIPTION OF NEW BELK CAPITAL STOCK
GENERAL
New Belk's authorized capital stock consists of 200,000,000 shares of New
Belk Class A Common Stock, 200,000,000 shares of New Belk Class B Common Stock
and 20,000,000 shares of Preferred Stock, par value of $.01 per share (the
"Preferred Stock").
As of the date hereof, there is issued and outstanding one share of New
Belk Class A Common Stock that is held of record by one stockholder. Assuming
that (i) all of the Belk Companies participate in the Reorganization and (ii)
none of the Existing Belk Shareholders exercise Applicable State Law Appraisal
Rights in any Merger, there will be 59,713,460 shares of New Belk Class A Common
Stock outstanding after the consummation of the Reorganization (excluding
246,042 shares of New Belk Class A Common Stock which will be acquired by
Belk-Simpson in the Belk-Simpson Merger and 285,375 shares of New Belk Class A
Common Stock which will be acquired by Belk-Lindsey in the Reorganization that
will then be cancelled upon consummation of the Reorganization). As of the date
hereof, there are no shares of Preferred Stock outstanding. The following
description is a summary and is subject to and qualified in its entirety by
reference to the provisions of the New Belk Certificate, the form of which has
been filed as an exhibit to the Registration Statement of which this Proxy
Statement/Prospectus forms a part and is attached as Exhibit B to the
Reorganization Agreement.
NEW BELK COMMON STOCK
The shares of New Belk Class A Common Stock and New Belk Class B Common
Stock are identical in all respects, except for voting rights and certain
conversion requirements and transfer restrictions in respect of the shares of
New Belk Class A Common Stock as described below.
Voting Rights. The holders of New Belk Class A Common Stock are entitled
to 10 votes per share. The holders of New Belk Class B Common Stock are entitled
to one vote per share. The holders of both classes of New Belk Common Stock are
entitled to vote and will vote together as a single class on all matters
presented to the stockholders for their vote or approval (including a proposal
to increase or decrease the authorized shares of either Class A Common Stock or
Class B Common Stock) except as otherwise required by Delaware Law.
Dividends. The holders of New Belk Class A Common Stock and New Belk Class
B Common Stock are entitled to receive dividends at the same rate if and when
such dividends are declared by the New Belk Board out of assets legally
available therefor after payment of dividends required to be paid on shares of
Preferred Stock, if any. If a dividend or distribution payable in either class
of New Belk Common Stock is payable on such class of New Belk Common Stock, New
Belk must also make a pro rata and simultaneous dividend or distribution on the
other class of New Belk Common Stock payable in shares of such other class.
Restrictions on Transfer. If a holder of New Belk Class A Common Stock
transfers such shares, whether by sale, assignment, gift, bequest, appointment
or otherwise, to a person other than a Class A Permitted Holder, such shares
will be automatically converted into shares of New Belk Class B Common Stock. In
the case of a pledge of shares of New Belk Class A Common Stock to a financial
institution, such shares shall remain subject to the transfer restrictions and
conversion requirements in the New Belk Certificate. In the event of foreclosure
or other similar action by the pledgee, such pledged shares of New Belk Class A
Common Stock may only be transferred to a Class A Permitted Holder or converted
into shares of New Belk Class B Common Stock, as the pledgee may elect.
Conversion. New Belk Class B Common Stock has no conversion rights. Shares
of New Belk Class A Common Stock are convertible into New Belk Class B Common
Stock, in whole or in part, at any time and from time to time at the option of
the holder, on the basis of one share of New Belk Class B Common Stock for each
share of New Belk Class A Common Stock converted. In the event of a transfer of
shares of New Belk Class A Common Stock to any person other than a Class A
Permitted Holder, each share of New Belk Class A Common Stock so transferred
will be automatically converted into one share of New Belk Class B
78
<PAGE> 87
Common Stock. Shares of New Belk Class A Common Stock held by a New Belk
Stockholder who is a Class A Permitted Holder will also automatically convert to
New Belk Class B Common Stock in the event that such New Belk Stockholder no
longer meets the requirements of a Class A Permitted Holder.
Liquidation. In the event of liquidation of New Belk, after payment of the
debts and other liabilities of New Belk and after making provisions for the
holders of Preferred Stock, if any, the remaining assets of New Belk will be
distributable ratably among the holders of New Belk Class A Common Stock and New
Belk Class B Common Stock treated as a single class.
Other Provisions. The holders of New Belk Class A Common Stock and New
Belk Class B Common Stock are not entitled to preemptive rights. None of the New
Belk Class A Common Stock or New Belk Class B Common Stock may be subdivided or
combined in any manner unless the other class is subdivided or combined in the
same proportion.
PREFERRED STOCK
The New Belk Board is authorized to issue shares of Preferred Stock at any
time and from time to time, in one or more series, and to fix or alter the
designations, preferences and relative participating, optional or other special
rights and qualifications, limitations or restrictions of such shares of
Preferred Stock, including without limitation of the generality of the
foregoing, dividend rights, dividend rates, conversion rights, voting rights,
rights and terms of redemption (including sinking fund provisions), redemption
price or prices and liquidation preferences of any wholly unissued series of
preferred shares and the number of shares constituting any of such series and
the designation thereof, or any of them; and to increase or decrease the number
of shares of a series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series is decreased, the shares
constituting such decrease will resume the status which they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
TRANSFER AGENT AND REGISTRAR
The principal transfer agent and registrar for New Belk Common Stock will
be New Belk.
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
The authorized but unissued shares of New Belk Common Stock and Preferred
Stock are available for future issuance without stockholder approval. Subject to
the transfer restrictions and conversion requirements of New Belk Class A Common
Stock, these additional shares may be utilized for a variety of corporate
purposes, including corporate acquisitions, employee benefit plans and future
public offerings to raise capital.
CERTAIN CHARTER AND BYLAW PROVISIONS
General. Stockholders' rights and related matters are governed by the
DGCL, the New Belk Certificate and the New Belk Bylaws. Certain provisions of
the New Belk Certificate and the New Belk Bylaws, which are summarized below,
tend to limit stockholders' ability to influence matters pertaining to corporate
governance and may have the effect of impeding the acquisition of control of New
Belk by means of a tender offer, proxy fight, merger, open market purchases or
otherwise in a transaction not approved by the New Belk Board. The New Belk
Board has no present intention to introduce other measures which might have an
anti-takeover effect. The New Belk Board reserves the right, however, to
introduce such measures in the future.
Classified Board; Removal of Directors. The New Belk Bylaws provide that
the New Belk Board will consist of not less than two nor more than 18 directors,
with the exact number of directors to be determined from time to time by the New
Belk Board. The New Belk Certificate provides that the New Belk Board will be
divided into three classes and, after an initial term, each director will be
elected for a three-year term. See "Management -- Directors."
The New Belk Certificate provides that directors may only be removed for
cause upon the affirmative vote of all other members of the New Belk Board or
the holders of two-thirds of the issued and outstanding shares of New Belk then
entitled to vote generally in the election of directors. See
"Management -- Directors
79
<PAGE> 88
and Executive Officers." As a result, it will be more difficult to change the
composition of the New Belk Board, which may discourage or make more difficult
any attempt by a person or group of persons to obtain control of New Belk.
Authorized But Unissued New Belk Common Stock and Preferred Stock. The
existence of authorized but unissued and unreserved New Belk Common Stock and
Preferred Stock may enable the New Belk Board to issue shares to persons
friendly to current management which could render more difficult or discourage
an attempt to obtain control of New Belk by means of a proxy contest, tender
offer, merger, open market purchases or otherwise, and thereby protect the
continuity of New Belk's management.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the New Belk Stockholders are not entitled to any
preemptive rights to subscribe for any part of any new or additional issue of
stock of any class, whether now or hereafter authorized, or of bonds, debentures
or other securities convertible into or exchangeable for stock. When New Belk
makes an offering of options, rights or warrants to subscribe for shares of any
other class or classes of capital stock (other than New Belk Class A Common
Stock) to all holders of a class of New Belk Common Stock, New Belk is required
to make simultaneously an identical offering to all holders of the other classes
of New Belk Common Stock other than to any class of New Belk Common Stock the
holders of which, voting as a separate class, determine that such offering need
not be made to such class. Further, New Belk may grant by contract a preemptive
right to purchase, subscribe for or otherwise acquire stock of any class or
series of New Belk or any security convertible into or exchangeable for, or any
warrant, option or right to purchase, subscribe for or otherwise acquire, stock
of any class or series of New Belk, whether now or hereafter authorized.
Business Combinations. Section 203 of the DGCL restricts a wide range of
transactions ("business combinations") between a corporation and an interested
stockholder. An "interested stockholder" is, generally, any person who
beneficially owns, directly of indirectly, 15% or more of the corporation's
outstanding voting stock. Business combinations are broadly defined to include
(i) mergers or consolidations with, (ii) sales or other dispositions of more
than 10% of the corporation's assets to, (iii) certain transactions resulting in
the issuance or transfer of any stock of the corporation or any subsidiary to,
(iv) certain transactions which would result in increasing the proportionate
share of stock of the corporation or any subsidiary owned by, or (v) receipt of
the benefit (other than proportionately as a stockholder) of any loans, advances
or other financial benefits by, an interested stockholder. Section 203 provides
that an interested stockholder may not engage in a business combination with the
corporation for a period of three years from the time of becoming an interested
stockholder unless (a) the board of directors approved either the business
combination or the transaction which resulted in the person becoming an
interested stockholder prior to the time such person became an interested
stockholder, (b) upon consummation of the transaction which resulted in the
person becoming an interested stockholder, that person owned at least 85% of the
corporation's voting stock (excluding shares owned by persons who are officers
and also directors and shares owned by certain employee stock plans) or (c) the
business combination is approved by the board of directors and authorized by the
affirmative vote of at least two-thirds of the outstanding voting stock not
owned by the interested stockholder. The restrictions on business combinations
with interested stockholders contained in Section 203 do not apply to a
corporation whose certificate of incorporation contains a provision expressly
electing not be governed by the statute. The New Belk Certificate does not
contain a provision electing to "opt-out" of Section 203.
Special Meetings; Prohibition of Actions by Written Consent. Pursuant to
the DGCL, a special meeting of stockholders may be called by the board of
directors or by any other person authorized to do so in the certificate of
incorporation or the bylaws. The New Belk Certificate provides that special
meetings of stockholders may only be called by a majority of the entire New Belk
Board or the Chairman of the New Belk Board. In addition, the New Belk
Certificate provides that any action required or permitted to be taken at any
annual or special meeting of stockholders may be taken only upon the vote of the
stockholders at an annual or special meeting, and may not be taken by a written
consent of the stockholders.
80
<PAGE> 89
Restrictions on Amendments to Bylaws. Under the New Belk Certificate, the
New Belk Bylaws may only be amended by a majority vote of the New Belk Board or
the affirmative vote of two-thirds of the outstanding voting stock of New Belk,
voting together as a single class. This supermajority restriction makes it more
difficult for the New Belk Stockholders to amend the New Belk Bylaws and thus
enhances the power of the Board of Directors vis-a-vis stockholders with regard
to matters of corporate governance that are governed by the New Belk Bylaws.
DIRECTORS' LIABILITY
The New Belk Certificate includes provisions to eliminate the personal
liability of its directors for monetary damages resulting from breaches of their
fiduciary duty (provided that such provision does not eliminate liability for
breaches of the duty of loyalty, acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, violations under
Section 174 of the DGCL or for any transaction from which the director derived
an improper personal benefit). New Belk believes that these provisions are
necessary to attract and retain qualified persons as directors and officers.
COMPARISON OF RIGHTS OF HOLDERS OF BELK COMPANIES COMMON STOCK
AND NEW BELK CLASS A COMMON STOCK
Upon consummation of the Reorganization, and to the extent they receive
shares of New Belk Class A Common Stock, shareholders of each Belk Company,
which are incorporated in various states, will become stockholders of New Belk,
a Delaware corporation. The rights of Existing Belk Shareholders will thereafter
be governed by applicable Delaware law, including the DGCL, and by the New Belk
Certificate and New Belk Bylaws. The Prospectus Supplement for each Belk Company
includes a summary of the material differences between the rights of the
Existing Belk Shareholders and New Belk Shareholders as a result of differences
in the DGCL and Applicable State Corporate Law for each such Belk Company
(Arkansas, Florida, Georgia, Kentucky, Mississippi, North Carolina, South
Carolina, Tennessee, Texas or Virginia), and between the New Belk Certificate
and New Belk Bylaws, on the one hand, and the certificates or articles of
incorporation and bylaws of each such Belk Company, on the other hand. Such
summary does not purport to be a complete statement of the difference in the
rights of Existing Belk Shareholders and New Belk Stockholders and is qualified
in its entirety by reference to the full text of the New Belk Certificate and
the New Belk Bylaws, each of the Belk Companies' certificates or articles of
incorporation and bylaws, the DGCL and the Applicable State Corporate Law.
EXPERTS
The combined financial statements of the Belk Companies as of February 3,
1996 and February 1, 1997, and for each of the years in the three-year period
ended February 1, 1997, have been included herein and in the registration
statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
The financial statements of Belk Brothers Company and Subsidiaries as of
February 3, 1996 and February 1, 1997 and for each of the years in the
three-year period ended February 1, 1997, and the financial statements of Belk
Enterprises, Inc. and Subsidiaries, Belk Department Store of Greenville, N.C.,
Inc., Belk of Miss, Inc., Belk-Lindsey Stores, Inc. and Hudson-Belk Company as
of February 1, 1997 and for the year then ended, have been included in the
applicable Prospectus Supplement for such Belk Companies and in the Registration
Statement in reliance upon the reports of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing. The reports of KPMG Peat
Marwick LLP covering the February 1, 1997 financial statements of Belk
Enterprises, Inc. and Subsidiaries and Belk-Lindsey Stores, Inc. refer to the
adoption of Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of."
81
<PAGE> 90
LEGAL MATTERS
The validity of the shares of New Belk Common Stock being registered under
the Registration Statement of which this Proxy Statement/Prospectus forms a part
will be passed upon for New Belk by King & Spalding, Atlanta, Georgia.
82
<PAGE> 91
THE BELK COMPANIES
INDEX TO HISTORICAL COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of KPMG Peat Marwick LLP, Independent Auditors....... F-2
Combined Balance Sheets..................................... F-3
Combined Statements of Income............................... F-4
Combined Statements of Shareholders' Equity................. F-5
Combined Statements of Cash Flows........................... F-6
Notes to Combined Financial Statements...................... F-8
</TABLE>
F-1
<PAGE> 92
INDEPENDENT AUDITORS' REPORT
The Boards of Directors of
The Belk Companies:
We have audited the accompanying combined balance sheets of the Belk
Companies (the "Companies") as of February 3, 1996 and February 1, 1997, and the
related combined statements of income, shareholders' equity and cash flows for
each of the years in the three-year period ended February 1, 1997. These
combined financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Belk Companies
as of February 3, 1996 and February 1, 1997, and the results of their operations
and their cash flows for each of the years in the three-year period ended
February 1, 1997, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Charlotte, North Carolina
November 14, 1997
F-2
<PAGE> 93
THE BELK COMPANIES
COMBINED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 74,408 $ 56,115 $ 18,063
Accounts receivable, net............................. 263,161 335,914 325,954
Merchandise inventory................................ 365,902 425,415 527,687
Prepaid income taxes................................. 2,076 2,682 19,787
Deferred income taxes................................ 5,648 6,990 8,482
Prepaid expenses and other current assets............ 29,425 26,646 17,158
---------- ---------- ----------
Total current assets................................... 740,620 853,762 917,131
Investments in unconsolidated entities................. 30,613 33,750 36,860
Investment securities.................................. 33,210 32,781 35,636
Property and equipment, net............................ 430,376 377,770 396,743
Intangible assets, net................................. 10,386 26,047 21,326
Other assets........................................... 15,774 34,790 28,301
---------- ---------- ----------
Total assets........................................... $1,260,979 $1,358,900 $1,435,997
========== ========== ==========
LIABILITIES, DEFERRED INCOME AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................... $ 118,032 $ 126,710 $ 159,337
Accrued expenses..................................... 47,830 59,709 67,013
Accrued income taxes................................. 3,323 5,680 --
Lines of credit and notes payable.................... 116,327 187,272 186,766
Current installments of long-term debt and capital
lease obligations................................. 31,565 31,638 34,559
---------- ---------- ----------
Total current liabilities.............................. 317,077 411,009 447,675
Deferred income taxes.................................. -- 31,481 38,277
Long-term debt and capital lease obligations, excluding
current installments................................. 146,876 184,372 208,594
Deferred compensation and other noncurrent
liabilities.......................................... 41,620 48,121 50,672
---------- ---------- ----------
Total liabilities...................................... 505,573 674,983 745,218
---------- ---------- ----------
Deferred income........................................ 6,700 11,901 11,164
---------- ---------- ----------
Shareholders' equity:
Common stock......................................... 88,949 70,885 70,838
Paid-in capital...................................... 470 470 470
Retained earnings.................................... 640,236 578,525 581,195
Net unrealized gains on investments.................. 19,051 22,136 27,112
---------- ---------- ----------
Total shareholders' equity............................. 748,706 672,016 679,615
---------- ---------- ----------
Total liabilities, deferred income and shareholders'
equity............................................... $1,260,979 $1,358,900 $1,435,997
========== ========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-3
<PAGE> 94
THE BELK COMPANIES
COMBINED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
--------------------------------------- -------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues....................... $1,694,422 $1,685,470 $1,772,613 $1,138,615 $1,342,918
Cost of goods sold (including
occupancy and buying
expenses).................... 1,151,713 1,149,270 1,205,687 774,294 907,654
Selling, general and
administrative expenses...... 450,356 465,375 470,018 335,572 380,793
---------- ---------- ---------- ---------- ----------
Income from operations......... 92,353 70,825 96,908 28,749 54,471
Interest expense............... (21,440) (20,864) (27,554) (18,191) (27,472)
Interest income................ 3,703 4,191 4,873 3,765 2,559
Gain (loss) on sale of property
and equipment................ 619 5,242 21,328 19,792 (177)
Gain on sale of investments.... 9 3,370 1,882 408 416
Other income (expense), net.... (874) (43) 1,816 1,720 (335)
---------- ---------- ---------- ---------- ----------
Income from continuing
operations before income
taxes and equity in earnings
of unconsolidated entities... 74,370 62,721 99,253 36,243 29,462
Income taxes................... 28,461 22,387 38,802 14,135 11,528
---------- ---------- ---------- ---------- ----------
Income from continuing
operations before equity in
earnings of unconsolidated
entities..................... 45,909 40,334 60,451 22,108 17,934
Equity in earnings of
unconsolidated entities, net
of income taxes.............. 984 2,184 4,046 505 442
---------- ---------- ---------- ---------- ----------
Income from continuing
operations................... 46,893 42,518 64,497 22,613 18,376
Discontinued operations:
Income (loss) from
discontinued operations,
net of income tax expense
(benefit) of $1,115, $834
and $(2,937) for fiscal
years 1995, 1996 and 1997,
respectively and $(2,280)
and $(814) for the nine
months ended November 2,
1996 and November 1, 1997,
respectively.............. 1,731 1,298 (4,593) (3,567) (1,273)
Gain (loss) on disposal of
discontinued operations,
net of income tax expense
(benefit) of $29,897 in
fiscal year 1997 and
$(2,474) at November 1,
1997...................... -- -- 41,466 -- (3,870)
---------- ---------- ---------- ---------- ----------
Net income..................... $ 48,624 $ 43,816 $ 101,370 $ 19,046 $ 13,233
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-4
<PAGE> 95
THE BELK COMPANIES
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
NET
UNREALIZED
COMMON PAID-IN RETAINED GAINS (LOSSES)
STOCK CAPITAL EARNINGS ON INVESTMENTS TOTAL
------- ------- -------- -------------- --------
<S> <C> <C> <C> <C> <C>
Balance at February 1, 1994.................. $94,864 $478 $577,201 $ (45) $672,498
Unrealized gains on investments, net of
income taxes............................... -- -- -- 8,306 8,306
Equity in net unrealized gains on investments
held by unconsolidated entities............ -- -- -- 6,348 6,348
Cash dividends............................... -- -- (10,334) -- (10,334)
Stock dividends.............................. 765 -- (765) -- --
Net income................................... -- -- 48,624 -- 48,624
Repurchase of stock.......................... (5,524) -- (2,635) -- (8,159)
------- ---- -------- ------- --------
Balance at January 31, 1995.................. 90,105 478 612,091 14,609 717,283
Unrealized gains on investments, net of
income taxes............................... -- -- -- 1,574 1,574
Equity in net unrealized gains on investments
held by unconsolidated entities............ -- -- -- 2,868 2,868
Cash dividends............................... -- -- (11,673) -- (11,673)
Net income................................... -- -- 43,816 -- 43,816
Repurchase of stock.......................... (1,156) (8) (3,998) -- (5,162)
------- ---- -------- ------- --------
Balance at February 3, 1996.................. 88,949 470 640,236 19,051 748,706
Unrealized gains on investments, net of
income taxes............................... -- -- -- 733 733
Equity in net unrealized gains on investments
held by unconsolidated entities............ -- -- -- 2,352 2,352
Cash dividends............................... -- -- (11,847) -- (11,847)
Net income................................... -- -- 101,370 -- 101,370
Repurchase of stock.......................... (18,064) -- (151,234) -- (169,298)
------- ---- -------- ------- --------
Balance at February 1, 1997.................. 70,885 470 578,525 22,136 672,016
Unrealized gains on investments, net of
income taxes (unaudited)................... -- -- -- 2,172 2,172
Equity in net unrealized gains on investments
held by unconsolidated entities
(unaudited)................................ -- -- -- 2,804 2,804
Cash dividends (unaudited)................... -- -- (8,846) -- (8,846)
Net income (unaudited)....................... -- -- 13,233 -- 13,233
Repurchase of stock (unaudited).............. (47) -- (1,717) -- (1,764)
------- ---- -------- ------- --------
Balance at November 1, 1997 (unaudited)...... $70,838 $470 $581,195 $27,112 $679,615
======= ==== ======== ======= ========
</TABLE>
See accompanying notes to combined financial statements.
F-5
<PAGE> 96
THE BELK COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
--------------------------------------- -------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income............................ $ 48,624 $ 43,816 $101,370 $ 19,046 $ 13,233
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Deferred income taxes................. (5,998) (1,338) 175 (849) 44
Deferred income....................... 531 910 759 447 (737)
Depreciation and amortization......... 46,762 50,832 54,198 47,908 39,608
Gain on disposal of discontinued
operations, net.................... -- -- (41,466) -- --
(Gain) loss on sale of property and
equipment.......................... (619) (5,242) (21,328) (19,792) 177
Gain on sale of investments........... (9) (3,370) (1,882) (408) (416)
Equity in earnings of unconsolidated
entities, net of income taxes...... (984) (2,184) (4,046) (505) (442)
(Increase) decrease in:
Accounts receivable, net........... 11,026 (23) (32,729) (14,074) 9,960
Merchandise inventory.............. 6,389 (16,292) 17,462 (85,711) (102,272)
Prepaid income taxes............... (252) (1,824) (606) (9,160) (17,105)
Prepaid expenses and other
assets........................... 1,063 (2,127) 6,706 29,732 18,312
Increase (decrease) in:
Accounts payable and accrued
expenses......................... 12,518 (8,151) (8,070) 14,004 39,931
Accrued income taxes............... 259 (5,495) 2,357 (3,323) (5,680)
Deferred compensation and other
liabilities...................... (1,373) 10,875 (5,607) (12,054) 6,542
-------- --------- -------- -------- ---------
Net cash provided (used) by operating
activities............................ 117,937 60,387 67,293 (34,739) 1,155
-------- --------- -------- -------- ---------
Cash flows from investing activities:
Distributions received from real
estate partnership................. -- -- 3,375 875 --
Purchases of investments.............. (59,198) (6,545) (16,338) (10,471) (3,903)
Proceeds from sales of investments.... 71,288 16,752 16,583 9,201 5,041
Purchases of property and equipment... (34,336) (50,329) (62,408) (53,744) (54,925)
Proceeds from sales of property and
equipment.......................... 2,830 9,589 27,275 26,085 2,469
Acquisition of businesses, net of cash
acquired........................... -- (82,954) (36,145) (36,145) --
-------- --------- -------- -------- ---------
Net cash used by investing activities... (19,416) (113,487) (67,658) (64,199) (51,318)
-------- --------- -------- -------- ---------
(continued)
</TABLE>
F-6
<PAGE> 97
THE BELK COMPANIES
COMBINED STATEMENTS OF CASH FLOWS -- (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
--------------------------------------- -------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from financing activities:
Proceeds from notes payable........... $ -- $ 104,840 $158,018 $139,524 $ 18,540
Payments on notes payable............. -- -- (91,023) -- (67,762)
Proceeds from issuance of long-term
debt............................... 13,100 11,177 220,157 209,703 95,109
Principal payments on long-term debt
and capital lease obligations...... (51,060) (64,126) (160,168) (147,847) (71,883)
Net proceeds from (payments on) lines
of credit.......................... (9,711) 487 36,233 62,235 48,716
Dividends paid........................ (10,334) (11,673) (11,847) (11,847) (8,846)
Repurchase of common stock............ (8,159) (5,162) (169,298) (166,674) (1,763)
-------- --------- -------- -------- ---------
Net cash provided (used) by financing
activities............................ (66,164) 35,543 (17,928) 85,094 12,111
-------- --------- -------- -------- ---------
Net increase (decrease) in cash and cash
equivalents........................... 32,357 (17,557) (18,293) (13,844) (38,052)
Cash and cash equivalents at beginning
of period............................. 59,608 91,965 74,408 74,408 56,115
-------- --------- -------- -------- ---------
Cash and cash equivalents at end of
period................................ $ 91,965 $ 74,408 $ 56,115 $ 60,564 $ 18,063
======== ========= ======== ======== =========
Supplemental disclosures of cash flow
information:
Interest paid......................... $ 18,042 $ 18,700 $ 31,129 $ 21,062 $ 29,578
Income taxes paid..................... 33,747 31,323 33,062 28,378 31,851
Supplemental schedule of noncash
investing and financing activities:
Decrease in assets and liabilities due
to sale of rental operations....... -- -- 167,318 -- --
Purchase of net assets of retail
company through assumption of
notes.............................. -- -- 51,923 51,923 --
</TABLE>
See accompanying notes to combined financial statements.
F-7
<PAGE> 98
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(1) BASIS OF PRESENTATION
The Belk Companies (also referred to herein as the "Company") operate
retail department stores in the southeastern United States. The Company's outlet
store subsidiary is presented as a discontinued operation. The Belk Companies
are listed in note 18.
Ownership of the entities included in the Belk Companies is collectively
held by approximately 585 individuals (referred to herein as the
"Shareholders"). The Boards of Directors of the Belk Companies have approved and
adopted an Agreement and Plan of Reorganization (the "Reorganization Agreement")
that provides for the reorganization (the "Reorganization") of the Belk
Companies into a single operating entity ("New Belk"). The surviving Belk
Companies will be wholly-owned by New Belk. The Boards of Directors of the Belk
Companies have recommended approval of the Reorganization Agreement and the
Reorganization to the Shareholders at special meetings of each Belk Company
called for the purpose of voting on such proposal. The accompanying combined
financial statements have been prepared for purposes of depicting the combined
financial position and results of operations of the Belk Companies, on a
historical cost basis, which includes those entities expected by management to
participate in the Reorganization.
It is anticipated that the majority of the shareholders of one of the Belk
Companies, Belk-Simpson Company, Greenville, South Carolina ("Belk-Simpson"),
will redeem their shares in Belk-Simpson prior to the Reorganization. The
prorata equity interest in Belk-Simpson held by shareholders that are
anticipated to become shareholders of the combined entity under the proposed
reorganization is included in the combined financial statements on the equity
method of accounting.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
All significant intercompany transactions, balances and profits have been
eliminated in combination.
(2) ACQUISITIONS AND DISCONTINUED OPERATIONS
On November 1, 1996, the Company acquired substantially all of the
outstanding shares of the common stock of Leggett of Virginia, Inc. ("Leggett").
Leggett operated retail department stores generally in the southeastern United
States. The acquisition was accounted for using the purchase method of
accounting and, accordingly, Leggett's operating results subsequent to the date
of acquisition have been included in the Company's combined financial
statements.
The aggregate purchase price was approximately $92 million which includes
acquisition expenses. The aggregate purchase price, which was financed through
available cash resources, proceeds from a credit facility and notes held by
previous Leggett shareholders, has been allocated to the assets and liabilities
of Leggett based upon their respective fair market values. The excess of
purchase price over net assets acquired of approximately $17 million is being
amortized over 15 years on a straight-line basis. The pro forma revenue and net
income for the Company and Leggett for the year ended February 1, 1997 as if the
acquisition had occurred at the beginning of the fiscal year are approximately
$2 billion and $94 million, respectively.
In November 1995, BAC, Inc., ("BAC"), a wholly-owned subsidiary of the
Company, purchased all of the stock of Ivey Properties, Inc., ("Ivey"), a real
estate investment trust. The largest holding of Ivey was an interest in JV
Properties ("JV"), a retail mall joint venture. Prior to fiscal year 1996, Ivey
owned 50% of JV, while the other 50% was owned by the Company. The acquisition
was accounted for as a purchase.
F-8
<PAGE> 99
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Prior to the purchase, the Company's ownership of JV was accounted for
using the equity method of accounting. Subsequent to the purchase, the Company
has consolidated the assets, liabilities and operations of JV, which is
comprised of the operations of a shopping mall facility located in Charlotte,
North Carolina.
In November 1996, JV's interest in the shopping mall, along with debt, was
distributed to BAC in redemption of BAC's partnership interest in JV.
Subsequently, the Company sold the stock of BAC to an unrelated third party and
recognized a gain on the disposal of $41,466, net of income tax expense of
$29,897. The accompanying combined financial statements present the results of
operations of JV as discontinued operations. JV recorded revenues of $4,111 for
the three months ended February 3, 1996 (after purchasing the net assets from
Ivey) and $11,897 for 1997.
In September 1997, the managers and the advisory board of TAGS Stores, LLC,
("TAGS"), the Company's discount outlet store subsidiary, adopted a formal plan
to liquidate its operations during the 1997 Christmas retailing season.
Accordingly, the results of operations of TAGS are presented as discontinued
operations. During the nine months ended November 1, 1997, the Company provided
for estimated losses on liquidation of the discontinued operations of $3.9
million, net of tax. TAGS, which was formed in February 1996, recorded revenues
of $25.4 million for fiscal year 1997 and $18.3 million for the nine months
ended November 1, 1997. TAGS's net assets as of November 1, 1997 consisted of
the following:
<TABLE>
<CAPTION>
(UNAUDITED)
<S> <C>
Current assets.............................................. $ 11,281
Noncurrent assets........................................... 3,568
Current liabilities......................................... (12,206)
--------
$ 2,643
========
</TABLE>
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR
Starting in fiscal year 1996, the Company's fiscal year ends on the
Saturday closest to each January 31. Fiscal years 1996 and 1997 ended on
February 3, 1996 and February 1, 1997, and included 368 and 365 days,
respectively. Fiscal year 1995 ended on Tuesday, January 31, 1995, and included
364 days.
INTERIM FINANCIAL STATEMENTS
The combined financial statements as of and for the periods ended November
2, 1996 and November 1, 1997 are unaudited and are presented pursuant to the
rules and regulations of the Securities and Exchange Commission. In the opinion
of management, the accompanying combined financial statements reflect all
adjustments (which are of normal recurring nature) necessary to present fairly
the financial position and results of operations and cash flows for the interim
periods, but are not necessarily indicative of the results of operations for a
full fiscal year.
REVENUES
Revenues include sales from retail operations and leased departments, net
of returns. Customer returns are recognized as incurred.
COST OF GOODS SOLD
Cost of goods sold includes occupancy and buying expenses. Occupancy
expenses include rent, utilities and real estate taxes. Buying expenses include
payroll and travel expenses associated with the buying function.
F-9
<PAGE> 100
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market as
determined by the retail inventory method.
FINANCE CHARGES
Selling, general and administrative expenses in the combined statements of
income are reduced by finance charge revenue arising from customer accounts
receivable. Finance charge revenues were $35,769, $33,014 and $37,562 in fiscal
years 1995, 1996 and 1997, respectively.
PROPERTY AND EQUIPMENT, NET
Property and equipment owned by the Company is stated at cost less
accumulated depreciation. Property and equipment leased by the Company under
capital leases is stated at an amount equal to the present value of the minimum
lease payments less accumulated amortization. Depreciation and amortization are
provided utilizing straight-line and various accelerated methods over the
shorter of estimated asset lives or related lease terms.
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred income tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement bases
and the respective tax bases of the assets and liabilities and operating loss
and tax credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized.
PRE-OPENING COSTS
Store pre-opening costs are expensed as incurred.
CASH EQUIVALENTS
Cash equivalents include liquid investments with an original maturity of 90
days or less.
ADVERTISING
Advertising costs are expensed as incurred and amounted to $50,863, $55,118
and $54,977 in fiscal years 1995, 1996 and 1997, respectively, net of
reimbursements by suppliers.
INTANGIBLE ASSETS, NET
Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over the expected
periods to be benefited, generally 15 to 20 years. Leasehold intangibles, which
represent the excess of fair value over the carrying value of leaseholds, are
amortized on a straight-line basis over the remaining terms of the lease
agreements. The carrying value of intangible assets is periodically reviewed by
the Company's management to assess the recoverability of the assets. Accumulated
amortization was $169, $838 and $2,670 at February 3, 1996, February 1, 1997 and
November 1, 1997, respectively.
F-10
<PAGE> 101
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
DERIVATIVE FINANCIAL INSTRUMENTS
The Company utilizes various derivative financial instruments (interest
rate swap agreements) to manage the interest rate risk associated with its
borrowings. The counterparties to these instruments are major financial
institutions. These agreements are used to reduce the potential impact of
increases in interest rates on variable rate long-term debt. The differential to
be paid or received is accrued as interest rates change and is recognized as an
adjustment to interest expense. The fair value of the swap agreements is not
recognized in the combined financial statements.
(4) ACCOUNTS RECEIVABLE, NET
Customer receivables arise primarily under open-end revolving credit
accounts used to finance purchases of merchandise from the Company. These
accounts have various billing and payment structures, including varying minimum
payment levels and finance charge rates. Installments of deferred payment
accounts receivable maturing after one year are included in current assets in
accordance with industry practice.
The Company provides an allowance for doubtful accounts which is determined
based on a number of factors, including the risk characteristics of the
portfolio, historical charge-off patterns and management judgment.
Accounts receivable, net consists of:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Customer receivables................................... $255,683 $326,907 $323,317
Other.................................................. 12,361 15,820 10,883
Less allowance for doubtful accounts................... (4,883) (6,813) (8,246)
-------- -------- --------
Accounts receivable, net............................... $263,161 $335,914 $325,954
======== ======== ========
</TABLE>
Changes in the allowance for doubtful accounts are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
--------------------------------------- -------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance, beginning of period.......... $ 4,642 $ 4,770 $ 4,883 $ 4,883 $ 6,813
Charged to expense.................... 5,278 5,403 10,829 5,388 10,160
Acquired.............................. -- -- 801 801 --
Net uncollectible balances written
off................................. (5,150) (5,290) (9,700) (5,392) (8,727)
------- ------- -------- ------- --------
Balance, end of period................ $ 4,770 $ 4,883 $ 6,813 $ 5,680 $ 8,246
======= ======= ======== ======= ========
</TABLE>
(5) INVESTMENTS IN UNCONSOLIDATED ENTITIES
The Company's 25% ownership in Carolina Place Associates Partnership
("CPA") is recorded on the equity method. Equity in earnings of CPA for the year
ended February 1, 1997 includes $3,072, net of income tax expense of $1,973, for
the Company's portion of the gain recognized by CPA for the sale of its
investment in a retail mall joint venture.
The Company's 37% investment in Belk-Simpson is recorded on the equity
method (see note 1). Equity in earnings of Belk-Simpson in fiscal years 1995,
1996 and 1997 were $984, $2,184 and $974, respectively.
F-11
<PAGE> 102
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Condensed combined financial information of the unconsolidated entities is
as follows:
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Current assets.......................................... $32,053 $31,551 $ 31,034
Noncurrent assets....................................... 74,900 91,603 107,574
Current liabilities..................................... 20,343 20,337 22,885
Noncurrent liabilities.................................. 25,366 28,062 45,750
Shareholders' equity.................................... 61,244 74,755 69,973
Revenues................................................ 68,906 72,482 69,332
Net income.............................................. 3,033 7,537 3,445
</TABLE>
Included in retained earnings of the combined financial statements at
February 1, 1997 is undistributed earnings of approximately $7,287 from the
unconsolidated entities.
(6) INVESTMENT SECURITIES
The Company classifies as held-to-maturity securities all debt securities
that the Company has the ability and intent to hold to maturity. All equity
securities and all other debt securities with a readily determinable market
value are classified as available-for-sale securities with unrealized gains and
losses, net of income taxes, reported as a component of shareholders' equity.
Held-to-maturity securities consist of federal, state and local debt
securities, and are reported at amortized cost. Available-for-sale securities
are reported at fair values.
Details of investments in held-to-maturity securities are as follows:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Amortized cost......................................... $ 9,904 $12,130 $10,924
Gross unrealized gains................................. 678 494 489
Gross unrealized losses................................ -- (8) --
------- ------- -------
Fair value............................................. $10,582 $12,616 $11,413
======= ======= =======
</TABLE>
At February 1, 1997, scheduled maturities of held-to-maturity securities
are as follows:
<TABLE>
<CAPTION>
FAIR VALUE AMORTIZED COST
---------- --------------
<S> <C> <C>
One to five years........................................... $ 7,823 $ 7,602
Six to ten years............................................ 3,281 3,088
After ten years............................................. 1,512 1,440
------- -------
$12,616 $12,130
======= =======
</TABLE>
F-12
<PAGE> 103
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Details of investments in available-for-sale securities are as follows:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Cost................................................... $ 8,096 $ 3,506 $ 4,160
Gross unrealized gains................................. 15,272 17,165 20,577
Gross unrealized losses................................ (62) (20) (25)
------- ------- -------
Fair value of securities............................... $23,306 $20,651 $24,712
======= ======= =======
</TABLE>
Realized gains and losses on sales of securities are recognized on a
specific identification basis. Gross realized gains included in income in fiscal
years 1995, 1996 and 1997 were $353, $3,486 and $1,966, respectively, and gross
realized losses included in income were $344, $116 and $84, in fiscal years
1995, 1996 and 1997, respectively.
(7) PROPERTY AND EQUIPMENT, NET
Details of property and equipment are as follows:
<TABLE>
<CAPTION>
ESTIMATED FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
LIVES 1996 1997 1997
--------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Land........................................... N/A $ 34,067 $ 20,340 $ 20,335
Buildings...................................... 30-50 437,427 395,443 416,732
Furniture, fixtures and equipment.............. 5-7 327,926 410,588 427,410
Construction in progress....................... N/A 8,559 12,146 15,241
--------- --------- ---------
807,979 838,517 879,718
Less accumulated depreciation and
amortization................................. (377,603) (460,747) (482,975)
--------- --------- ---------
Property and equipment, net.................... $ 430,376 $ 377,770 $ 396,743
========= ========= =========
</TABLE>
(8) ACCRUED EXPENSES
Accrued expenses are comprised of the following:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Salaries, wages and employee benefits.................. $26,992 $28,913 $22,806
Interest............................................... 1,759 5,277 5,371
Rent................................................... 4,352 4,524 3,987
Taxes, other than income............................... 3,652 3,781 7,277
Other.................................................. 11,075 17,214 27,572
------- ------- -------
$47,830 $59,709 $67,013
======= ======= =======
</TABLE>
F-13
<PAGE> 104
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(9) BORROWINGS
Long-term debt, principally due to banks, and capital lease obligations
consist of the following:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Mortgage notes payable........................... $ 43,263 $ 41,831 $ 40,857
Unsecured notes payable.......................... 122,914 163,053 190,984
Secured note payable............................. 3,087 2,612 --
Capital lease agreements through September
2011........................................... 9,177 8,514 11,312
-------- -------- --------
178,441 216,010 243,153
Less current installments........................ (31,565) (31,638) (34,559)
-------- -------- --------
Long-term debt and capital lease obligations,
excluding current installments................. $146,876 $184,372 $208,594
======== ======== ========
</TABLE>
The mortgage notes are payable in installments and are due August 1997
through June 2003, at fixed rates ranging from 6.7% to 9.625% and at variable
rates based on the secondary 90 day CD rate plus 50 basis points and LIBOR plus
80 basis points. The unsecured notes are payable in installments and are due
through January 2007, at fixed rates ranging from 6.75% to 8% and variable rates
based on such bank's 90 day CD rate (as defined by the Bank) plus 50 basis
points and LIBOR plus from 50 to 175 basis points. The secured note is payable
in installments through September 2000 at prime less 15 basis points. On
November 1, 1997, the prime and LIBOR rates were 8.5% and 5.656%, respectively.
Carrying values of land, buildings and personal property pledged as
collateral for the mortgage notes and the secured note were approximately
$50,800 at February 1, 1997.
The annual maturities of long-term debt and capital lease obligations over
the next five years as of February 1, 1997 are $31,638, $29,772, $28,648,
$29,789 and $21,130, respectively.
The Company's loan agreements place restrictions on mergers,
consolidations, acquisitions, sales of assets, transactions with affiliates,
leases, liens, dividend payments, debt and investments. They also contain
certain financial requirements including current ratio, debt to equity, tangible
net worth, cash flow coverage and fixed charge coverage ratios. The Belk
Companies have obtained waivers for all out-of-compliance conditions.
The Belk Companies have entered into interest rate swap agreements with
various financial institutions to manage the exposure to changes in interest
rates on its LIBOR based indebtedness. The amount of indebtedness covered by the
interest rate swaps is $125 million at November 1, 1997. Subsequent to November
1, 1997, the Belk Companies entered into an additional $50 million in interest
rate swaps. The amount of indebtedness covered by the interest rate swaps is
$175 million for 1998, $150 million for 1999, $75 million for 2000 and 2001, and
$50 million through 2007.
The Company has short-term loan agreements at variable interest rates based
on LIBOR plus from 50 to 180 basis points and at the fixed rate of 5.6%. The
amounts outstanding under these agreements at February 3, 1996, February 1, 1997
and November 1, 1997 were $104,840, $139,552 and $90,330, respectively.
At February 3, 1996, February 1, 1997 and November 1, 1997, the Company has
unsecured line of credit agreements totaling $109,620, $213,870 and $177,000,
respectively, with banks at varying interest rates based on LIBOR plus from 50
to 175 basis points. The amounts outstanding under these agreements at February
3, 1996, February 1, 1997 and November 1, 1997 were $11,487, $47,720, and
$96,436, respectively.
F-14
<PAGE> 105
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(10) LEASES
The Company leases certain of its stores, warehouse facilities and
equipment. The majority of these leases will expire over the next 10 years. The
leases usually contain renewal options and provide for payment by the lessee of
real estate taxes and other expenses and, in certain instances, increased
rentals based on percentages of sales.
Future minimum lease payments under noncancelable leases as of February 1,
1997 were as follows:
<TABLE>
<CAPTION>
FISCAL YEAR CAPITAL OPERATING
----------- ------- ---------
<S> <C> <C>
1998........................................................ $ 1,178 $ 32,941
1999........................................................ 1,178 29,665
2000........................................................ 1,178 26,901
2001........................................................ 1,094 25,336
2002........................................................ 1,034 19,070
After 2002.................................................. 5,443 166,510
------- --------
Total..................................................... 11,105 $300,423
========
Less imputed interest....................................... (2,591)
-------
Present value of minimum lease payments..................... 8,514
Less current portion........................................ (712)
-------
$ 7,802
=======
</TABLE>
Rental expense for all operating leases consists of the following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Buildings:
Minimum rentals....................................... $24,060 $26,091 $29,982
Contingent rentals.................................... 4,702 4,316 4,562
Equipment............................................... 10,810 10,630 10,484
------- ------- -------
Total rental expense.................................... $39,572 $41,037 $45,028
======= ======= =======
</TABLE>
Contingent rentals are determined on the basis of a percentage of sales in
excess of stipulated minimums for certain store facilities.
F-15
<PAGE> 106
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(11) INCOME TAXES
Federal and state income tax expense (benefit) from continuing operations
was as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
--------------------------------------- -------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
Federal................................ $27,900 $19,160 $31,427 $12,100 $ 9,339
State.................................. 6,559 4,565 7,200 2,884 2,145
------- ------- ------- ------- -------
34,459 23,725 38,627 14,984 11,484
Deferred:
Federal................................ (4,633) (578) 91 (368) 22
State.................................. (1,365) (760) 84 (481) 22
------- ------- ------- ------- -------
(5,998) (1,338) 175 (849) 44
------- ------- ------- ------- -------
Income taxes............................. $28,461 $22,387 $38,802 $14,135 $11,528
======= ======= ======= ======= =======
</TABLE>
A reconciliation between income taxes from continuing operations computed
using the effective income tax rate and the federal statutory income tax rate of
35% is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Income tax at the statutory federal rate................ $26,030 $21,952 $34,739
State income taxes, net of federal income tax benefit... 3,376 2,473 4,735
Other................................................... (945) (2,038) (672)
------- ------- -------
Income taxes............................................ $28,461 $22,387 $38,802
======= ======= =======
</TABLE>
F-16
<PAGE> 107
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Deferred taxes based upon differences between the financial statement and
tax bases of assets and liabilities and available tax carryforwards consist of:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
Deferred tax assets:
Benefit plan costs........................................ $12,974 $ 14,520
Tax carryovers............................................ 6,408 6,963
Inventory capitalization.................................. 3,863 4,469
Allowance for doubtful accounts........................... 1,785 2,521
Capitalized leases........................................ 991 970
Other..................................................... 2,392 6,626
------- --------
Gross deferred tax assets................................... 28,413 36,069
Less valuation allowance.................................... (2,035) (3,488)
------- --------
Net deferred tax assets..................................... 26,378 32,581
Deferred tax liabilities:
Investment securities..................................... 5,219 5,930
Property and equipment.................................... 12,720 16,104
Prepaid pension costs..................................... 2,132 1,529
Provision for gain on disposal of discontinued
operations............................................. -- 29,897
Other..................................................... 15 3,612
------- --------
Gross deferred tax liabilities.............................. 20,086 57,072
------- --------
Net deferred tax assets (liabilities)....................... $ 6,292 $(24,491)
======= ========
</TABLE>
The change in the valuation allowance was a (decrease) increase of $(2,191)
and $1,453 for February 3, 1996 and February 1, 1997, respectively. In assessing
the realizability of deferred tax assets, management considers whether it is
more likely than not that some portion or all of the deferred tax assets will
not be realized. The ultimate realization of deferred tax assets is dependent
upon the temporary differences becoming deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment.
As of February 1, 1997, the Company has net operating loss and contribution
carryforwards for federal and state income tax purposes of approximately $3,983
and $697, respectively, which are available to offset future taxable income, if
any. These carryforwards expire at various intervals through 2012. In addition,
the Company has alternative minimum tax credit carryforwards of approximately
$627 which are available to reduce future federal regular income taxes, if any,
over an indefinite period.
F-17
<PAGE> 108
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(12) PENSION BENEFITS
The Company has a defined benefit pension plan covering substantially all
of its employees. The benefits are based on years of service and the employee's
compensation during the five years before retirement. The cost of pension
benefits has been determined by the projected unit credit actuarial method in
accordance with SFAS No. 87 "Employers' Accounting for Pensions". The following
table sets forth the plan's funded status and amounts recognized in the
Company's combined balance sheets at February 3, 1996 and February 1, 1997:
<TABLE>
<CAPTION>
1996 1997
-------- ---------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation................................... $148,995 $ 156,651
======== =========
Accumulated benefit obligation.............................. $152,430 $ 159,054
======== =========
Projected benefit obligation................................ $171,363 $ 183,083
Plan assets at fair value................................... 270,063 289,482
-------- ---------
Plan assets in excess of projected benefit obligation....... 98,700 106,399
Unrecognized net gain....................................... (82,756) (94,136)
Unrecognized net asset at January 1, 1986 being recognized
over 15 years............................................. (9,630) (7,664)
-------- ---------
Prepaid pension cost........................................ $ 6,314 $ 4,599
======== =========
</TABLE>
Net pension cost for fiscal years 1995, 1996 and 1997 includes the
following components:
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Service cost............................................. $ 10,284 $ 11,118 $ 10,657
Interest cost on projected benefit obligation............ 12,453 13,196 13,202
Actual return on plan assets............................. (17,791) (18,021) (19,146)
Net amortization and deferral............................ (3,333) (3,724) (2,998)
-------- -------- --------
Net pension cost......................................... $ 1,613 $ 2,569 $ 1,715
======== ======== ========
</TABLE>
Assumptions used in accounting for the pension plan as of February 3, 1996
and February 1, 1997 were:
<TABLE>
<CAPTION>
1996 1997
----- -----
<S> <C> <C>
Discount rates.............................................. 7.25% 7.75%
Rates of increase in compensation levels.................... 4.00% 4.00%
Expected long-term rate of return on assets................. 8.50% 8.50%
</TABLE>
(13) OTHER POSTRETIREMENT BENEFIT PLANS
The Company has a defined benefit health care plan that provides
postretirement medical and life insurance benefits to certain retired full-time
employees. The Company accounts for postretirement benefits by recognizing the
cost of these benefits over an employee's estimated term of service with the
Company.
F-18
<PAGE> 109
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The following table presents the plan's funded status reconciled with
amounts recognized in the Company's combined balance sheets at February 3, 1996
and February 1, 1997:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.................................................... $ 16,446 $ 16,295
Active plan participants.................................... 11,210 11,448
-------- --------
Accumulated postretirement benefit obligation............... 27,656 27,743
Unrecognized net obligation at February 1, 1993 being
recognized over 20 years.................................. (15,891) (14,957)
Unrecognized net loss....................................... (7,592) (6,884)
-------- --------
Accrued postretirement benefit cost......................... $ 4,173 $ 5,902
======== ========
</TABLE>
Net postretirement benefit cost for fiscal years 1995, 1996 and 1997
includes the following components:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Service cost................................................ $ 323 $ 343 $ 455
Interest cost............................................... 1,773 1,968 2,044
Net amortization and deferral............................... 950 1,104 1,298
------ ------ ------
Net postretirement benefit cost............................. $3,046 $3,415 $3,797
====== ====== ======
</TABLE>
For measurement purposes, a 10.0% annual rate of increase in the per capita
cost of covered benefits (i.e., health care cost trend rate) was assumed for
fiscal year 1997; the rate was assumed to decrease gradually to 5.0% by fiscal
year 2003 and remain at that level thereafter. The health care cost trend rate
assumption has a significant effect on the amounts reported. For example,
increasing the assumed health care cost trend rates by one percentage point in
each year would increase the accumulated postretirement benefit obligation as of
February 1, 1997 by $2,028 and the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for the year ended
February 1, 1997 by $257.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.25% and 7.75% at February 3, 1996 and
February 1, 1997, respectively.
(14) OTHER EMPLOYEE BENEFITS
The Belk Employee's Group Medical Plan provides medical benefits to
substantially all employees of the Belk Companies. This Plan is "self-funded"
for medical benefits through a 501(c)(9) Trust. The Group Life Insurance Plan
provides life insurance to substantially all employees of the Belk Companies and
is fully insured through a contract issued by an insurance company.
Contributions by the Company under the Belk Employees' Group Medical Plan and
the Group Life Insurance Plan amounted to approximately $12,747, $12,268 and
$12,311 in fiscal years 1995, 1996 and 1997, respectively.
The Belk Profit Sharing Plan, a contributory, defined contribution
multi-employer plan, provides benefits for substantially all employees of the
Belk Companies. The costs of the plan generally represent 10% of profits, as
defined, and amounted to approximately $12,589, $10,848 and $14,003 in fiscal
years 1995, 1996 and 1997, respectively.
The Supplemental Executive Retirement Plan ("SERP") is a non-qualified
defined benefit retirement plan which provides retirement and death benefits to
certain qualified executives of the Company. Total SERP costs charged to
operations were approximately $1,529, $1,987 and $1,002 in fiscal years 1995,
1996 and 1997, respectively. The effective discount rate used in determining the
net periodic SERP cost is 8.5% for fiscal years
F-19
<PAGE> 110
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
1995 and 1996, and 7.25% for fiscal year 1997. Actuarial gains and losses are
amortized over the average remaining service lives of the participants.
Certain eligible employees participate in a non-qualified Deferred
Compensation Plan ("DCP"). Participants in the plan have elected to defer a
portion of their regular compensation subject to certain limitations prescribed
by the DCP. The Company is required to pay interest on the employees' deferred
compensation at various rates between 9% and 15%. Total interest expense related
to this plan and charged to operations was approximately $2,425, $2,598 and
$2,768 in fiscal years 1995, 1996 and 1997, respectively.
(15) FAIR VALUE OF FINANCIAL INSTRUMENTS
For financial instruments which are short-term in nature, such as cash and
cash equivalents, accounts receivable, accounts payable, accrued expenses and
lines of credit, carrying values approximate fair values. The fair value of
other financial instruments are as follows:
<TABLE>
<CAPTION>
FEBRUARY 3, 1996 FEBRUARY 1, 1997 NOVEMBER 1, 1997
--------------------------- --------------------------- ---------------------------
(UNAUDITED)
CARRYING VALUE FAIR VALUE CARRYING VALUE FAIR VALUE CARRYING VALUE FAIR VALUE
-------------- ---------- -------------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Notes payable................. $104,840 $104,840 $139,552 $138,993 $ 90,330 $ 89,696
Long-term debt (excluding
capitalized leases)......... 169,264 172,685 207,496 209,487 231,841 234,204
Interest rate swap
agreements.................. -- -- -- -- -- (3,775)
Investment securities......... 33,210 33,888 32,781 33,267 35,636 36,125
</TABLE>
The fair value of the Company's fixed rate long-term debt and notes payable
is estimated based on the current rates offered to the Company for debt of the
same remaining maturities. The carrying values of the Company's variable rate
long-term debt and notes payable are reasonable estimates of fair value.
The fair value of interest rate swap agreements is the estimated amount
that the Company would pay to terminate the swap agreement, taking into account
current credit worthiness of the swap counterparties.
(16) RELATED PARTY TRANSACTIONS
The Company owns a 37% interest in Belk-Simpson, an affiliated retail
company. The Company has outstanding receivable balances from Belk-Simpson of
$15,040, $10,541 and $8,028 at February 3, 1996, February 1, 1997 and November
1, 1997, respectively, which are included in prepaid expenses and other current
assets in the combined balance sheets. The Company also has a loan payable to
Belk-Simpson which is included in deferred compensation and other non-current
liabilities in the combined balance sheets. The outstanding balances on this
loan are $5,626, $7,851 and $7,851 at February 3, 1996, February 1, 1997 and
November 1, 1997, respectively.
Various officers and directors of the Company have outstanding loans with
the Company at a fixed rate of 7.5%. The balances of these loans are $2,929 and
$2,226 as of February 3, 1996 and February 1, 1997, respectively. Various
officers, directors and employees of the Company have demand deposits with the
Company. The deposits are invested in highly liquid securities and other
investments and earn interest at the 30 day secondary CD rate less 50 basis
points. The aggregate amount of demand deposits are $5,059, $4,065 and $5,669 at
February 3, 1996, February 1, 1997 and November 1, 1997, respectively.
On November 21, 1996, several directors, executive officers, and their
families sold 6,601.33 shares of common stock of the corporations that owned and
operated the 42 Leggett stores acquired in the Leggett acquisition to Belk of
Virginia, Inc. for $6,019.
On April 19, 1996 and April 23, 1996, Belk Finance Company guaranteed two
bank loans made to two directors and executive officers, both in the amount of
$800. Each loan bears interest at the prime rate
F-20
<PAGE> 111
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
established by the Federal Reserve Bank, less 0.5% per annum, payable quarterly,
and are due on May 1, 1998. At November 1, 1997, these loans had outstanding
balances of $156 and $197.
On August 1, 1997, Belk Finance Company guaranteed a $5,000 bank loan made
to Brothers Investment Company. This loan bears interest at the prime rate as
established by the Federal Reserve Bank, less 0.5% per annum, payable monthly,
and is due on July 31, 1998. At November 1, 1997, this loan had an outstanding
balance of $5,000. John M. Belk, the current Chairman of the Board of all of the
Belk Companies, owns 50% of Brothers Investment Company and is a director of
Brothers Investment Company. The estate of Thomas M. Belk, of which John M. Belk
is a co-executor, owns the remaining 50% of Brothers Investment Company.
(17) SUBSEQUENT EVENT
On November 14, 1997, the Company entered into an agreement with two banks
to consolidate its seasonal borrowings. The agreement provides for a one year
seasonal line of credit of $164,000. The line will be reduced to $128,500 on
January 31, 1998 and will expire on September 30, 1998.
(18) THE BELK COMPANIES
The following related entities (referred to in note 1) are included in the
Belk Companies:
Belk-Simpson Company of Paragould, Arkansas, Inc., Belk Department Store of
Stuttgart, Ark., Inc., Belk-Lindsey Stores, Inc., Belk's Department Store of
Albany, Georgia, Belk of Americus, Ga., Inc., Belk of Athens, Ga., Inc.,
Belk-Simpson Co., of Bainbridge, Ga., Inc., Belk of Canton, Ga., Inc.,
Belk-Rhodes Company, of Carrollton, Ga., Belk's Department Store of
Cartersville, Georgia, Incorporated, Belk of Cornelia, Ga., Inc., Belk of
Covington, Ga., Inc., Belk of Dalton, Ga., Inc., Belk-Matthews Company of
Dublin, Georgia, Belk of Hartwell, Ga., Inc., Belk of LaGrange, Ga., Inc., Belk
of Lawrenceville, Ga., Inc., Belk-Matthews Company of Macon, Georgia,
Belk-Matthews Company of Milledgeville, Ga., Inc., Belk of Monroe, Ga., Inc.,
Belk of Newnan, Ga., Inc., Belk-Rhodes Company, (Rome, Georgia), Belk of
Statesboro, Ga., Inc., Belk of Thomaston, Ga., Inc., Belk of Toccoa, Ga., Inc.,
Belk-Matthews Company, Vidalia, Georgia, Inc., Belk of Washington, Ga., Inc.,
Belk of Waycross, Ga., Inc., Belk-Simpson Company of Corbin, Kentucky,
Incorporated, Belk-Simpson Company of Harlan, Kentucky, Incorporated, Belk of
Miss., Inc., Belk Department Store of Ahoskie, N.C., Inc., Belk's Department
Store of Albemarle, North Carolina, Incorporated, Belk of Asheboro, N.C., Inc.,
Belk's Department Store of Asheville, North Carolina, Incorporated,
Belk-Matthews Company, Belk's Department Store of Boone, North Carolina,
Incorporated, Belk's Department Store of Brevard, N.C. Incorporated, Belk-Beck
Company of Burlington, North Carolina, Inc., Belk Brothers Company, Belk
Enterprises, Inc., Belk-Matthews Company of Cherryville, N.C., Incorporated,
Belk Department Store of Clinton, N.C., Inc., Belk's Department Store of Dunn,
North Carolina, Incorporated, Belk Department Store of Eden, N.C., Inc., Belk
Department Store of Elkin, N.C., Inc., Belk Department Store of Forest City,
N.C., Inc., Hudson-Belk Co. of Fuquay-Varina, N.C., Inc., Matthews-Belk Company,
Belk Department Store of Greenville, N.C., Inc., Belk-Simpson Company of
Hendersonville, N.C., Incorporated, Belk Department Store of Hickory, N.C.,
Inc., Belk-Beck Co. of High Point, N.C., Inc., Belk's Department Store of
Jacksonville, N.C., Inc., Belk's Department Store of Lenoir, North Carolina,
Incorporated, Belk Department Store of Lincolnton, N.C., Inc., Belk Brothers of
Monroe, North Carolina, Incorporated, Belk's Department Store of Morehead City,
N.C., Inc., Belk's Department Store of Mount Airy, North Carolina, Incorporated,
Belk's Department Store of New Bern, N.C., Incorporated, Hudson-Belk Company,
Belk Department Store of Reidsville, N.C., Inc., Belk's Department Store of
Rockingham, N.C., Incorporated, Belk-Harry Company -- Salisbury, N.C., Belk
Department Store of Shelby, N.C., Inc., Belk of Siler City, N.C., Inc., Belk
Department Store of Waynesville, N.C., Inc., Belk Department Store of
Wilkesboro, N.C., Inc., Belk's Department Store, Incorporated of Aiken, South
Carolina, Gallant-Belk Company, Belk's Department Store of Batesburg, S.C.,
Inc., Belk-Simpson Company, Incorporated of Beaufort, South Carolina, Belk's
Department Store of Camden, S.C., Incorporated, Belk
F-21
<PAGE> 112
THE BELK COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Department Store of Charleston, S.C., Inc., Belk's Department Store of Conway,
S.C., Incorporated, Belk's Department Store of Florence, S.C., Incorporated,
Belk's Department Store of Gaffney, South Carolina, Incorporated, Belk of
Georgetown, S.C., Inc., Belk Department Store of Greenwood, S.C., Inc., Belk's
Department Store of Hartsville, S.C., Incorporated, Belk's Department Store,
Incorporated, of Lake City, South Carolina, Belk's Department Store of
Lancaster, S.C., Inc., Belk's Department Store of Laurens, South Carolina,
Incorporated, Belk of Orangeburg, S.C., Inc., Belk of Seneca, S.C., Inc., Belk
of Spartanburg, S.C., Inc., Belk of Union, S.C., Inc., Belk of Walterboro, S.C.,
Inc., Belk's Department Store of Winnsboro, S.C., Incorporated, Parks-Belk
Company of Clarksville, Tennessee, Belk Department Store of Greenville, Texas,
Inc., Belk's Department Store of Paris, Texas, Inc., Parks-Belk Company,
Incorporated, Belk of Danville, Va., Inc., Belk of Lynchburg, Va., Inc., Belk
Stores of Virginia, Inc., Belk of Roanoke, Va., Inc., Belk of South Boston, Va.,
Inc., Belk of Dawson, Ga., Inc., Belk of Elberton, Ga., Inc., Belk of Thomson,
Ga., Inc., Belk Department Store of Edenton, N.C., Inc., Belk of Thomasville,
N.C., Inc., Belk's Department Store of Chesterfield, S.C., Incorporated, Belk's
Department Store of Columbia, South Carolina, Incorporated, Belk Finance
Company, Belk-Simpson Realty Company, Belk of Lawrenceville, Va., Inc., Belk
Realty of Radford, Va., Inc., Belk Realty of Staunton, Va., Inc., Belk Outlet
Center, Inc., Belk of St. Augustine, Fla., Inc., Belk-Simpson Company of
Somerset, Kentucky, Incorporated, Belk Stores of Maryland, Inc., Belk Charlotte,
Inc., Belk Department Store of Greensboro, N.C., Inc., Belk of Roanoke Rapids,
N.C., Inc., Belk Department Store of North Augusta, S.C., Inc., Belk's
Department Store of Rock Hill, S.C., Incorporated, Belk Department Store of
Chattanooga, Tennessee, Incorporated, Parks-Belk Company of Wise, Virginia,
Incorporated, Belk of West Virginia, Inc., Belk Brothers Properties, Inc., Belk
Investment Company, Belk of Virginia, Inc., Belk of Delaware, Inc., Archdale
Advertising Agency, Inc., Belk Leasing Company, Belk Stores Services, Inc.,
United Electronic Services, Inc., Belk Stores Mutual Insurance Company, The Belk
Center, Inc., Belk International, Inc., and TAGS Stores, LLC.
F-22
<PAGE> 113
ANNEX A
THE BELK COMPANIES
<TABLE>
<CAPTION>
REQUIRED
SHAREHOLDER
BELK COMPANY VOTE
- ------------ -----------
<S> <C>
Belk-Simpson Company of Paragould, Arkansas, Inc............ Two-thirds
Belk Department Store of Stuttgart, Ark., Inc............... Two-thirds
Belk-Lindsey Stores, Inc.................................... Majority
Belk's Department Store of Albany, Georgia.................. Majority
Belk of Americus, Ga., Inc.................................. Majority
Belk of Athens, Ga., Inc.................................... Majority
Belk-Simpson Co., of Bainbridge, Ga., Inc................... Majority
Belk of Canton, Ga., Inc.................................... Majority
Belk-Rhodes Company, of Carrollton, Ga...................... Majority
Belk's Department Store of Cartersville, Georgia,
Incorporated.............................................. Majority
Belk of Cornelia, Ga., Inc.................................. Majority
Belk of Covington, Ga., Inc................................. Majority
Belk of Dalton, Ga., Inc.................................... Majority
Belk-Matthews Company of Dublin, Georgia.................... Majority
Belk of Hartwell, Ga., Inc.................................. Majority
Belk of LaGrange, Ga., Inc.................................. Majority
Belk of Lawrenceville, Ga., Inc............................. Majority
Belk-Matthews Company of Macon, Georgia..................... Majority
Belk-Matthews Company of Milledgeville, Ga., Inc............ Majority
Belk of Monroe, Ga., Inc.................................... Majority
Belk of Newnan, Ga., Inc.................................... Majority
Belk-Rhodes Company, (Rome, Georgia)........................ Majority
Belk of Statesboro, Ga., Inc................................ Majority
Belk of Thomaston, Ga., Inc................................. Majority
Belk of Toccoa, Ga., Inc.................................... Majority
Belk-Matthews Company, Vidalia, Georgia, Inc................ Majority
Belk of Washington, Ga., Inc................................ Majority
Belk of Waycross, Ga., Inc.................................. Majority
Belk-Simpson Company of Corbin, Kentucky, Incorporated...... Majority
Belk-Simpson Company of Harlan, Kentucky, Incorporated...... Majority
Belk of Miss., Inc.......................................... Majority
Belk Department Store of Ahoskie, N.C., Inc................. Majority
Belk's Department Store of Albemarle, North Carolina,
Incorporated.............................................. Majority
Belk of Asheboro, N.C., Inc................................. Majority
Belk's Department Store of Asheville, North Carolina,
Incorporated.............................................. Majority
Belk-Matthews Company....................................... Majority
Belk's Department Store of Boone, North Carolina,
Incorporated.............................................. Majority
Belk's Department Store of Brevard, N.C., Incorporated...... Majority
Belk-Beck Company of Burlington, North Carolina, Inc........ Majority
Belk Brothers Company....................................... Majority
Belk Enterprises, Inc....................................... Majority
Belk-Matthews Company of Cherryville, N.C., Incorporated.... Majority
Belk Department Store of Clinton, N.C., Inc................. Majority
Belk's Department Store of Dunn, North Carolina,
Incorporated.............................................. Majority
Belk Department Store of Eden, N.C., Inc.................... Majority
Belk Department Store of Elkin, N.C., Inc................... Majority
Belk Department Store of Forest City, N.C., Inc............. Majority
</TABLE>
A-1
<PAGE> 114
<TABLE>
<CAPTION>
REQUIRED
SHAREHOLDER
BELK COMPANY VOTE
- ------------ -----------
<S> <C>
Hudson-Belk Co. of Fuquay-Varina, N.C., Inc................. Majority
Matthews-Belk Company....................................... Majority
Belk Department Store of Greenville, N.C., Inc.............. Majority
Belk-Simpson Company of Hendersonville, N.C.,
Incorporated.............................................. Majority
Belk Department Store of Hickory, N.C., Inc................. Majority
Belk-Beck Co. of High Point, N.C., Inc...................... Majority
Belk's Department Store of Jacksonville, N.C., Inc.......... Majority
Belk's Department Store of Lenoir, North Carolina,
Incorporated.............................................. Majority
Belk Department Store of Lincolnton, N.C., Inc.............. Majority
Belk Brothers of Monroe, North Carolina, Incorporated....... Majority
Belk's Department Store of Morehead City, N.C., Inc......... Majority
Belk's Department Store of Mount Airy, North Carolina,
Incorporated.............................................. Majority
Belk's Department Store of New Bern, N.C., Incorporated..... Majority
Hudson-Belk Company......................................... Majority
Belk Department Store of Reidsville, N.C., Inc.............. Majority
Belk's Department Store of Rockingham, N.C., Incorporated... Majority
Belk-Harry Company.......................................... Majority
Belk Department Store of Shelby, N.C., Inc.................. Majority
Belk of Siler City, N.C., Inc............................... Majority
Belk Department Store of Waynesville, N.C., Inc............. Majority
Belk Department Store of Wilkesboro, N.C., Inc.............. Majority
Belk's Department Store, Incorporated of Aiken, South
Carolina.................................................. Two-thirds
Gallant-Belk Company........................................ Two-thirds
Belk's Department Store of Batesburg, S.C., Inc............. Two-thirds
Belk-Simpson Company, Incorporated of Beaufort, South
Carolina.................................................. Two-thirds
Belk's Department Store of Camden, S.C., Incorporated....... Two-thirds
Belk Department Store of Charleston, S.C., Inc.............. Two-thirds
Belk's Department Store of Conway, S.C., Incorporated....... Two-thirds
Belk's Department Store of Florence, S.C., Incorporated..... Two-thirds
Belk's Department Store of Gaffney, South Carolina,
Incorporated.............................................. Two-thirds
Belk of Georgetown, S.C., Inc............................... Two-thirds
Belk-Simpson Company, Greenville, South Carolina............ Two-thirds
Belk Department Store of Greenwood, S.C., Inc............... Two-thirds
Belk's Department Store of Hartsville, S.C., Incorporated... Two-thirds
Belk's Department Store, Incorporated, of Lake City, South
Carolina.................................................. Two-thirds
Belk's Department Store of Lancaster, S.C., Inc............. Two-thirds
Belk's Department Store of Laurens, South Carolina,
Incorporated.............................................. Two-thirds
Belk of Orangeburg, S.C., Inc............................... Two-thirds
Belk of Seneca, S.C., Inc................................... Two-thirds
Belk of Spartanburg, S.C., Inc.............................. Two-thirds
Belk's Department Store of Union, S.C., Incorporated........ Two-thirds
Belk of Walterboro, S.C., Inc............................... Two-thirds
Belk's Department Store of Winnsboro, S.C., Incorporated.... Two-thirds
Parks-Belk Company of Clarksville, Tennessee................ Majority
Belk Department Store of Greenville, Texas, Inc............. Two-thirds
Belk's Department Store of Paris, Texas, Inc................ Two-thirds
Parks-Belk Company, Incorporated............................ Two-thirds
Belk of Danville, Va., Inc.................................. Two-thirds
Belk of Lynchburg, Va., Inc................................. Two-thirds
Belk Stores of Virginia, Inc................................ Two-thirds
</TABLE>
A-2
<PAGE> 115
<TABLE>
<CAPTION>
REQUIRED
SHAREHOLDER
BELK COMPANY VOTE
- ------------ -----------
<S> <C>
Belk of Roanoke, Va., Inc................................... Two-thirds
Belk of South Boston, Va., Inc.............................. Two-thirds
Belk of Dawson, Ga., Inc.................................... Majority
Belk of Elberton, Ga., Inc.................................. Majority
Belk of Thomson, Ga., Inc................................... Majority
Belk Department Store of Edenton, N.C., Inc................. Majority
Belk of Thomasville, N.C., Inc.............................. Majority
Belk's Department Store of Chesterfield, S.C.,
Incorporated.............................................. Two-thirds
Belk's Department Store of Columbia, South Carolina,
Incorporated.............................................. Two-thirds
Belk Finance Company........................................ Majority
Belk-Simpson Realty Company................................. Two-thirds
Belk of Lawrenceville, Va., Inc............................. Two-thirds
Belk Realty of Radford, Va., Inc............................ Two-thirds
Belk Realty of Staunton, Va., Inc........................... Two-thirds
Belk Outlet Center, Inc..................................... Two-thirds
</TABLE>
THE SURVIVING BELK SUBSIDIARIES
Belk of St. Augustine, Fla., Inc.
Belk-Simpson Company of Somerset, Kentucky, Incorporated
Belk Stores of Maryland, Inc.
Belk Charlotte, Inc.
Belk Department Store of Greensboro, N.C., Inc.
Belk of Roanoke Rapids, N.C., Inc.
Belk Department Store of North Augusta, S.C., Inc.
Belk's Department Store of Rock Hill, S.C., Incorporated
Belk Department Store of Chattanooga, Tennessee, Incorporated
Parks-Belk Company of Wise, Virginia, Incorporated
Belk of West Virginia, Inc.
Belk Brothers Properties, Inc.
Belk Investment Company
Belk of Virginia, Inc.
Belk of Delaware, Inc.
*Archdale Advertising Agency, Inc.
*Belk Leasing Company
*Belk Stores Services, Inc.
*United Electronic Services, Inc.
*Belk Stores Mutual Insurance Company
*The Belk Center, Inc.
*Belk International, Inc.
*Belk Funding, LLC
*TAGS Stores, LLC
- ---------------
* These Surviving Belk Subsidiaries are not expected to be merged into New Belk
following the consummation of the Reorganization.
A-3
<PAGE> 116
ANNEX B
PLAN AND AGREEMENT OF REORGANIZATION
BY AND
AMONG
BELK, INC.,
BELK ACQUISITION CO.
AND
THE SEPARATE BELK COMPANIES
LISTED ON EXHIBIT A
Dated as of
November 25, 1997
B-1
<PAGE> 117
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1 THE REORGANIZATION......................................... B-4
1.1 The Reorganization.......................................... B-4
1.2 Conversion of Shares........................................ B-5
1.3 Exchange of Certificates.................................... B-6
1.4 Dividends................................................... B-7
1.5 Escheat Laws................................................ B-7
1.6 Closing of Company Transfer Books........................... B-7
ARTICLE 2 CLOSING.................................................... B-7
2.1 Time and Place of Closing................................... B-7
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF EACH BELK COMPANY........ B-7
3.1 Organization, Good Standing and Power....................... B-7
3.2 Authorization; Enforceability............................... B-8
3.3 Investigation by Company.................................... B-8
3.4 Information in Disclosure Documents......................... B-8
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF NEW BELK................. B-8
4.1 Organization, Good Standing and Power....................... B-8
4.2 Capitalization.............................................. B-9
4.3 Authority; Enforceability................................... B-9
4.4 Investigation by New Belk................................... B-9
ARTICLE 5 CONDUCT OF BUSINESS PENDING THE EFFECTIVE TIME; CERTAIN
COVENANTS.................................................. B-10
5.1 Conduct of Business Pending Merger.......................... B-10
5.2 Belk-Simpson Reorganization................................. B-10
5.3 Takeover Statutes........................................... B-11
5.4 Consents.................................................... B-11
5.5 Further Assurances.......................................... B-11
5.6 Notice; Efforts to Remedy................................... B-11
5.7 Registration Statement; Stockholder Approvals............... B-11
5.8 Expenses.................................................... B-12
5.9 Indemnification of Officers and Directors................... B-12
5.10 Tax Treatment............................................... B-12
5.11 Confidentiality............................................. B-12
5.12 No Solicitation of Transactions............................. B-12
5.13 Dividends................................................... B-13
ARTICLE 6 CONDITIONS PRECEDENT TO MERGER............................. B-13
6.1 Conditions to Each Party's Obligations...................... B-13
6.2 Conditions to Obligations of the Belk Companies............. B-13
6.3 Conditions to Obligations of New Belk and New Belk Sub...... B-14
6.4 Conditions to Obligations of Belk-Simpson................... B-14
ARTICLE 7 TERMINATION AND ABANDONMENT OF THE REORGANIZATION.......... B-14
7.1 Termination................................................. B-14
7.2 Effect of Termination and Abandonment....................... B-15
ARTICLE 8 MISCELLANEOUS.............................................. B-15
8.1 Waiver and Amendment........................................ B-15
Non-Survival of Representations, Warranties and
8.2 Agreements.................................................. B-16
8.3 Notices..................................................... B-16
8.4 Descriptive Headings; Interpretation........................ B-16
8.5 Counterparts................................................ B-16
</TABLE>
B-2
<PAGE> 118
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
8.6 Entire Agreement............................................ B-16
8.7 Governing Law............................................... B-17
8.8 Severability................................................ B-17
8.9 Enforcement of Agreement.................................... B-17
8.10 Assignment.................................................. B-17
8.11 Limited Liability........................................... B-17
8.12 Consent to Jurisdiction; Service of Process................. B-17
</TABLE>
B-3
<PAGE> 119
PLAN AND AGREEMENT OF REORGANIZATION
THIS PLAN AND AGREEMENT OF REORGANIZATION (this "Agreement"), dated as of
November 25, 1997, by and among BELK, INC., a Delaware corporation ("New Belk"),
BELK ACQUISITION CO., a South Carolina corporation ("New Belk Sub"), and each of
the Belk companies identified on Exhibit A attached hereto (each a "Belk
Company" and, collectively, the "Belk Companies").
WHEREAS, the respective Boards of Directors of each Belk Company, New Belk
and New Belk Sub have approved and declared advisable the merger of (a) each
Belk Company (other than Belk-Simpson Company, Greenville, South Carolina
("Belk-Simpson)) with and into New Belk and (b) the merger of New Belk Sub, a
wholly owned subsidiary of New Belk, with and into Belk-Simpson (the
"Belk-Simpson Merger") (for each Belk Company other than Belk-Simpson, the
"Merger," and collectively, the "Mergers" or the "Reorganization") pursuant to:
(i) the applicable provisions of the Delaware General Corporation Law (the
"DGCL"); (ii) the applicable provisions of the state laws identified on Exhibit
A attached hereto (for each Belk Company, the "Applicable State Corporate Law,"
and collectively, the "Applicable State Corporate Laws") pursuant to which each
such Belk Company has been organized; and (iii) the terms and provisions of this
Agreement and the transactions contemplated hereby;
WHEREAS, the respective Boards of Directors of New Belk, New Belk Sub and
each Belk Company have determined that the Merger is in furtherance of and
consistent with their respective long-term business strategies and is fair to
and in the best interests of their respective stockholders;
WHEREAS, for federal income tax purposes, it is intended that each Merger
other than the Belk-Simpson Merger shall qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the Belk-Simpson Merger shall qualify as an exchange under Section
351(a) of the Code, and this Agreement is intended to be and is adopted as a
plan of reorganization; and
WHEREAS, the Reorganization described herein is subject to the approval of
the stockholders of each Belk Company and applicable state and federal
authorities, and satisfaction of certain other conditions described in this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements herein contained, the
parties agree as follows:
ARTICLE 1
THE REORGANIZATION
1.1 THE REORGANIZATION
(a) Upon the terms and subject to the conditions of this Agreement, at the
Effective Time and in accordance with the provisions of this Agreement, the DGCL
and the Applicable State Corporate Laws, each Belk Company (other than
Belk-Simpson) shall be merged with and into New Belk, which shall be the
surviving corporation in each Merger, and the separate corporate existence of
each such Belk Company shall cease. Subject to the provisions of this Agreement,
a certificate of merger (the "Delaware Certificate of Merger") shall be duly
prepared, executed and acknowledged by New Belk and thereafter delivered to the
Secretary of State of the State of Delaware for filing as provided in the DGCL
on the Closing Date (as defined in Section 2.1). Subject to the provisions of
this Agreement, a certificate of merger or articles of merger, as provided in
the Applicable State Corporate Laws for each such Belk Company (other than
Belk-Simpson) shall be duly prepared, executed and acknowledged by each such
Belk Company and thereafter delivered to the Secretary of State of the state set
forth next to the name of each such Belk Company on Exhibit A (for each such
Belk Company, the "Belk Company Certificate of Merger" and collectively, the
"Belk Company Certificates of Merger"). Each Merger, and the Reorganization as a
whole, shall become effective (the "Effective Time") immediately upon the last
to be filed of (i) the Delaware Certificate of Merger with the
B-4
<PAGE> 120
Secretary of State of the State of Delaware, (ii) the Belk Company Certificate
of Merger relating to the Merger of such Belk Company, and (iii) the
Belk-Simpson Certificate of Merger (defined below).
(b) From and after the Effective Time, the Merger of each Belk Company
(other than Belk-Simpson) shall have all the effects set forth in the DGCL and
the Applicable State Corporate Laws. Without limiting the generality of the
foregoing, and subject thereto, by virtue of each such Merger and in accordance
with the DGCL and the Applicable State Corporate Laws, (i) all of the
properties, rights, privileges, powers and franchises of each Belk Company
(other than Belk-Simpson) shall vest in New Belk, (ii) all of the debts,
liabilities and duties of each Belk Company (other than Belk-Simpson) shall
become the debts, liabilities and duties of New Belk (other than debts,
liabilities and duties of any such Belk Company owed to any other Belk Company),
and (iii) all of the debts, liabilities and duties of each Belk Company (other
than Belk-Simpson) owed to any other Belk Company shall be canceled and shall
cease to exist.
(c) The Certificate of Incorporation of New Belk in effect immediately
prior to the Effective Time shall be amended and restated substantially in the
form attached hereto as Exhibit B (the "Amended and Restated Certificate of
Incorporation of New Belk") and thereafter shall remain the Certificate of
Incorporation of New Belk until thereafter amended in accordance with the
provisions thereof and the DGCL.
(d) The Bylaws of New Belk in effect immediately prior to the Effective
Time shall be amended and restated substantially in the form attached hereto as
Exhibit C and thereafter shall remain the Bylaws of New Belk until altered,
amended or repealed as provided therein, in the Certificate of Incorporation of
New Belk and the DGCL.
(e) The directors of New Belk at the Effective Time shall be the persons
whose names are set forth on Exhibit D hereto, in each case until their
respective successors are duly elected and qualified.
(f) Upon the terms and subject to the conditions of this Agreement, at the
Effective Time and in accordance with the provisions of this Agreement and the
South Carolina Business Corporation Act of 1988 (the "SCBA"), New Belk Sub shall
be merged with and into Belk-Simpson, which shall be the surviving corporation
in such merger, and the separate corporate existence of New Belk Sub shall
cease. Subject to the provisions of this Agreement, a certificate of merger (the
"Belk-Simpson Certificate of Merger") shall be duly prepared, executed and
acknowledged by Belk-Simpson and thereafter delivered to the Secretary of State
of the State of South Carolina for filing as provided in the SCBA on the Closing
Date. From and after the Effective Time, the Belk-Simpson Merger shall have all
the effects set forth in the SCBA. Without limiting the generality of the
foregoing, and subject thereto, by virtue of the Belk-Simpson Merger and in
accordance with the SCBA , (i) all of the properties, rights, privileges, powers
and franchises of New Belk Sub shall vest in Belk-Simpson and (ii) all of the
debts, liabilities and duties of New Belk Sub shall become the debts,
liabilities and duties of Belk-Simpson.
(g) The Certificate of Incorporation of Belk-Simpson in effect immediately
prior to the Effective Time shall remain the Certificate of Incorporation of
Belk-Simpson until thereafter amended in accordance with the provisions thereof
and the SCBA.
(h) The Bylaws of Belk-Simpson in effect immediately prior to the Effective
Time shall remain the Bylaws of Belk-Simpson until altered, amended or repealed
as provided therein, in the Certificate of Incorporation of Belk-Simpson and the
SCBA.
1.2 Conversion of Shares. As of the Effective Time, by virtue of the
Mergers (including the Belk-Simpson Merger) and without any action on the part
of any holder thereof:
(a) Subject to Section 1.2(c), each share of common stock of each Belk
Company and each share of any other capital stock of such Belk Company that
is owned (i) by such Belk Company as treasury stock, (ii) by New Belk, or
(iii) by another Belk Company other than Belk-Simpson shall be canceled and
retired and shall cease to exist and no stock of New Belk or other
consideration shall be delivered in exchange therefor.
(b) Subject to Section 1.3(b), each outstanding share of common stock
of each Belk Company that is issued and outstanding and owned by
shareholders other than Belk-Simpson immediately prior to the
B-5
<PAGE> 121
Effective Time (other than shares to be canceled in accordance with Section
1.2(a)) shall be converted into a right to receive a number (the "Exchange
Ratio") of shares, or fraction thereof, of Class A common stock, $.01 par
value per share, of New Belk ("New Belk Class A Common Stock") as specified
in Exhibit A. All such shares of common stock of each Belk Company other
than Belk-Simpson, when so converted, shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist.
Shares of common stock of Belk-Simpson, when converted into the right to
receive shares of New Belk Class A Common Stock, shall not be canceled,
retired or otherwise cease to exist; rather, such shares will be
transferred, by operation of the Belk-Simpson Merger, to New Belk. Each
outstanding share of common stock of Belk Department Store of Camden, S.C.,
Incorporated, Parks-Belk Company of Clarksville, Tennessee, Belk-Simpson
Realty Company and TAGS Stores, LLC that is issued and outstanding and that
is owned by Belk-Simpson immediately prior to the Effective Time shall be
converted into the right to receive 44,866.5, 120,155.4, 1,208.8 and
79,811.3 shares of New Belk Class A Common Stock, respectively. Each
certificate previously representing shares of common stock of any Belk
Company (a "Certificate") shall thereafter represent the right to receive
that number of shares of New Belk Class A Common Stock into which such
shares of each Belk Company common stock have been converted. Certificates
previously representing shares of each Belk Company's common stock shall be
exchanged for certificates representing whole shares of New Belk Class A
Common Stock issued in consideration therefor upon the surrender of such
Certificates in accordance with Section 1.3, without interest. After adding
all fractions of shares of New Belk Class A Common Stock received by a
shareholder of any Belk Company in each Merger, any fraction of a share of
New Belk Class A Common Stock remaining shall be rounded upward to a whole
share of New Belk Class A Common Stock.
(c) If, after the date hereof and prior to the Effective Time, New
Belk shall have declared a stock split (including a reverse split) of New
Belk Class A Common Stock or a dividend payable in New Belk Class A Common
Stock or any other similar transaction, then the Exchange Ratio shall be
appropriately adjusted to reflect such stock split or dividend or similar
transaction.
1.3 Exchange of Certificates. (a) As soon as practicable after the
Effective Time, New Belk shall mail to each holder of record of common stock of
any of the Belk Companies (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to New Belk accompanied by a
properly executed letter of transmittal and shall be in such form and have such
other provisions as New Belk may reasonably specify), and (ii) instructions for
use in effecting the surrender of such Certificates in exchange for certificates
representing shares of New Belk Class A Common Stock (the "New Belk
Certificates") issuable pursuant to Section 1.2 in exchange for outstanding
shares of common stock of each Belk Company. Upon the surrender to New Belk of
one or more Certificates representing such shares of Belk Company common stock
for cancellation or exchange, together with such letter of transmittal, duly
executed, the holder will be entitled to receive New Belk Certificates
representing that number of whole shares of New Belk Class A Common Stock to be
issued in respect of the aggregate number of such shares of such Belk Company's
common stock previously represented by the Certificates surrendered based upon
the Exchange Ratio (or, in the case of Belk-Simpson, based upon the number of
shares of New Belk Class A Common Stock to which it is entitled pursuant to
Section 1.2(b)).
(b) No certificate or scrip representing fractional shares of New Belk
Class A Common Stock shall be issued upon the surrender for exchange of
Certificates. All fractional shares of New Belk Class A Common Stock that a
holder of common stock of a Belk Company would otherwise be entitled to receive
as a result of any of the Mergers or the Belk-Simpson Merger shall be aggregated
as provided in Section 1.2(b) hereof.
(c) If a New Belk Certificate is to be sent to a person other than the
person in whose name the Certificates for shares of Belk Company common stock
surrendered for exchange are registered, it shall be a condition of the exchange
that the person requesting such exchange shall pay to New Belk any transfer or
other taxes required by reason of the delivery of such New Belk Certificate to a
person other than the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of New Belk that such tax has been paid or is not
applicable.
B-6
<PAGE> 122
(d) The shares of New Belk Class A Common Stock issued upon the surrender
of Certificates in accordance with the terms hereof shall be deemed to have been
paid and issued in full satisfaction of all rights pertaining to such shares of
common stock of a Belk Company.
1.4 Dividends. No dividends or other distributions that are declared or
made after the Effective Time with respect to New Belk Class A Common Stock
payable to holders of record thereof after the Effective Time shall be paid to
any holder of common stock in any Belk Company entitled to receive New Belk
Certificates representing New Belk Class A Common Stock until such stockholder
has properly surrendered such stockholder's Certificates. Upon such surrender,
there shall be paid to the stockholder in whose name the New Belk Certificates
shall be issued any dividends which shall have become payable with respect to
such New Belk Class A Common Stock between the Effective Time and the time of
such surrender, without interest. After such surrender, there shall also be paid
to the stockholder in whose name the New Belk Certificates shall be issued any
dividend on such New Belk Class A Common Stock that shall have a record date
subsequent to the Effective Time and prior to such surrender and a payment date
after such surrender; provided that such dividend payments shall be made on such
payment dates. In no event shall the stockholders entitled to receive such
dividends be entitled to receive interest on such dividends.
1.5 Escheat Laws. Notwithstanding any other provision of this Article 1,
neither New Belk, the Belk Companies or any other party hereto shall be liable
to any holder of Belk Company common stock for any New Belk Class A Common
Stock, or dividends or distributions thereon, delivered to a public official
pursuant to any applicable abandoned property, escheat or similar laws.
1.6 Closing of Company Transfer Books. At the Effective Time, the stock
transfer books of each Belk Company shall be closed and no transfer of any of
the common stock of any of the Belk Companies shall thereafter be made. If,
after the Effective Time, Certificates are presented to New Belk, they shall,
when accompanied by proper documentation, be exchanged for New Belk Class A
Common Stock in the manner provided in this Article 1.
ARTICLE 2
CLOSING
2.1 Time and Place of Closing. Unless otherwise mutually agreed upon in
writing by New Belk and the Belk Companies, the closing of the Reorganization
(the "Closing") will be held at 10:00 a.m., local time, on the later of (i)
April 1, 1998, and (ii) the second business day following the date that all of
the conditions precedent specified in this Agreement have been (or will be at
the Closing) satisfied or waived by the party or parties permitted to do so
(such date being referred to hereinafter as the "Closing Date"). The place of
Closing shall be at the offices of Belk Stores Services, Inc. at 2801 West
Tyvola Road, Charlotte, North Carolina 28217, or at such other place as may be
agreed between New Belk and the Belk Companies.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF EACH BELK COMPANY
Each Belk Company hereby represents and warrants to New Belk as follows:
3.1 Organization, Good Standing and Power. Each Belk Company is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Each Belk Company is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
or licensing necessary, except where the failure to be so qualified or licensed
or to be in good standing would not, individually or in the aggregate, have a
Material Adverse Effect on any Belk Company (as defined below). Each Belk
Company has delivered to New Belk complete and correct copies of its articles or
certificate of incorporation and bylaws or other organizational documents and
all amendments thereto to the date hereof. As used in this Agreement, the phrase
"Material Adverse Effect on Belk Company" means as to
B-7
<PAGE> 123
a particular Belk Company a material adverse effect on (a) the financial
condition, business or results of operations of such Belk Company and its
subsidiaries (if any) on a consolidated basis or (b) the ability of such Belk
Company to consummate the transactions contemplated by this Agreement.
3.2 Authority; Enforceability. Each Belk Company has the corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby, subject to the approval of this Agreement by the
stockholders of each Belk Company and, to the extent applicable, subject to
compliance with the provisions of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"). Subject to such approval and
compliance, the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of each Belk Company, and this Agreement has been
duly executed and delivered by each Belk Company and constitutes the valid and
binding obligation of such Belk Company, enforceable against it in accordance
with its terms, (i) except as may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to enforcement of
creditors' rights generally and (ii) subject to general principles of equity.
3.3 Investigation by Company. In entering into this Agreement, each Belk
Company:
(a) acknowledges that none of New Belk or any of its directors,
shareholders, officers, employees, affiliates, agents or representatives
has made any representation or warranty, either express or implied, as to
the accuracy or completeness of any of the information provided or made
available to such Belk Company or its agents or representatives prior to
the execution of this Agreement; and
(b) agrees, to the fullest extent permitted by law, that none of New
Belk or any of its directors, shareholders, officers, employees,
affiliates, agents or representatives shall have any liability or
responsibility whatsoever to such Belk Company or any of its directors,
shareholders, officers, employees, agents, affiliates or representatives on
any basis (including, without limitation, in contract or tort, under
federal or state securities laws or otherwise) based upon any information
provided or made available, or statements made, to such Belk Company or its
agents or representatives prior to the execution of this Agreement, except
that the foregoing shall not apply (i) to the extent New Belk makes the
specific representations and warranties set forth in Article 4 of this
Agreement, but always subject to the limitations and restrictions contained
in this Agreement, or (ii) to the extent New Belk or any of its directors,
officers, employees, affiliates, agents or representatives commits fraud
with respect to the information that it provides or makes available to such
Belk Company or its agents or representatives.
3.4 Information in Disclosure Documents. None of the information to be
supplied by any of the Belk Companies for inclusion or incorporation by
reference in the Proxy Statement (defined herein) or the Registration Statement
(defined herein) filed by New Belk pursuant to the Securities Act (defined
herein), as amended, and the rules and regulations promulgated thereunder by the
Securities and Exchange Commission, at the time it becomes effective and at the
Effective Time or, in the case of the Proxy Statement (defined herein) or any
amendments or supplements thereto, at the Mailing Date (defined herein) of the
Proxy Statement and any amendments or supplements thereto and at the time of the
meetings of stockholders to be held in connection with the Mergers, contains any
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF NEW BELK
New Belk hereby represents and warrants to each Belk Company as follows:
4.1 Organization, Good Standing and Power. New Belk is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted. New
Belk Sub is a corporation duly organized, validly existing and in good standing
under the laws of the State of
B-8
<PAGE> 124
South Carolina and has all requisite corporate power and authority to own, lease
and operate its properties and to carry out its business as now being conducted.
Each of New Belk and New Belk Sub is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties make such qualification or
licensing necessary, except where the failure to be so qualified or licensed or
to be in good standing would not, individually or in the aggregate, have a
Material Adverse Effect on New Belk (as defined below). As used in this
Agreement, the phrase "Material Adverse Effect on New Belk" means a material
adverse effect on (a) the financial condition, business or results of operations
of New Belk or (b) the ability of New Belk to consummate the transactions
contemplated by this Agreement.
4.2 Capitalization. (a) The authorized capital stock of New Belk consists
of (i) 200,000,000 shares of Class A Common Stock, $.01 par value per share, of
which as of the date hereof one (1) share was issued and outstanding, (ii)
200,000,000 shares of Class B Common Stock, $.01 par value per share, of which
as of the date hereof no shares are issued and outstanding, and (iii) 20,000,000
shares of Preferred Stock, $.01 par value per share, of which as of the date
hereof no shares are issued and outstanding. The outstanding share of New Belk
Class A Common Stock is duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. All of the shares of New
Belk Class A Common Stock to be issued in exchange for Belk Company common stock
at the Effective Time in accordance with this Agreement will be, when so issued,
duly authorized, validly issued, fully paid and nonassessable and free of
preemptive rights. Except as set forth above, as of the date hereof, there were
no shares of capital stock or other equity securities of New Belk outstanding,
and there are no outstanding options, warrants or rights to purchase or acquire
from New Belk any capital stock of New Belk, there are no existing registration
covenants with New Belk with respect to outstanding shares of New Belk Class A
Common Stock, and there are no convertible securities or other contracts,
commitments, agreements, understandings, arrangements or restrictions by which
New Belk is bound to issue any additional shares of its capital stock or other
securities.
(b) The authorized capital stock of New Belk Sub consists of 100 shares of
common stock, $.01 par value per share, of which as of the date hereof one (1)
share was issued and outstanding. The outstanding share of New Belk Sub common
stock is duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. Except as set forth above, as of the date hereof,
there were no shares of capital stock or other equity securities of New Belk Sub
outstanding, and there were no outstanding options, warrants or rights to
purchase or acquire from New Belk Sub any capital stock of New Belk Sub, there
are no existing registration covenants with New Belk Sub with respect to
outstanding shares of New Belk Sub common stock, and there are no convertible
securities or other contracts, commitments, agreements, understandings,
arrangements or restrictions by which New Belk Sub is bound to issue any
additional shares of its capital stock or other securities.
4.3 Authority; Enforceability. Each of New Belk and New Belk Sub has the
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby, subject to the approval of this Agreement by
the stockholders of New Belk and, to the extent applicable, subject to
compliance with the provisions of the HSR Act. Subject to such approval and
compliance, the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of New Belk and New Belk Sub, and this Agreement
has been duly executed and delivered by New Belk and New Belk Sub and
constitutes the valid and binding obligation of New Belk and New Belk Sub,
enforceable against New Belk and New Belk Sub in accordance with its terms, (i)
except as may be limited by bankruptcy, insolvency, moratorium or other similar
laws affecting or relating to enforcement of creditors' rights generally and
(ii) subject to general principles of equity.
4.4 Investigation by New Belk. Each of New Belk and New Belk Sub has
conducted its own independent review and analysis of the businesses, assets,
condition, operations and prospects of each Belk Company and each acknowledges
that it and its agents and representatives have been provided access to the
properties, premises and records of each Belk Company for this purpose. In
entering into this Agreement,
B-9
<PAGE> 125
New Belk and New Belk Sub have relied solely upon its own investigation and
analysis and the representations and warranties contained herein, and New Belk
and New Belk Sub:
(a) acknowledge that none of the Belk Companies or any of their
directors, shareholders, officers, employees, affiliates, agents or
representatives has made any representation or warranty, either express or
implied, as to the accuracy or completeness of any of the information
provided or made available to New Belk or New Belk Sub or its agents or
representatives prior to the execution of this Agreement; and
(b) agree, to the fullest extent permitted by law, that none of such
Belk Companies or any of its directors, shareholders, officers, employees,
affiliates, agents or representatives shall have any liability or
responsibility whatsoever to New Belk or New Belk Sub on any basis
(including, without limitation, in contract or tort, under federal or state
securities laws or otherwise) based upon any information provided or made
available, or statements made, to New Belk or New Belk Sub or its agents or
representatives prior to the execution of this Agreement, except that the
foregoing shall not apply (i) to the extent any such Belk Company makes the
specific representations and warranties set forth in Article 3 of this
Agreement, but always subject to the limitations and restrictions contained
in this Agreement, or (ii) to the extent any such Belk Company or any of
its directors, shareholders, officers, employees, affiliates, agents or
representatives commits fraud with respect to the information that it
provides or makes available to such Belk Company or its agents or
representatives.
ARTICLE 5
CONDUCT OF BUSINESS PENDING THE EFFECTIVE TIME;
CERTAIN COVENANTS
5.1 Conduct of Business Pending Merger. (a) Each Belk Company agrees that
from the date hereof to the Effective Time, except as contemplated by this
Agreement or to the extent that New Belk shall otherwise consent in writing
(which consent will not be unreasonably withheld or delayed), each Belk Company
will operate its businesses only in the ordinary course and, consistent with
such operation, will use reasonable efforts consistent with past practices to
preserve their business organization intact, to keep available to it the
goodwill of its customers and others with whom business relationships exist to
the end that its goodwill and ongoing business shall not be impaired in any
material respect at the Effective Time, and will further exercise reasonable
efforts to maintain their existing relationships with its employees.
(b) Each Belk Company agrees that from the date hereof to the Effective
Time, except as otherwise consented to by New Belk and New Belk Sub in writing
(which consent will not be unreasonably withheld or delayed) or as permitted,
required or contemplated by this Agreement, (i) it will not change any provision
of its articles or certificate of incorporation or bylaws or similar governing
documents; (ii) except as provided in Section 5.13, it will not make, declare or
pay any dividend; and (iii) it will not make any distribution or directly or
indirectly sell, issue, redeem, purchase or otherwise acquire, any shares of its
outstanding capital stock, change the number of shares of its authorized or
issued capital stock or issue or grant any option, warrant, call, commitment,
subscription, right to purchase or agreement of any character relating to its
authorized or issued capital stock or any securities convertible into shares of
such stock.
(c) New Belk and New Belk Sub agree that from the date hereof to the
Effective Time, each of New Belk and New Belk Sub will conduct its respective
operations only as contemplated hereby.
5.2 Belk-Simpson Reorganization. Prior to the date (the "Mailing Date")
that the Belk Companies mail the Proxy Statement to the shareholders in
connection with the Stockholder Meetings (herein defined), Belk-Simpson shall
complete the plan of reorganization which has been agreed to by Belk-Simpson and
New Belk (the "Belk-Simpson Plan of Reorganization"). If Belk-Simpson has not
completed the Belk-Simpson Plan of Reorganization prior to the Mailing Date,
Belk-Simpson shall use its best efforts to take such alternative steps as may be
agreed to by Belk-Simpson and New Belk so that, on the Effective Time, the
assets of Belk-Simpson shall consist solely of the assets related to, and
necessary for the conduct of, the retail department store business of
Belk-Simpson as described in the Belk-Simpson Plan of Reorganization.
B-10
<PAGE> 126
5.3 Takeover Statutes. If any "fair price," "moratorium," "control share
acquisition," "business combination," "stockholder protection" or similar
antitakeover statute or regulation enacted under state or federal law shall
become applicable to the Merger or any of the other transactions contemplated
hereby, each of the Belk Companies, New Belk Sub and New Belk will grant such
approvals and take such commercially reasonable actions so that each Merger and
the other transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise use commercially
reasonable efforts to eliminate or minimize the effects of such statute or
regulation on each such Merger and the other transactions contemplated hereby.
5.4 Consents. Each of the Belk Companies, New Belk Sub and New Belk will
use its commercially reasonable efforts to obtain the written consent or
approval of each and every governmental authority and other regulatory body and
each third party, the consent or approval of which shall be required in order to
permit New Belk, New Belk Sub and such Belk Company to consummate the
transactions contemplated by this Agreement.
5.5 Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto will promptly file and prosecute diligently
the applications and related documents required to be filed by such party with
applicable governmental authorities and regulatory bodies in order to effect the
transactions contemplated hereby, including, to the extent applicable, filings
under the HSR Act requesting early termination of the applicable waiting period.
Each party hereto agrees to use commercially reasonable efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
In case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement will take all such necessary action.
Each of the parties hereto agrees to defend vigorously against any actions,
suits or proceedings in which such party is named as defendant which seeks to
enjoin, restrain or prohibit the transactions contemplated hereby or seeks
damages with respect to such transactions.
5.6 Notice; Efforts to Remedy. Each party hereto will promptly give
written notice to the other parties hereto upon becoming aware of the impending
occurrence of any event which would cause or constitute a breach of any of the
representations, warranties or covenants of such party contained in this
Agreement and shall use commercially reasonable efforts to prevent or promptly
remedy the same. During the period from the date of this Agreement to the
Effective Time, each Belk Company will cause one or more of its representatives
to confer on a regular and frequent basis with representatives of New Belk and
to report on the business, financial condition and results of operations of such
Belk Company. Each Belk Company will promptly notify New Belk and New Belk Sub
of any material change in the normal course of such Belk Company's business or
in the operation of its properties or of the receipt by such Belk Company of
notice of any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated) or the receipt by
such Belk Company of a notice of the institution or the threat of litigation
involving such Belk Company and will keep New Belk and New Belk Sub fully
informed with respect to such events.
5.7 Registration Statement; Stockholder Approvals. (a) As soon as is
reasonably practicable after the execution of this Agreement, New Belk shall
prepare and file with the SEC a registration statement on Form S-4 with respect
to the New Belk Class A Common Stock to be issued in each Merger, which
registration statement shall also constitute a proxy statement of the Belk
Companies (the "Registration Statement"). New Belk and the Belk Companies shall
use commercially reasonable efforts to cause the Registration Statement to
become effective under the Securities Act of 1933, as amended (the "Securities
Act") as promptly as practicable after such filing and shall take all
commercially reasonable actions required to be taken under any applicable state
blue sky or securities laws in connection with the issuance of the shares of New
Belk Class A Common Stock pursuant to this Agreement. Each party hereto shall
furnish all information concerning it and the holders of its capital stock as
the other party hereto may reasonably request in connection with such actions.
(b) Each Belk Company shall call a meeting of its stockholders to be held
as soon as practicable after the date hereof for the purpose of voting upon the
Merger for such Belk Company and this Agreement (the
B-11
<PAGE> 127
"Stockholder Meetings"). Each Belk Company shall mail the proxy statement
contained in the Registration Statement (the "Proxy Statement") to its
stockholders in connection with its Stockholder Meeting, and the Board of
Directors of each Belk Company shall recommend to its stockholders the approval
of the Merger for such Belk Company and this Agreement and use commercially
reasonable efforts to obtain such stockholder approval.
5.8 Expenses. All expenses incident to preparing for, entering into, and
carrying out this Agreement and to consummating each Merger shall be paid by
Belk Stores Services, Inc.
5.9 Indemnification of Officers and Directors. (a) Until such time as the
applicable statute of limitations shall have expired, New Belk shall provide
with respect to each present or former director and officer of a Belk Company
(the "Indemnified Parties") the indemnification rights (including any rights to
advancement of expenses) which such Indemnified Parties had from such Belk
Company immediately prior to the Merger, whether under applicable state law or
the bylaws of such Belk Company or otherwise.
(b) New Belk shall cause to be in effect at the Effective Time the current
policies of directors' and officers' liability insurance maintained by each Belk
Company; provided New Belk may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are no less
advantageous with respect to claims arising from facts or events which occurred
at or before the Effective Time, and New Belk shall maintain such coverage for a
period of six years after the Effective Time.
(c) This Section 5.9 shall survive the Closing and is intended to benefit
each Belk Company, New Belk and each of the Indemnified Parties and his or her
heirs and representatives (each of whom shall be entitled to enforce this
Section 5.9 against New Belk to the extent specified herein) and shall be
binding on all successors and assigns of New Belk.
5.10 Tax Treatment. Each of New Belk, New Belk Sub and the Belk Companies
agree to treat each Merger (other than the Belk-Simpson Merger) as a
reorganization within the meaning of Section 368(a) of the Code and to treat the
Belk-Simpson Merger as an exchange qualifying under Section 351(a) of the Code.
During the period from the date of this Agreement through the Effective Time,
unless the parties shall otherwise agree in writing, neither New Belk, New Belk
Sub nor any Belk Company shall knowingly take or fail to take any action which
action or failure to act would jeopardize qualification of any Merger as a
reorganization within the meaning of Section 368(a) of the Code or that would
jeopardize the qualification of the Belk-Simpson Merger as an exchange
qualifying under Section 351(a) of the Code.
5.11 Confidentiality. Each of the Belk Companies, New Belk Sub and New
Belk agree that it will not make any disclosures about the contents of this
Agreement or negotiations relating to the proposed transactions or cause the
contents thereof to be publicized in any manner whatsoever by way of interviews,
responses to questions or inquiries, press releases or otherwise, or otherwise
disclose any aspect or proposed aspect of the proposed transactions, without
prior notice to and approval of the other parties, except as may otherwise be
required by law. In the event that any party determines that it is required by
law to make any such disclosure, it will notify the other parties prior to
making such disclosure in order to permit the other parties to obtain an
appropriate protective order.
5.12 No Solicitation of Transactions. Until the valid termination of this
Agreement, no Belk Company shall directly or indirectly, through any director,
shareholder, officer, employee, affiliate, agent or representative, initiate,
solicit or knowingly encourage (including by way of furnishing non-public
information or assistance), or enter into negotiations of any type, directly or
indirectly, or enter into a letter of intent or purchase agreement, merger
agreement or other similar agreement with any person, firm or corporation with
respect to a sale of any substantial portion of the assets of such Belk Company
or a merger, consolidation, business combination, sale of all or any portion of
the capital stock of such Belk Company, or the liquidation or similar
extraordinary transaction with respect to such Belk Company. Each Belk Company
shall notify the other parties in writing (as promptly as practicable) of all
relevant terms of any proposals by a third party to do any of the foregoing
which such Belk Company or any of its directors, shareholders, officers,
employees, affiliates, agents or representatives may receive relating to any of
such matters.
B-12
<PAGE> 128
5.13 Dividends. Each Belk Company may, in the discretion of its Board of
Directors, pay dividends for fiscal year 1997 in amounts consistent with
dividends paid for prior years, provided that (i) each Belk Company shall retain
cash sufficient to meet normal working capital requirements and (ii) without the
prior consent of New Belk, no Belk Company shall pay dividends in an aggregate
amount in excess of the aggregate amount paid in dividends for fiscal year 1996.
ARTICLE 6
CONDITIONS PRECEDENT TO MERGER
6.1 Conditions to Each Party's Obligations. The respective obligations of
each party to effect the Merger relating to such party shall be subject to the
satisfaction on or prior to the Closing Date of each of the following
conditions:
(a) This Agreement and the Merger for each Belk Company shall have
been approved and adopted by the affirmative vote or consent of the holders
of at least the number of shares of outstanding common stock of such Belk
Company specified in Exhibit A attached hereto.
(b) All consents, authorizations, orders and approvals of (or filings
or registrations with) any governmental authority or other regulatory body
required in connection with the execution, delivery and performance of this
Agreement shall have been obtained and shall be in full force and effect.
(c) All authorizations, consents, waivers and approvals from third
parties to contracts or other agreements to which any Belk Company, New
Belk Sub or New Belk is a party, or by which either is bound, as may be
required to be obtained by it in connection with the performance of this
Agreement shall have been obtained and shall be in full force and effect.
(d) To the extent applicable, early termination shall have been
granted or applicable waiting periods shall have expired under the HSR Act.
(e) No governmental authority or other regulatory body (including any
court of competent jurisdiction) shall have enacted, issued, promulgated,
enforced or entered any law, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent)
which is then in effect and has the effect of making illegal or in any way
preventing or prohibiting the Merger or the transactions contemplated by
this Agreement.
(f) The Registration Statement shall have become effective under the
Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall be in effect and no proceedings for such
purpose, or under the proxy rules of the SEC pursuant to the Exchange Act
and with respect to the transactions contemplated hereby, shall be pending
before or threatened by the SEC. At the effective date of the Registration
Statement, the Registration Statement shall not contain any untrue
statement of a material fact, or omit to state any material fact necessary
in order to make the statements therein not misleading, and, at the Mailing
Date, the Proxy Statement shall not contain any untrue statement of a
material fact, or omit to state any material fact necessary in order to
make the statements therein not misleading.
6.2 Conditions to Obligations of the Belk Companies. The obligations of
each Belk Company to effect the Merger for such Belk Company shall be subject to
the satisfaction on or prior to the Closing Date of each of the following
conditions unless waived by such Belk Company:
(a) The representations and warranties of New Belk set forth in this
Agreement shall be true and correct in all material respects at and as of
the date of this Agreement and at and as of the Closing Date as though made
at and as of the Closing Date, except to the extent such representations
and warranties are made as of a specified date and except to the extent
contemplated or permitted by this Agreement.
(b) New Belk and New Belk Sub shall have performed in all material
respects all covenants and agreements required to be performed by it under
this Agreement at or prior to the Closing Date.
B-13
<PAGE> 129
(c) New Belk and New Belk Sub shall furnish the Belk Companies with a
certificate of its appropriate officers as to compliance with the
conditions set forth in Sections 6.2(a) and (b).
6.3 Conditions to Obligations of New Belk and New Belk Sub. The
obligations of New Belk and New Belk Sub to effect the Merger for any Belk
Company shall be subject to the satisfaction on or prior to the Closing Date of
each of the following conditions unless waived by New Belk and New Belk Sub:
(a) The representations and warranties of each Belk Company set forth
in this Agreement shall be true and correct in all material respects at and
as of the date of this Agreement and at and as of the Closing Date as
though made at and as of the Closing Date, except to the extent such
representations and warranties are made as of a specified date and except
to the extent contemplated or permitted by this Agreement.
(b) Each Belk Company shall have performed in all material respects
all covenants and agreements required to be performed by it under this
Agreement at or prior to the Closing Date.
(c) No holders of common stock of any of the Belk Companies issued and
outstanding at the Effective Time shall have exercised dissenters' rights
under applicable state law.
(d) Each Belk Company shall furnish New Belk and New Belk Sub with a
certificate of its appropriate officers as to compliance with the
conditions set forth in Sections 6.3(a), (b) and (c).
(e) Each Belk Company (other than Belk-Simpson) shall have merged with
and into New Belk.
(f) Belk-Simpson shall have completed the Belk-Simpson Plan of
Reorganization or shall have taken such alternative steps as shall have
been agreed to by Belk-Simpson and New Belk to reorganize its business as
contemplated by Section 5.2 hereof and New Belk Sub shall have merged with
and into Belk-Simpson.
6.4 Conditions to Obligations of Belk-Simpson. The obligation of
Belk-Simpson to effect the Merger of Belk-Simpson shall be subject to the
completion on or prior to the Closing Date of the Belk-Simpson Plan of
Reorganization or the completion of such alternative steps as shall have been
agreed to by Belk-Simpson and New Belk to reorganize Belk-Simpson's business as
contemplated by Section 5.2 hereof.
ARTICLE 7
TERMINATION AND ABANDONMENT OF THE REORGANIZATION
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after the approval by the stockholders of any
Belk Company:
(a) by the mutual written consent of New Belk, New Belk Sub and a Belk
Company as to the Merger for such Belk Company;
(b) by a Belk Company as to the Merger for such Belk Company if:
(i) the Merger for such Belk Company is not consummated on or
before June 1, 1998 (or such later date as shall have been approved by
New Belk, New Belk Sub and such Belk Company), unless the failure of
such occurrence shall be due to the failure of such Belk Company to
perform or observe the covenants, agreements and conditions hereof to be
performed or observed by it at or before the Effective Time;
(ii) an event occurs which renders impossible the satisfaction by
New Belk or New Belk Sub of one or more of the conditions set forth in
Sections 6.1 and 6.2 required to be satisfied by New Belk or New Belk
Sub and such conditions are not waived by such Belk Company, unless the
failure to satisfy such condition shall be due to the failure of such
Belk Company to perform or observe the covenants, agreements and
conditions hereof to be performed or observed by it at or before the
Effective Time; or
B-14
<PAGE> 130
(iii) such Belk Company is enjoined or restrained by any
governmental authority or regulatory body (including any court) from
performing its obligations hereunder and any such injunction or order
shall not have been withdrawn by the earlier to occur of the date 60
days after the date on which such injunction or order was first issued
or June 1, 1998.
(c) by New Belk as to the Merger relating to a Belk Company or, at the
election of New Belk, as to the Reorganization as a whole if:
(i) the Merger of any Belk Company is not consummated on or before
June 1, 1998 (or such later date as shall have been approved by such
Belk Company, New Belk Sub and New Belk), unless the failure of such
occurrence shall be due to the failure of New Belk or New Belk Sub to
perform or observe the covenants, agreements and conditions hereof to be
performed or observed by it at or before the Effective Time;
(ii) an event occurs which renders impossible the satisfaction by
such Belk Company of one or more of the conditions set forth in Sections
6.1 and 6.3 required to be satisfied by such Belk Company and such
conditions are not waived by New Belk and New Belk Sub, unless the
failure to satisfy such condition shall be due to the failure of New
Belk to perform or observe the covenants, agreements and conditions
hereof to be performed or observed by it at or before the Effective
Time;
(iii) New Belk or New Belk Sub is enjoined or restrained by any
governmental authority or other regulatory body (including any court)
from performing its obligations hereunder and any such injunction or
order shall not have been withdrawn by the earlier to occur of the date
60 days after the date on which such injunction or order was first
issued or June 1, 1998;
(iv) the shareholders of such Belk Company do not approve this
Agreement and the Merger relating to such Belk Company at its
Stockholder Meeting;
(v) the Board of Directors of a Belk Company shall have withdrawn,
or modified in a manner adverse to New Belk, its recommendation of this
Agreement and such Merger; or
(vi) any stockholder owning shares of common stock in such Belk
Company shall have elected to dissent from and exercise dissenters'
rights with respect to the Merger relating to such Belk Company.
(d) by Belk-Simpson as to the Belk-Simpson Merger if an event occurs
which renders impossible the satisfaction of the condition set forth in
Section 6.4 required to be satisfied by Belk-Simpson and such condition is
not waived by Belk-Simpson, unless the failure to satisfy such condition
shall be due to the failure of Belk-Simpson to perform or observe the
covenants, agreements and conditions hereof to be performed or observed by
it at or before the Effective Time.
7.2 Effect of Termination and Abandonment. In the event of the termination
and abandonment of this Agreement under Section 7.1, this Agreement shall become
void and have no effect, without any liability on the part of any party or its
directors, officers or stockholders, except (i) as provided in Sections 5.8 and
5.11 and (ii) to the extent that such termination results from the willful
breach by any party hereto of any material representation, warranty or covenant
hereunder.
ARTICLE 8
MISCELLANEOUS
8.1 Waiver and Amendment. Any term or provision of this Agreement may be
waived in writing at any time by the party which is, or whose stockholders are,
entitled to the benefits thereof, and any term or provision of this Agreement
may be amended or supplemented at any time by action of New Belk, New Belk Sub
and the Belk Companies, whether before or after the Stockholder Meetings;
provided, however, that after approval of the stockholders of the Belk Companies
at the Stockholders' Meetings, no such amendment shall reduce the amount or
change the form of the consideration to be delivered to each Belk Company's
stockholders as contemplated by this Agreement or otherwise materially adversely
affect the interests of such
B-15
<PAGE> 131
stockholders unless such amendment is approved by the stockholders of each Belk
Company. No amendment to this Agreement shall be effective unless it has been
executed by each Belk Company, New Belk Sub and New Belk.
8.2 Non-Survival of Representations, Warranties and Agreements. Except for
the agreements contained in Sections 5.8, 5.9 and 5.11 and this Section 8.2,
none of the representations, warranties and agreements of the Belk Companies,
New Belk Sub or New Belk in this Agreement, or in any instrument or certificate
delivered pursuant to this Agreement, shall survive the Merger for any Belk
Company and none of its stockholders, directors or officers shall have any
liability to the other after the Effective Time on account of any breach of any
representation or warranty or agreement contained herein or in any certificate
or other instrument delivered pursuant to this Agreement. The sole right and
remedy arising from a breach of any such representation or warranty or
agreement, from the failure of any of the conditions of such Merger to be met,
or from the failure to perform any promise or discharge any obligation in this
Agreement, shall be termination of this Agreement by the aggrieved party and the
remedies provided in Section 7.2.
8.3 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally,
telecopied (if confirmed) or sent by registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
If to a Belk Company:
Belk Stores Services, Inc.
2801 West Tyvola Road
Charlotte, North Carolina 28217
Attention: Ralph A. Pitts, General Counsel
Telecopy No.: (704) 357-1883
If to New Belk:
2801 West Tyvola Road
Charlotte, North Carolina 28217
Attention: Ralph A. Pitts, General Counsel
Telecopy No.: (704) 357-1883
If to New Belk Sub:
2801 West Tyvola Road
Charlotte, North Carolina 28217
Attention: Ralph A. Pitts, General Counsel
Telecopy No.: (704) 357-1883
8.4 Descriptive Headings; Interpretation. The descriptive headings are for
convenience of reference only and shall not control or affect the meaning or
construction of any provision of this Agreement. When a reference is made in
this Agreement to Sections, such reference shall be to a Section of this
Agreement unless otherwise indicated. The phrases "the date of this Agreement",
"the date hereof", and terms of similar import, unless the context otherwise
requires, shall be deemed to refer to November 25, 1997.
8.5 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement. This Agreement shall become effective when one or more counterparts
have been signed by each of the parties and delivered to the other parties, it
being understood that the parties need not sign the same counterpart.
8.6 Entire Agreement. This Agreement contains the entire agreement between
New Belk and each Belk Company with respect to each Merger, and supersede all
prior arrangements or understandings with respect to the subject matter hereof.
Except as otherwise contemplated in Section 8.2 (which covenants shall be
enforceable by the person or persons affected thereby following the Effective
Time), this Agreement is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
B-16
<PAGE> 132
8.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO ANY
APPLICABLE CONFLICTS OF LAW PROVISIONS THEREOF).
8.8 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby are not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties shall negotiate
in good faith to modify this Agreement so as to effect the original intent of
the parties as closely as possible in a mutually acceptable manner in order that
the transactions be consummated as originally contemplated to the fullest extent
possible.
8.9 Enforcement of Agreement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States of America or
any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
8.10 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties, and any attempt to make any such assignment without such consent shall
be null and void. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties hereto
and their respective successors and assigns.
8.11 Limited Liability. Notwithstanding any other provision of this
Agreement, no director, shareholder, officer, employee, affiliate, agent or
representative of any Belk Company or New Belk shall have any personal liability
in respect of or relating to the covenants, obligations, representations or
warranties of such party under this Agreement or in respect of any certificate
delivered with respect hereto or thereto, except to the extent that such person
or entity has engaged in fraud with respect to such matters. Except as set forth
in the preceding sentence, to the fullest extent legally permissible, each of
the Belk Companies, New Belk Sub and New Belk, for itself and its directors,
shareholders, officers, employees, affiliates, agents and representatives,
waives and agrees not to seek to assert or enforce any such liability that any
such person otherwise might have pursuant to applicable law.
8.12 CONSENT TO JURISDICTION; SERVICE OF PROCESS. (a) EACH PARTY
IRREVOCABLY CONSENTS AND AGREES THAT ANY LEGAL ACTION, SUIT OR PROCEEDING BY OR
AGAINST IT WITH RESPECT TO ITS RIGHTS, OBLIGATIONS OR LIABILITIES UNDER THIS
AGREEMENT OR ANY OTHER AGREEMENT EXECUTED IN CONNECTION WITH THIS AGREEMENT
SHALL BE BROUGHT BY SUCH PARTY ONLY IN THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF DELAWARE OR, IF (BUT ONLY IF) SUCH COURT DOES NOT HAVE SUBJECT
MATTER JURISDICTION OVER SUCH ACTION, SUIT OR PROCEEDING (INCLUDING, WITHOUT
LIMITATION, CLAIMS FOR INTERIM RELIEF, COUNTERCLAIMS, ACTIONS WITH MULTIPLE
DEFENDANTS AND ACTIONS IN WHICH SUCH PARTY IS IMPLED). EACH PARTY IRREVOCABLY
AND UNCONDITIONALLY WAIVES ANY RIGHT THAT IT MAY HAVE TO A JURY TRIAL IN ANY
LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO, OR ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER AGREEMENT EXECUTED IN CONNECTION
WITH THIS AGREEMENT.
(b) EACH BELK COMPANY HEREBY IRREVOCABLY DESIGNATES CT CORPORATION SYSTEM
(IN SUCH CAPACITY, THE "PROCESS AGENT"), WITH AN OFFICE AT 1209 ORANGE STREET,
WILMINGTON, DELAWARE 19801 AS ITS DESIGNEE, APPOINTEE AND AGENT TO RECEIVE, FOR
AND ON ITS BEHALF SERVICE OF PROCESS IN SUCH JURISDICTION IN ANY LEGAL ACTION OR
PROCEEDINGS WITH RESPECT TO THIS AGREEMENT
B-17
<PAGE> 133
OR ANY OTHER AGREEMENT EXECUTED IN CONNECTION WITH THIS AGREEMENT, AND SUCH
SERVICE SHALL BE DEEMED COMPLETE UPON DELIVERY THEREOF TO THE PROCESS AGENT,
PROVIDED THAT IN THE CASE OF ANY SUCH SERVICE UPON THE PROCESS AGENT, THE PARTY
EFFECTING SUCH SERVICE SHALL ALSO DELIVER A COPY THEREOF TO COMPANY IN THE
MANNER PROVIDED IN SECTION 8.3. EACH BELK COMPANY SHALL TAKE ALL SUCH ACTION AS
MAY BE NECESSARY TO CONTINUE SAID APPOINTMENT IN FULL FORCE AND EFFECT OR TO
APPOINT ANOTHER AGENT SO THAT NEW BELK WILL AT ALL TIMES HAVE AN AGENT FOR
SERVICE OF PROCESS FOR THE ABOVE PURPOSES IN DELAWARE. IN THE EVENT OF THE
TRANSFER OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS AND BUSINESS OF THE PROCESS
AGENT TO ANY OTHER CORPORATION BY CONSOLIDATION, MERGER, SALE OF ASSETS OR
OTHERWISE, SUCH OTHER CORPORATION SHALL BE SUBSTITUTED HEREUNDER FOR THE PROCESS
AGENT WITH THE SAME EFFECT AS IF NAMED HEREIN IN PLACE OF CT CORPORATION SYSTEM.
EACH BELK COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED AIRMAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS
ADDRESS SET FORTH IN THIS AGREEMENT, SUCH SERVICE OF PROCESS TO BE EFFECTIVE
UPON ACKNOWLEDGMENT OF RECEIPT OF SUCH REGISTERED MAIL. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
APPLICABLE LAW. EACH BELK COMPANY EXPRESSLY ACKNOWLEDGES THAT THE FOREGOING
WAIVER IS INTENDED TO BE IRREVOCABLE UNDER THE LAWS OF THE STATE OF DELAWARE AND
OF THE UNITED STATES OF AMERICA.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed and delivered by its respective duly authorized officers, all as of
the date first above written.
BELK, INC.
By: /s/ JOHN M. BELK
------------------------------------
John M. Belk
President
BELK ACQUISITION CO.
By: /s/ JOHN M. BELK
------------------------------------
John M. Belk
President
THE BELK COMPANIES
By: /s/ JOHN M. BELK
------------------------------------
John M. Belk*
* For each of the Belk Companies
listed on Exhibit A in his
capacity as Chairman
B-18
<PAGE> 134
FIRST AMENDMENT TO PLAN AND AGREEMENT OF REORGANIZATION
FIRST AMENDMENT TO PLAN AND AGREEMENT OF REORGANIZATION, dated as of March
12, 1998 (the "First Amendment"), by and among Belk, Inc., a Delaware
corporation ("New Belk"), Belk Acquisition Co., a South Carolina corporation
("New Belk Sub"), and each of the Belk companies identified on Exhibit A
attached hereto (each a "Belk Company" and, collectively, the "Belk Companies").
WHEREAS, pursuant to the terms of that certain Plan and Agreement of
Reorganization, dated November 25, 1997, by and among New Belk, New Belk Sub and
the Belk Companies (the "Reorganization Agreement"), the Belk Companies (other
than Belk-Simpson Company, Greenville, South Carolina ("Belk-Simpson")) will
merge with and into New Belk, with New Belk as the surviving corporation, and
New Belk Sub will merge with and into Belk-Simpson; and
WHEREAS, the parties wish to amend the Reorganization Agreement to modify
certain provisions;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Section 1.2(b) of the Reorganization Agreement is hereby amended by
deleting the words "right to receive 44,890.6, 120,219.8, 1,209.4 and
79,854.2" and substituting in lieu thereof the following: "right to receive
44,866.5, 120,155.4, 1,208.8 and 79,811.3".
2. Exhibit A of the Reorganization Agreement is hereby amended by
deleting such Exhibit A in its entirety and substituting in lieu thereof
Exhibit A to this First Amendment.
3. Exhibit B of the Reorganization Agreement is hereby amended by
deleting such Exhibit B in its entirety and substituting in lieu thereof
Exhibit B to this First Amendment.
4. Except as amended hereby, the terms, conditions, covenants,
agreements, representations and warranties contained in the Reorganization
Agreement shall remain unaffected hereby and shall continue in full force
and effect.
5. This First Amendment may be executed and delivered (including by
facsimile transmission) in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed and
delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
B-19
<PAGE> 135
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
BELK, INC.
By: /s/ JOHN M. BELK
------------------------------------
Name: John M. Belk
Title: President
BELK ACQUISITION CO.
By: /s/ JOHN M. BELK
------------------------------------
Name: John M. Belk
Title: President
THE BELK COMPANIES
By: /s/ JOHN M. BELK
------------------------------------
Name: John M. Belk*
* For each of the Belk Companies
listed on Exhibit A in his
capacity as Chairman
B-20
<PAGE> 136
EXHIBIT A TO PLAN AND
AGREEMENT OF REORGANIZATION
<TABLE>
<CAPTION>
VOTING STATE OF APPLICABLE
BELK COMPANY REQUIREMENT ORGANIZATION EXCHANGE RATIO
- ------------ ----------- --------------- --------------
<S> <C> <C> <C>
Belk-Simpson Company of Paragould, Arkansas,
Inc............................................ Two-thirds Arkansas 74.2871
Belk Department Store of Stuttgart, Ark., Inc.... Two-thirds Arkansas 5.5909
Belk-Lindsey Stores, Inc......................... Majority Florida 5.7075
Belk's Department Store of Albany, Georgia....... Majority Georgia 22.9234
Belk of Americus, Ga., Inc....................... Majority Georgia 13.2397
Belk of Athens, Ga., Inc......................... Majority Georgia 57.4570
Belk-Simpson Co., of Bainbridge, Ga., Inc........ Majority Georgia 51.9882
Belk of Canton, Ga., Inc......................... Majority Georgia 29.6482
Belk-Rhodes Company, of Carrollton, Ga........... Majority Georgia 31.6405
Belk's Department Store of Cartersville, Georgia,
Incorporated................................... Majority Georgia 31.3247
Belk of Cornelia, Ga., Inc....................... Majority Georgia 37.1405
Belk of Covington, Ga., Inc...................... Majority Georgia 35.3644
Belk of Dalton, Ga., Inc......................... Majority Georgia 53.0073
Belk-Matthews Company of Dublin, Georgia......... Majority Georgia 59.7949
Belk of Hartwell, Ga., Inc....................... Majority Georgia 27.4770
Belk of LaGrange, Ga., Inc....................... Majority Georgia 0.3852
Belk of Lawrenceville, Ga., Inc.................. Majority Georgia 32.1911
Belk-Matthews Company of Macon, Georgia.......... Majority Georgia 100.2971
Belk-Matthews Company of Milledgeville, Ga.,
Inc............................................ Majority Georgia 37.1091
Belk of Monroe, Ga., Inc......................... Majority Georgia 16.8755
Belk of Newnan, Ga., Inc......................... Majority Georgia 18.5978
Belk-Rhodes Company, (Rome, Georgia)............. Majority Georgia 27.9775
Belk of Statesboro, Ga., Inc..................... Majority Georgia 21.9140
Belk of Thomaston, Ga., Inc...................... Majority Georgia 0.4196
Belk of Toccoa, Ga., Inc......................... Majority Georgia 30.4628
Belk-Matthews Company, Vidalia, Georgia, Inc..... Majority Georgia 51.5862
Belk of Washington, Ga., Inc..................... Majority Georgia 27.4037
Belk of Waycross, Ga., Inc....................... Majority Georgia 15.6819
Belk-Simpson Company of Corbin, Kentucky,
Incorporated................................... Majority Kentucky 107.7259
Belk-Simpson Company of Harlan, Kentucky,
Incorporated................................... Majority Kentucky 128.0566
Belk of Miss., Inc............................... Majority Mississippi 9.2238
Belk Department Store of Ahoskie, N.C., Inc...... Majority North Carolina 52.3994
Belk's Department Store of Albemarle, North
Carolina, Incorporated......................... Majority North Carolina 37.8995
Belk of Asheboro, N.C., Inc...................... Majority North Carolina 112.9320
Belk's Department Store of Asheville, North
Carolina, Incorporated......................... Majority North Carolina 19.5744
Belk-Matthews Company............................ Majority North Carolina 28.0294
Belk's Department Store of Boone, North Carolina,
Incorporated................................... Majority North Carolina 141.8032
Belk's Department Store of Brevard, N.C.,
Incorporated................................... Majority North Carolina 39.2748
Belk-Beck Company of Burlington, North Carolina,
Inc............................................ Majority North Carolina 108.1051
Belk Brothers Company............................ Majority North Carolina 96.5480
Belk Enterprises, Inc............................ Majority North Carolina 18.4129
</TABLE>
B-21
<PAGE> 137
<TABLE>
<CAPTION>
VOTING STATE OF APPLICABLE
BELK COMPANY REQUIREMENT ORGANIZATION EXCHANGE RATIO
- ------------ ----------- --------------- --------------
<S> <C> <C> <C>
Belk-Matthews Company of Cherryville, N.C.,
Incorporated................................... Majority North Carolina 27.9259
Belk Department Store of Clinton, N.C., Inc...... Majority North Carolina 110.8714
Belk's Department Store of Dunn, North Carolina,
Incorporated................................... Majority North Carolina 69.7358
Belk Department Store of Eden, N.C., Inc......... Majority North Carolina 75.1865
Belk Department Store of Elkin, N.C., Inc........ Majority North Carolina 46.7109
Belk Department Store of Forest City, N.C.,
Inc............................................ Majority North Carolina 35.8890
Hudson-Belk Co. of Fuquay-Varina, N.C., Inc...... Majority North Carolina 86.6147
Matthews-Belk Company............................ Majority North Carolina 36.3001
Belk Department Store of Greenville, N.C.,
Inc............................................ Majority North Carolina 157.6685
Belk-Simpson Company of Hendersonville, N.C.,
Incorporated................................... Majority North Carolina 190.2252
Belk Department Store of Hickory, N.C., Inc...... Majority North Carolina 177.2478
Belk-Beck Co. of High Point, N.C., Inc........... Majority North Carolina 36.7519
Belk's Department Store of Jacksonville, N.C.,
Inc............................................ Majority North Carolina 114.5736
Belk's Department Store of Lenoir, North
Carolina, Incorporated......................... Majority North Carolina 38.0445
Belk Department Store of Lincolnton, N.C.,
Inc............................................ Majority North Carolina 228.1762
Belk Brothers of Monroe, North Carolina,
Incorporated................................... Majority North Carolina 146.3169
Belk's Department Store of Morehead City, N.C.,
Inc............................................ Majority North Carolina 90.4245
Belk's Department Store of Mount Airy, North
Carolina, Incorporated......................... Majority North Carolina 29.8170
Belk's Department Store of New Bern, N.C.,
Incorporated................................... Majority North Carolina 82.0225
Hudson-Belk Company.............................. Majority North Carolina 37.2679
Belk Department Store of Reidsville, N.C.,
Inc............................................ Majority North Carolina 81.9355
Belk's Department Store of Rockingham, N.C.,
Incorporated................................... Majority North Carolina 27.6691
Belk-Harry Company............................... Majority North Carolina 25.8812
Belk Department Store of Shelby, N.C., Inc....... Majority North Carolina 44.5304
Belk of Siler City, N.C., Inc.................... Majority North Carolina 4.9094
Belk Department Store of Waynesville, N.C.,
Inc............................................ Majority North Carolina 60.4876
Belk Department Store of Wilkesboro, N.C.,
Inc............................................ Majority North Carolina 72.8152
Belk's Department Store, Incorporated of Aiken,
South Carolina................................. Two-thirds South Carolina 44.8296
Gallant-Belk Company............................. Two-thirds South Carolina 77.2144
Belk's Department Store of Batesburg, S.C.,
Inc............................................ Two-thirds South Carolina 49.0796
Belk-Simpson Company, Incorporated of Beaufort,
South Carolina................................. Two-thirds South Carolina 148.8005
Belk's Department Store of Camden, S.C.,
Incorporated................................... Two-thirds South Carolina 82.4755
Belk Department Store of Charleston, S.C.,
Inc............................................ Two-thirds South Carolina 67.0008
Belk's Department Store of Conway, S.C.,
Incorporated................................... Two-thirds South Carolina 41.2258
Belk's Department Store of Florence, S.C.,
Incorporated................................... Two-thirds South Carolina 110.9298
Belk's Department Store of Gaffney, South
Carolina, Incorporated......................... Two-thirds South Carolina 24.6844
Belk of Georgetown, S.C., Inc.................... Two-thirds South Carolina 51.7662
Belk-Simpson Company, Greenville, South
Carolina....................................... Two-thirds South Carolina 62.9390
Belk Department Store of Greenwood, S.C., Inc.... Two-thirds South Carolina 128.1062
Belk's Department Store of Hartsville, S.C.,
Incorporated................................... Two-thirds South Carolina 104.4982
</TABLE>
B-22
<PAGE> 138
<TABLE>
<CAPTION>
VOTING STATE OF APPLICABLE
BELK COMPANY REQUIREMENT ORGANIZATION EXCHANGE RATIO
- ------------ ----------- --------------- --------------
<S> <C> <C> <C>
Belk's Department Store, Incorporated, of Lake
City, South Carolina........................... Two-thirds South Carolina 24.3005
Belk's Department Store of Lancaster, S.C.,
Inc............................................ Two-thirds South Carolina 60.4443
Belk's Department Store of Laurens, South
Carolina, Incorporated......................... Two-thirds South Carolina 40.5055
Belk of Orangeburg, S.C., Inc.................... Two-thirds South Carolina 89.8055
Belk of Seneca, S.C., Inc........................ Two-thirds South Carolina 42.1339
Belk of Spartanburg, S.C., Inc................... Two-thirds South Carolina 91.7760
Belk's Department Store of Union, S.C.,
Incorporated................................... Two-thirds South Carolina 19.4979
Belk of Walterboro, S.C., Inc.................... Two-thirds South Carolina 103.0058
Belk's Department Store of Winnsboro, S.C.,
Incorporated................................... Two-thirds South Carolina 26.8012
Parks-Belk Company of Clarksville, Tennessee..... Majority Tennessee 39.5467
Belk Department Store of Greenville, Texas,
Inc............................................ Two-thirds Texas 65.6983
Belk's Department Store of Paris, Texas, Inc..... Two-thirds Texas 67.1993
Parks-Belk Company, Incorporated................. Two-thirds Virginia 28.1936
Belk of Danville, Va., Inc....................... Two-thirds Virginia 139.6428
Belk of Lynchburg, Va., Inc...................... Two-thirds Virginia 37.0503
Belk Stores of Virginia, Inc..................... Two-thirds Virginia 93.1655
Belk of Roanoke, Va., Inc........................ Two-thirds Virginia 21.2573
Belk of South Boston, Va., Inc................... Two-thirds Virginia 77.4054
Belk of Dawson, Ga., Inc......................... Majority Georgia 28.7701
Belk of Elberton, Ga., Inc....................... Majority Georgia 29.2525
Belk of Thomson, Ga., Inc........................ Majority Georgia 27.2683
Belk Department Store of Edenton, N.C., Inc...... Majority North Carolina 33.8123
Belk of Thomasville, N.C., Inc................... Majority North Carolina 19.8693
Belk's Department Store of Chesterfield, S.C.,
Incorporated................................... Two-thirds South Carolina 17.9679
Belk's Department Store of Columbia, South
Carolina, Incorporated......................... Two-thirds South Carolina 7.3168
Belk Finance Company............................. Majority North Carolina 1,210.7396
Belk-Simpson Realty Company...................... Two-thirds South Carolina 30.2193
Belk of Lawrenceville, Va., Inc.................. Two-thirds Virginia 377.3850
Belk Realty of Radford, Va., Inc................. Two-thirds Virginia 74.5076
Belk Realty of Staunton, Va., Inc................ Two-thirds Virginia 7.5527
Belk Outlet Center, Inc.......................... Two-thirds Virginia 49.4728
</TABLE>
B-23
<PAGE> 139
EXHIBIT B TO PLAN AND
AGREEMENT OF REORGANIZATION
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BELK, INC.
FIRST: The name of the corporation is Belk, Inc. (the "Corporation").
SECOND: The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, New Castle County, Wilmington, Delaware 19801.
The name of its registered agent at such address is The Corporation Trust
Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the Delaware General
Corporation Law (the "DGCL").
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 420,000,000, consisting of (i)
200,000,000 shares, par value $.01 per share, of Class A Common Stock (the
"Class A Common Stock"); (ii) 200,000,000 shares, par value $.01 per share, of
Class B Common Stock (the "Class B Common Stock"); and (iii) 20,000,000 shares,
par value $.01 per share, of Preferred Stock ("Preferred Stock"). The Class A
Common Stock and the Class B Common Stock shall hereinafter collectively be
called the "Common Stock."
4.1 Common Stock Provisions. All shares of Common Stock will be identical
in all respects and will entitle the holders thereof to the same rights and
privileges, except as otherwise provided herein.
4.1.1 Voting Rights. The holders of shares of Common Stock shall have the
following voting rights:
(a) Each share of Class A Common Stock shall entitle the holder
thereof to ten votes in person or by proxy on all matters submitted to a
vote of the stockholders of the Corporation.
(b) Each share of Class B Common Stock shall entitle the holder
thereof to one vote in person or by proxy on all matters submitted to a
vote of the stockholders of the Corporation.
(c) Except as otherwise required by applicable law, the holders of
shares of Common Stock shall vote together as one class on all matters
submitted to a vote of stockholders of the Corporation (together with any
holders of shares of Preferred Stock who are entitled to vote together with
the holders of Common Stock on any matter). The number of authorized shares
of Class A Common Stock or Class B Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by
the affirmative vote of the holders of a majority of the Common Stock
(voting together as one class and not as separate classes).
4.1.2 Dividends and Distributions. Subject to the preferences applicable
to Preferred Stock outstanding at any time, the holders of shares of Common
Stock shall be entitled to receive such dividends and other distributions in
cash, property or shares of stock of the Corporation as may be declared thereon
by the Board of Directors from time to time out of assets or funds of the
Corporation legally available therefor; provided, that, subject to the
provisions of this Section 4.1.2, the Corporation shall not pay dividends or
make distributions to any holders of any class of Common Stock unless
simultaneously with such dividend or distribution, as the case may be, the
Company makes the same dividend or distribution with respect to each outstanding
share of Common Stock regardless of class. In the case of dividends or other
distributions payable in Class A Common Stock or Class B Common Stock, including
distributions pursuant to stock splits or divisions of Class A Common Stock or
Class B Common Stock which occur after the first date upon which the Corporation
has issued shares of either Class A Common Stock or Class B Common Stock, only
shares of Class A Common Stock shall be distributed with respect to Class A
Common Stock and only shares of Class B Common Stock shall be distributed with
respect to Class B Common Stock. Whenever a dividend or
B-24
<PAGE> 140
distribution, including distributions pursuant to stock splits or divisions of
the Common Stock, is payable in shares of Class A Common Stock or Class B Common
Stock, the number of shares of each class of Common Stock payable per share of
such class of Common Stock shall be equal in number. In the case of dividends or
other distributions consisting of other voting securities of the Corporation or
of voting securities of any corporation which is a wholly-owned subsidiary of
the Corporation, the Corporation shall declare and pay such dividends in two
separate classes of such voting securities, identical in all respects, except
that (i) the voting rights of each such security paid to the holders of Class B
Common Stock shall be one-tenth of the voting rights of each such security paid
to the holders of Class A Common Stock and (ii) such security paid to the
holders of Class A Common Stock shall convert into the security paid to the
holders of Class B Common Stock upon the same terms and conditions applicable to
the conversion of Class A Common Stock into Class B Common Stock and shall have
the same restrictions on transfer and ownership applicable to the transfer and
ownership of the Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of the Corporation or voting securities of another corporation
which is a wholly-owned subsidiary of the Corporation, the Corporation shall
provide that such convertible or exchangeable securities and the underlying
securities be identical in all respects (including, without limitation, the
conversion or exchange rate), except that (i) the voting rights of each security
underlying the convertible or exchangeable security paid to the holders of Class
B Common Stock shall be one-tenth of the voting rights of each security
underlying the convertible or exchangeable security paid to the holders of the
Class A Common Stock and (ii) such underlying securities paid to the holders of
Class A Common Stock shall convert into the underlying securities paid to the
holders of Class B Common Stock upon the same terms and conditions applicable to
the conversion of Class A Common Stock into Class B Common Stock and shall have
the same restrictions on transfer and ownership applicable to the transfer and
ownership of the Class A Common Stock
4.1.3 Conversion of Class A Common Stock. (a) Each holder of Class A
Common Stock shall be entitled to convert, at any time and from time to time,
any or all of the shares of such holder's Class A Common Stock on a one-for-one
basis, into the same number of fully paid and non-assessable shares of Class B
Common Stock. Such right shall be exercised by the surrender of the certificate
or certificates representing the shares of Class A Common Stock to be converted
to the Corporation at any time during normal business hours at the principal
executive offices of the Corporation, accompanied by a written notice of the
holder of such shares stating that such holder desires to convert such shares,
or a stated number of the shares represented by such certificate or
certificates, into an equal number of shares of the Class B Common Stock, and
(if so required by the Corporation) by instruments of transfer, in form
satisfactory to the Corporation, duly executed by such holder or such holder's
duly authorized attorney, and transfer tax stamps or funds therefor, if required
pursuant to Section 4.1.3(e).
(b) As promptly as practicable following the surrender for conversion of a
certificate representing shares of Class A Common Stock in the manner provided
in Section 4.1.3(a) and the payment in cash of any amount required by the
provisions of Section 4.1.3(e), the Corporation will deliver or cause to be
delivered a certificate or certificates representing the number of full shares
of Class B Common Stock issuable upon such conversion, issued in such name or
names as such holder may direct. Such conversion shall be deemed to have been
effected immediately prior to the close of business on the date of the surrender
of the certificate or certificates representing shares of Class A Common Stock.
Upon the date any such conversion is made or effected, all rights of the holder
of such shares as such holder shall cease, and the person or persons in whose
name or names the certificates or certificates representing the shares of Class
B Common Stock are to be issued shall be treated for all purposes as having
become the record holder or holders of such shares of Class B Common Stock;
provided, however, that if any such surrender and payment occurs on any date
when the stock transfer books of the Corporation shall be closed, the person or
persons in whose name or names the certificate or certificates representing
shares of Class B Common Stock are to be issued shall be deemed the record
holder or holders thereof for all purposes immediately prior to the close of
business on the next succeeding day on which the stock transfer books are open.
(c) In the event of a reclassification or other similar transaction as a
result of which the shares of Class B Common Stock are converted into another
security, then a holder of Class A Common Stock shall be entitled
B-25
<PAGE> 141
to receive upon conversion the amount of such security that such holder would
have received if such conversion had occurred immediately prior to the record
date of such reclassification or other similar transaction. No adjustments in
respect of dividends shall be made upon the conversion of any share of Class A
Common Stock; provided, however, that if a share shall be converted subsequent
to the record date for the payment of a dividend or other distribution on shares
of Class A Common Stock but prior to such payment, then the registered holder of
such share at the close of business on such record date shall be entitled to
receive the dividend or other distribution payable on such share on such date
notwithstanding the conversion thereof or the Corporation's default in payment
of the dividend due on such date.
(d) The Corporation covenants that it will at all times reserve and keep
available out of its authorized but unissued shares of Class B Common Stock,
solely for the purpose of issuance upon conversion of the outstanding shares of
Class A Common Stock, such number of shares of Class B Common Stock that shall
be issuable upon the conversion of all such outstanding shares of Class A Common
Stock; provided that nothing contained herein shall be construed to preclude the
Corporation from satisfying its obligations in respect of the conversion of the
outstanding shares of Class A Common Stock by delivery of purchased shares of
Class B Common Stock which are held in the treasury of the Corporation. The
Corporation covenants that if any shares of Class B Common Stock require
registration with or approval of any governmental authority under any federal or
state law before such shares of Class B Common Stock may be issued upon
conversion, the Corporation will cause such shares to be duly registered or
approved, as the case may be. The Corporation will use its best efforts to list
the shares of Class B Common Stock required to be delivered upon conversion
prior to such delivery upon each national securities exchange upon which the
outstanding Class B Common Stock is listed at the time of such delivery. The
Corporation covenants that all shares of Class B Common Stock that shall be
issued upon conversion of the shares of Class A Common Stock will, upon issue,
be validly issued, fully paid and non-assessable.
(e) The issuance of certificates for shares of Class B Common Stock upon
conversion of shares of Class A Common Stock shall be made without charge to the
holders of such shares except for any stamp or other similar tax in respect of
such issuance; provided, however, that, if any such certificate is to be issued
in a name other than that of the holder of the share or shares of Class A Common
Stock converted, then the person or persons requesting the issuance thereof
shall pay to the Corporation the amount of any tax that may be payable in
respect of any transfer involved in such issuance or shall establish to the
satisfaction of the Corporation that such tax has been paid.
(f) Shares of Class A Common Stock that are converted into shares of Class
B Common Stock as provided herein shall continue to be authorized shares of
Class A Common Stock and available for reissue by the Corporation; provided,
however, that no shares of Class A Common Stock shall be reissued except as
expressly permitted by Sections 4.1.2 and 4.1.4 of this Amended and Restated
Certificate of Incorporation.
4.1.4 Stock Splits. The Corporation shall not in any manner subdivide (by
any stock split, stock dividend, reclassification, recapitalization or
otherwise) or combine (by reverse stock split, reclassification,
recapitalization or otherwise) the outstanding shares of one class of Common
Stock unless the outstanding shares of all classes of Common Stock shall be
proportionately subdivided or combined.
4.1.5 Options, Rights or Warrants. (a) The Corporation shall not make any
offering of options, rights or warrants to subscribe for shares of Class A
Common Stock. If the Corporation makes an offering of options, rights or
warrants to subscribe for shares of any other class or classes of capital stock
(other than Class A Common Stock) to all holders of a class of Common Stock,
then the Corporation shall simultaneously make an identical offering to all
holders of the other classes of Common Stock other than to any class of Common
Stock the holders of which, voting as a separate class, determine that such
offering need not be made to such class. All such options, rights or warrants
offerings shall offer the respective holders of Class A Common Stock and Class B
Common Stock the right to subscribe at the same rate per share.
(b) Subject to Section 4.1.3(c) and 4.1.5(a), the Corporation shall have
the power to create and issue, whether or not in connection with the issue and
sale of any shares of stock or other securities of the Corporation, rights or
options entitling the holders thereof to purchase from the Corporation any
shares of its capital stock of any class or classes at the time authorized
(other than Class A Common Stock), such rights or
B-26
<PAGE> 142
options to have such terms and conditions, and to be evidenced by or in such
instrument or instruments, as shall be approved by the Board of Directors.
4.1.6 Mergers, Consolidation, Etc. The Corporation shall not enter into
any consolidation, merger, combination or other transaction in which shares of
Common Stock are exchanged for or changed into other stock or securities, cash
and/or any other property, unless the shares of each class of Common Stock shall
be exchanged for or changed into either (i) the same amount of stock,
securities, cash and/or any other property, as the case may be, into which or
for which each share of any other class of Common Stock is exchanged or changed;
provided, however, that if shares of Common Stock are exchanged for or changed
into shares of capital stock, such shares so exchanged for or changed into may
differ to the extent and only to the extent that the Class A Common Stock and
the Class B Common Stock differ as provided herein; or (ii) if holders of each
class of Common Stock are to receive different distributions of stock,
securities, cash and/or any other property, an amount of stock, securities, cash
and/or property per share having a value, as determined by an independent
investment banking firm of national reputation selected by the Board of
Directors, equal to the value per share into which or for which each share of
any other class of Common Stock is exchanged or changed.
4.1.7 Liquidation Rights. In the event of any dissolution, liquidation or
winding up of the affairs of the Corporation, whether voluntary or involuntary,
after payment or provision for payment of the debts and other liabilities of the
Corporation and after making provision for the holders of each series of
Preferred Stock, if any, the remaining assets and funds of the Corporation, if
any, shall be divided among and paid ratably to the holders of the shares of the
Class A Common Stock and the Class B Common Stock treated as a single class.
4.1.8 No Preemptive Rights. Except as provided in Section 4.1.5 or Section
4.3.2, the holders of shares of Common Stock are not entitled to any preemptive
right to subscribe for, purchase or receive any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock.
4.1.9 Transfer of Class A Common Stock. (a) No person may, directly or
indirectly, sell (whether by involuntary or judicial sale or otherwise), assign,
transfer, grant a security interest in, pledge, encumber, hypothecate, give (by
bequest, gift or appointment) or otherwise (voluntarily or by operation of law)
dispose of (collectively, "Transfer") any interest in his, her or its shares of
Class A Common Stock (or in any shares of Class A Common Stock held by such
person for the benefit of or on the behalf of another person) (including,
without limitation, the power to vote or provide a consent with respect to his,
her or its shares of Class A Common Stock by proxy or otherwise, except for
proxies given to any Class A Permitted Holder (as defined below) or to a person
designated by the Board of Directors of the Corporation who is soliciting
proxies on behalf of the Corporation), and the Corporation and the transfer
agent for the Class A Common Stock, if any (the "Class A Transfer Agent"), shall
not register the Transfer of such shares of Class A Common Stock, except to the
Corporation or a Class A Permitted Holder; provided, however, such restrictions
on transfer shall not apply to a merger, consolidation or business combination
of the Corporation with or into another corporation pursuant to which all of the
outstanding shares of each class of Common Stock and Preferred Stock of the
Company is being exchanged or changed pursuant to Section 4.1.6. Any transfer of
Class A Common Stock in violation of this Section 4.1.9 shall be null and void
ab initio, and the Corporation shall not register such Transfer.
For purposes of this Amended and Restated Certificate of Incorporation, a
"Class A Permitted Holder" shall include only the following persons: (i) each
person who is at November 25, 1997 a holder of record of any share of Belk
Company Common Stock (a "Record Holder") and his or her estate, guardian or
conservator, (ii) each spouse of a Record Holder and his or her estate, guardian
or conservator, (iii) each descendant of a Record Holder and his or her estate,
guardian or conservator, (iv) each spouse of a descendant of a Record Holder and
his or her estate, guardian or conservator (the Record Holder and the spouse,
descendants and spouses of descendants of the Record Holder, and their
respective estates, guardians and conservators being collectively referred to as
a "Record Holder Family Group"), (v) each Record Holder Entity (hereinafter
defined), (vi) each Record Holder Trust (hereinafter defined) and (vii) each
Permitted Charitable Beneficiary (hereinafter defined). The term "Record Holder
Entity" means any corporation,
B-27
<PAGE> 143
partnership, unincorporated association, firm, joint venture or other legal
entity controlled by one or more members of a Record Holder Family Group. The
term "Record Holder Trust" means any trust the primary beneficiaries of which
are one or more members of a Record Holder Family Group and Permitted Charitable
Beneficiaries. The term "Permitted Charitable Beneficiary" means any
organization described in Section 501(c)(3) of the Internal Revenue Code of
1986, as amended (the "Code"), but only with respect to shares of Class A Common
Stock or interests therein, including future interests, which such organization
receives by gift, grant, bequest, devise or similar gratuitous transfer from one
or more Class A Permitted Holders. For purposes of this Section 4.1, the primary
beneficiaries of a trust will be deemed to be one or more members of a Record
Holder Family Group and Permitted Charitable Beneficiaries if, under the maximum
exercise of discretion by the trustees of such trust in favor of persons who are
not members of the Record Holder Family Group and Permitted Charitable
Beneficiaries, the value of the interest of such persons in the trust, computed
actuarially, is 50% or less. The factors and methods prescribed in Section 7520
of the Code for use in ascertaining the value of certain interests shall be used
in determining a beneficiary's actuarial interest in a trust for purposes of
applying this Section 4.1. For purposes of this Section 4.1, the actuarial value
of the interest in a trust of any person in whose favor a testamentary power of
appointment may be exercised shall be deemed to be zero.
(b) Notwithstanding anything to the contrary set forth herein, any Class A
Permitted Holder may pledge his, her or its shares of Class A Common Stock to a
financial institution pursuant to a bona fide pledge of such shares as
collateral security for indebtedness due to the pledgee; provided that such
shares shall remain subject to the provisions of this Section 4.1.9. In the
event of foreclosure or other similar action by the pledgee, such pledged shares
of Class A Common Stock may only be transferred to a Class A Permitted Holder or
converted into shares of Class B Common Stock, as the pledgee may elect.
(c) For purposes of Sections 4.1.9 and 4.1.10.
(1) The relationship of any person that is derived by or through legal
adoption shall be considered a natural relationship.
(2) A minor for whom shares of Class A Common Stock are held pursuant
to a Uniform Gifts to Minors Act or similar law shall be considered the
Class A Permitted Holder and the custodian who is the Record Holder of such
shares shall not be considered the Class A Permitted Holder of such shares.
(3) An incompetent stockholder who is a Class A Permitted Holder but
whose shares are owned or held by a guardian or conservator shall be
considered the Class A Permitted Holder of such shares and such guardian or
conservator who is the holder of such shares shall not be considered the
Class A Permitted Holder of such shares.
(4) Unless otherwise specified, the term "person" means and includes
natural persons, corporations, partnerships, unincorporated associations,
firms, joint ventures, trusts and all other entities.
(5) The term "control" shall mean, with respect to any person, the
following:
(i) ownership, directly or indirectly, by such person of equity
securities entitling it to exercise in the aggregate more than 50% of
the voting power of the entity in question, or
(ii) the possession by such person of the power, directly or
indirectly (A) to elect a majority of the board of directors (or
equivalent governing body) of the entity in question; or (B) to direct
or cause the direction of the management and policies of or with respect
to the entity in question, whether through ownership of securities, by
contract or otherwise.
(6) Except as provided in clauses (2) and (3) above, for purposes of
determining whether the holder of a share of Class A Common Stock is a
Class A Permitted Holder, the Record Holder of such share shall be
considered the holder; provided, however, that if such Record Holder is a
nominee, the holder for purposes of determining whether the holder of
shares of Class A Common Stock is a Class A Permitted Holder shall be the
first person in the chain of ownership of such share of Class A Common
Stock who is not holding such share solely as a nominee.
B-28
<PAGE> 144
(7) Each certificate representing a share of Class A Common Stock
shall be endorsed with a legend that states that shares of Class A Common
Stock are not transferrable other than to certain transferees and are
subject to certain restrictions as set forth in this Amended and Restated
Certificate of Incorporation filed by the Corporation with the Secretary
State of the State of Delaware.
(8) Notwithstanding anything to the contrary set forth herein, any
holder of Class A Common Stock may transfer shares of Class A Common Stock
to the underwriters of any public offering of Class A Common Stock by the
Corporation pursuant to the terms of the underwriting agreement entered
into by such holder of Class A Common Stock with respect to such public
offering, and the ownership of shares of Class A Common Stock by such
underwriters as a result of such transfer will not result in the conversion
of the transferred shares of Class A Common Stock into shares of Class B
Common Stock until the closing of such public offering, at which time such
shares of Class A Common Stock shall automatically convert into shares of
Class B Common Stock in accordance with Section 4.1.3.
4.1.10 Certain Automatic Conversions of Class A Common Stock. Subject to
Section 4.1.9, at such time as a person ceases to be a Class A Permitted Holder,
any and all shares of Class A Common Stock held by such person at such time
shall automatically convert into shares of Class B Common Stock, provided that,
no conversion shall occur upon the pledge of a Class A Permitted Holder's share
of Class A Common Stock to a financial institution as contemplated by Section
4.1.9(b).
4.1.11 Restrictions on Issuance. The Corporation shall not issue or sell
(x) any shares of Class A Common Stock or any securities (including, without
limitation, any rights, options, warrants or other securities) convertible,
exchangeable or exercisable into shares of Class A Common Stock to any person
that is not a Class A Permitted Holder. Any issuance or sale of shares of Class
A Common Stock (or securities convertible into, or exchangeable or exercisable
for, shares of Class A Common Stock) in violation of this Section 4.1.11 shall
be null and void ab initio.
4.2 Preferred Stock Provisions. The Preferred Stock may be issued from
time to time in one or more series. Subject to limitations prescribed by law and
the provisions of this Amended and Restated Certificate of Incorporation or any
amendment hereto, authority is expressly granted to the Board of Directors to
authorize the issue of one or more series of Preferred Stock without any vote or
other action by the stockholders of the Corporation (the "Stockholders"), and to
fix by designation (the "Preferred Stock Designation") the voting powers,
designations, preferences and relative, participating, optional or other special
rights, and the qualifications, limitations and restrictions thereof to the full
extent now or hereafter permitted by law.
4.3 Other Provisions.
4.3.1 Other than as provided in Section 4.1 the Board of Directors shall
have authority to authorize the issuance from time to time without any vote or
other action by the stockholders of the Corporation of any or all shares of
stock of the Corporation of any class at any time authorized, and any securities
convertible into or exchangeable for any such shares, in each case to such
persons and for such consideration and on such terms as the Board of Directors
from time to time in its discretion lawfully may determine; provided, however,
that the consideration for the issuance of shares of stock of the Corporation
having par value shall not be less than such par value. Shares so issued, for
which the consideration has been paid to the Corporation, shall be fully paid,
and the holders of such stock shall not be liable to any further call or
assessments thereon.
4.3.2 No holder of stock of any class or series of the Corporation nor of
any security convertible into or exchangeable for stock of any class or series
of the Corporation, nor of any warrant, option or right to purchase, subscribe
for or otherwise acquire stock of any class or series of the Corporation,
whether now or hereafter authorized, shall, as such holder, have any preemptive
right whatsoever to purchase, subscribe for or otherwise acquire stock of any
class or series of the Corporation, or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of the Corporation, whether now
or hereafter authorized. Nothing in this Section 4.3.2 shall be deemed to
eliminate or limit the ability of the Corporation to grant by contract a
preemptive right to purchase, subscribe for or otherwise acquire stock of any
class or series of the Corporation or any security convertible into or
B-29
<PAGE> 145
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of the Corporation, whether now
or hereafter authorized.
4.3.3 The Board of Directors may set a record date in the manner and for
the purposes authorized in the Bylaws of the Corporation with respect to shares
of stock of the Corporation of any class or series.
FIFTH: Meetings of Stockholders. 5.1 No action required to be taken or
which may be taken at any annual or special meeting of stockholders of the
Corporation may be taken without a meeting, and the power of stockholders to
consent in writing, without a meeting, to the taking of any action is
specifically denied.
5.2 Special meetings of stockholders of the Corporation may only be called
by the Chairman of the Board or by the Board of Directors pursuant to a
resolution adopted by the affirmative vote of a majority of the entire Board of
Directors.
5.3 At a meeting of the stockholders of the Corporation, only such business
shall be conducted which has been properly brought before the meeting. To be
properly brought before a meeting of the stockholders, business must be (i)
specified in the notice of meeting (or any supplement thereto) given by, or at
the direction of, the Board of Directors or (ii) otherwise properly brought
before the meeting by or at the direction of the Board of Directors or by a
stockholder. For business to be properly brought before a meeting by a
stockholder, the stockholder must have given timely notice of the business to
the Secretary of the Corporation. To be timely, a stockholder's notice must be
in writing delivered to or mailed, postage prepaid, and received by the
Secretary not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that if less than 70 days notice or prior public disclosure
of the date of the meeting is given to stockholders, notice by the stockholder
to be timely must be received by the Secretary not later than the close of
business on the tenth day following the day on which notice of the date of the
meeting was mailed or public disclosure was made. For each matter the
stockholder proposes to bring before the meeting, the notice to the Secretary
shall include (i) a brief description of the business desired to be brought
before the meeting and the reasons for conducting the business at the meeting,
(ii) the name and address, as they appear on the Corporation's books, of the
stockholder proposing the business, (iii) the class and number of shares of the
Corporation which are beneficially owned by the stockholder, and (iv) any
material interest of the stockholder in such business. Notwithstanding anything
in the Corporation's Bylaws to the contrary, no business shall be conducted at
the meeting except in accordance with the procedures set forth in this Section
5.3. The chairman of a meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 5.3. If the chairman
determines that business was not properly brought before the meeting in
accordance with the provisions of this Section 5.3, the business shall not be
transacted.
5.4 Notwithstanding any other provisions of this Amended and Restated
Certificate of Incorporation or any provision of law which might permit a lesser
vote or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the capital stock of the Corporation required by
law, this Amended and Restated Certificate of Incorporation or any amendment
hereto or any Preferred Stock Designation, the affirmative vote of the holders
of at least 66 2/3% of the voting power of all of the then outstanding shares of
capital stock of the Corporation entitled to vote on all matters submitted to
the stockholders of the Corporation generally (the "Voting Stock"), voting
together as a single class, shall be required to alter, amend, repeal, or adopt
any provision inconsistent with this Article FIFTH.
SIXTH: Court May Sanction Compromise or Arrangement with Creditors or
Stockholders. Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation, under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the
B-30
<PAGE> 146
stockholders or class of stockholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
SEVENTH: Board of Directors. 7.1 The Board of Directors of the Corporation
shall be such number as is determined by the affirmative vote of a majority of
the entire Board of Directors. The directors of the Corporation shall be divided
into three classes, designated as Class I, Class II and Class III. The term of
office of each director shall be three years; provided, however, that the term
of office of all of the initial directors shall expire at the first annual
meeting of the stockholders after the date of filing of this Amended and
Restated Certificate of Incorporation (at which time the stockholders shall
elect all of the directors in each of the three classes). The term of office of
the directors in Class I elected at the first annual meeting shall expire at the
second annual meeting of the stockholders after the date of filing of this
Amended and Restated Certificate of Incorporation, the term of the office of the
directors in Class II elected at the first annual meeting shall expire at the
third annual meeting after the date of filing of this Amended and Restated
Certificate of Incorporation, and the term of office of the directors in Class
III elected at the first annual meeting shall expire at the fourth annual
meeting after the date of filing of this Amended and Restated Certificate of
Incorporation. At each annual meeting after the first annual meeting of the
stockholders after the date of filing of this Amended and Restated Certificate
of Incorporation, directors of each class shall be elected for a full term of
three years to succeed those whose terms expire.
7.2 Only persons who are nominated in accordance with the procedures set
forth in this Section 7.2 shall be eligible for election as directors.
Nominations for election to the Board of Directors of the Corporation at a
meeting of stockholders may be made by the Board of Directors, on behalf of the
Board of Directors by any nominating committee appointed by the Board of
Directors, or by any stockholder of the Corporation entitled to vote for the
election of directors at the meeting. Nominations, other than those made by or
on behalf of the Board of Directors, shall be made by notice in writing
delivered to or mailed, postage prepaid, and received by the Secretary not less
than 60 nor more than 90 days prior to any meeting of stockholders called for
the election of directors; provided, however, that if less than 70 days notice
or prior public disclosure of the date of the meeting is given to stockholders,
the nomination must be received by the Secretary not later than the close of
business on the tenth day following the day on which notice of the date of the
meeting was mailed or public disclosure was made. The notice shall set forth:
(i) the name and address, as they appear on the Corporation's books, of the
stockholder who or which intends to make the nomination; (ii) the name, age,
business address and, if known, residence address of each nominee; (iii) the
principal occupation or employment of each nominee; (iv) the class and number of
shares of stock of the Corporation which are beneficially owned by each nominee
and by the nominating stockholder; (v) any other information concerning the
nominee that must be disclosed of nominees in a proxy solicitation pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"); and (vi) the executed consent of each nominee to being named in
the proxy statement for such proxy solicitation as a nominee, and to serve as a
director of the Corporation, if elected. The chairman of the meeting of
stockholders may, if the facts warrant, determine that a nomination was not made
in accordance with the foregoing procedures, and if the chairman should so
determine, the chairman shall so declare to the meeting and the defective
nomination shall be disregarded. Nothing in this Section 7.2 shall be construed
to affect the requirements for proxy statements of the Corporation under
Regulation 14A of the Exchange Act.
7.3 Subject to the rights of the holders of any series of Preferred Stock
then outstanding, newly created directorships resulting from any increase in the
number of directors and any vacancies on the Board of Directors resulting from
death, resignation, disqualification, removal or other cause shall be filled
only by the affirmative vote of a majority of the directors then in office, even
though less than a quorum, or by the sole remaining director, as the case may
be, and not by the stockholders. Such a director shall hold office until the
annual meeting of stockholders at which the term of office of the class to which
they have been chosen expires, and until such director's successor shall have
been elected and qualified. No decrease in the number of directors constituting
the Board of Directors shall shorten the term of any incumbent director.
B-31
<PAGE> 147
7.4 Notwithstanding the foregoing Sections 7.1, 7.2 and 7.3 of this Article
SEVENTH, whenever the holders of any one or more series of Preferred Stock
issued by the Corporation shall have the right, voting separately by class or
series, to elect directors at an annual or special meeting of stockholders, (i)
the election, filling of vacancies and other features of such directorships
shall be governed by the terms of this Amended and Restated Certificate of
Incorporation or the Preferred Stock Designation applicable to such class or
series of Preferred Stock, (ii) the then authorized number of directors of the
Corporation shall be increased by the number of additional directors to be
elected, and (iii) the directors so elected shall serve a term which shall
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of this Amended and Restated Certificate of
Incorporation or the Preferred Stock Designation applicable to such class or
series.
7.5 Unless and except to the extent that the Bylaws of the Corporation
shall so require, the election of directors of the Corporation need not be by
written ballot.
7.6 Notwithstanding any other provisions of this Amended and Restated
Certificate of Incorporation or any provisions of law which might permit a
lesser vote or no vote, but in addition to any affirmative vote of the holders
of any particular class or series of the capital stock of the Corporation
required by law, this Amended and Restated Certificate of Incorporation or any
amendment hereto or any Preferred Stock Designation, the affirmative vote of the
holders of at least 66 2/3% of the voting power of all of the then outstanding
shares of Voting Stock, voting together as a single class, shall be required to
alter, amend, repeal, or adopt any provision inconsistent with this Article
SEVENTH.
7.7 In furtherance, and not in limitation of the powers conferred on it by
statute, the Board of Directors is expressly authorized:
(a) to adopt, amend or repeal the Bylaws of the Corporation, subject
to such restrictions upon the exercise of such power as may be imposed by
this Amended and Restated Certificate of Incorporation or any amendment
hereto;
(b) to authorize and cause to be executed mortgages and liens upon the
whole or any part of the real and personal property of the Corporation,
without any action of or by the stockholders of the Corporation, except as
otherwise provided by law; and
(c) to set apart out of any of the funds of the Corporation available
for dividends a reserve or reserves for any proper purpose or to abolish
any such reserve in the manner in which it was created.
The Corporation may in its Bylaws confer powers upon its Board of Directors
in addition to the foregoing, and in addition to the powers and authorities
expressly conferred upon it by law.
7.8 The Board of Directors shall have power from time to time to fix and to
determine and vary the amount of the working capital of the Corporation and to
direct and determine the use and disposition of any surplus or net profits over
and above the capital as determined pursuant to, and subject to, the provisions
of the DGCL; and in its discretion the Board of Directors may use and apply any
such surplus or accumulated profits in purchasing or acquiring bonds,
debentures, notes, or other obligations or securities of the Corporation or
shares of its own stock of any class so far as may be permitted by law, to such
extent and in such manner and upon such terms as the Board of Directors shall
deem expedient, but any such bonds, debentures, notes, obligations, securities
or stock so purchased or acquired (together with any stock or securities
acquired in satisfaction of a debt or otherwise) may be resold. Nothing,
however, shall be held to limit the general power of the Corporation to apply
any other funds or assets to the purchase or acquisition or retirement of its
stock, bonds, debentures, notes or other obligations or securities.
7.9 The Board of Directors, subject to the applicable provisions of the
Amended and Restated Bylaws and the DGCL, may from time to time determine
whether and to what extent and at what times and places and under what
conditions and regulations the accounts and books of the Corporation or any of
them shall be open to the inspection of the stockholders; and no stockholder
shall have any right to inspect any account book or document of the Corporation,
except as conferred by law or as authorized by the Board of Directors.
B-32
<PAGE> 148
7.10 The books of the Corporation may be kept within or without the State
of Delaware at such place or places as may be designated from time to time by
the Board of Directors.
7.11 The Board of Directors may determine, from time to time, the amount of
compensation which shall be paid to its members. The Board of Directors shall
also have power, in its discretion, to provide for and to pay directors
rendering unusual or exceptional services to the Corporation special
compensation appropriate to the value of such services as determined by the
Board of Directors from time to time.
7.12 Subject to the rights of the holders of any series of Preferred Stock
then outstanding to remove directors that the holders of such Preferred Stock
were entitled to elect, a director of the Corporation may be removed only for
cause. Such removal for cause may be effected only by the affirmative vote of
all other Board members or the holders of at least 66 2/3% of the voting power
of all of the then outstanding shares of Voting Stock, voting together as a
single class.
EIGHTH: Amendment of Certificate and Bylaws.
8.1 The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Amended and Restated Certificate of
Incorporation in the manner now or hereafter prescribed by law, and all rights
conferred upon stockholders herein are granted subject to this reservation;
provided; however, that the provisions of Section 4.1 may not be amended,
altered, changed or repealed in any respect to a class of Common Stock unless
such amendment, alteration, change or repeal is approved by such class of Common
Stock voting as separate class. In addition, the preceding sentence of this
Section 8.1 may not be amended, altered, changed or repealed in any respect
unless such amendment, alteration, change or repeal is approved by each class of
Common Stock voting as a separate class.
8.2 The Bylaws of the Corporation may not be amended except by a majority
vote of the entire Board of Directors, or the affirmative vote of the holders of
at least two-third of the voting power of all of the then outstanding shares of
Voting Stock, voting together as a single class.
NINTH: Director Liability to Corporation. No director of the Corporation
shall be personally liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty by such director as a director; provided,
however, that this Article NINTH shall not eliminate or limit the liability of a
director to the extent provided by applicable law (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any
transaction from which the director derived an improper financial benefit. No
amendment or repeal of this Article NINTH shall apply to or have any effect on
the liability or alleged liability of a director of the Corporation for or with
respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
B-33
<PAGE> 149
EXHIBIT C TO PLAN AND
AGREEMENT OF REORGANIZATION
AMENDED AND RESTATED BYLAWS
OF
BELK, INC.
ARTICLE I
STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of the stockholders of
Belk, Inc. (the "Corporation") for the election of directors of the Corporation
and for the transaction of such other business as may properly come before the
meeting shall be held at such place, either within or without the State of
Delaware, on such date and at such time as the Board of Directors may by
resolution provide. The Board of Directors may specify by resolution prior to
any special meeting of stockholders held within the year that such meeting shall
be in lieu of the annual meeting.
Section 2. Special Meetings. Special meetings of the stockholders of the
Corporation may only be called at any time by the Chairman of the Board or by
the Board of Directors pursuant to a resolution adopted by the affirmative vote
of a majority of the entire Board of Directors. Special meetings shall be held
at such place, either within or without the State of Delaware, as is stated in
the call and notice thereof. Such notice shall also state the purpose or
purposes of the proposed meeting.
Section 3. Notice of Meetings. (a) Unless otherwise provided by law,
whenever stockholders are required or permitted to take any action at a meeting,
a written notice of the meeting stating the place, date and hour of the meeting,
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called, shall be given not less than ten, nor more than sixty, days
prior to such meeting to each stockholder entitled to vote at the meeting. If
mailed, such notice shall be deemed to be given when deposited in the mail,
postage prepaid, directed to the stockholder at such stockholder's address as it
appears on the records of the Corporation. Whenever notice is required to be
given to any stockholder, a written waiver thereof, signed by the stockholder
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance at a meeting shall constitute a waiver
of notice of such meeting, except when the stockholder attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business transacted at, nor the purpose of, any regular or
special meeting need be stated in the written waiver of notice of such meeting.
(b) Notice of any meeting may be given by or at the direction of the
Chairman, the President, the Secretary or the Board of Directors. No notice need
be given of the time and place of reconvening of any adjourned meeting if the
time and place to which the meeting is adjourned are announced at the adjourned
meeting. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 4. List of Stockholders. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, showing the address of each
stockholder and the class and number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who or which is present. The stock ledger shall be the only evidence as to who
are the stockholders entitled to examine the stock ledger, the list of
B-34
<PAGE> 150
stockholders or the books of the Corporation, or to vote in person or by proxy
at any meeting of the stockholders.
Section 5. Quorum; Required Stockholder Vote. Except as otherwise
provided by the Certificate of Incorporation, each stockholder entitled to vote
at any meeting of stockholders shall be entitled to (i) ten votes for each share
of Class A Stock held by such stockholder that has voting power upon the matter
in question and (ii) one vote for each share of Class B Stock held by such
stockholder that has voting power upon the matter in question. A quorum for the
transaction of business at any annual or special meeting of stockholders shall
exist when the holders of the outstanding shares of both classes taken together
entitled to vote and constituting a majority of the total votes are represented
either in person or by proxy at such meeting. In all matters other than the
election of directors, the affirmative vote of the shares of both classes taken
together present in person or represented by proxy and constituting a majority
of the total votes present and entitled to be cast at the meeting and entitled
to vote on the subject matter shall be the act of the stockholders, unless a
greater vote is required by law, by the Amended and Restated Certificate of
Incorporation or by these Amended and Restated Bylaws. Directors shall be
elected by the affirmative vote of a plurality of the votes represented by the
shares of both classes taken together present in person or represented by proxy
at the meeting and entitled to vote on the election of directors. When a quorum
is once present to organize a meeting, the stockholders present may continue to
do business at the meeting or at any adjournment thereof notwithstanding the
withdrawal of enough stockholders to leave less than a quorum. Shares of its own
stock belonging to the Corporation or to another corporation, if a majority of
the shares entitled to vote in the election of directors of such other
corporation is held, directly or indirectly, by the Corporation, shall neither
be entitled to vote nor be counted for quorum purposes; provided, however, that
the foregoing shall not limit the right of the Corporation to vote stock,
including but not limited to its own stock, held by it in a fiduciary capacity.
Section 6. Proxies. A stockholder may vote either in person or by a proxy
which such stockholder has duly executed in writing. No proxy shall be valid
after three years from the date of its execution unless a longer period is
expressly provided in the proxy. A duly executed proxy shall be irrevocable if
it states that it is irrevocable and if, and only as long as, it is coupled with
an interest sufficient in law to support an irrevocable power. A stockholder may
revoke any proxy which is not irrevocable by attending the meeting and voting in
person or by filing an instrument in writing revoking the proxy or another duly
executed proxy bearing a later date with the Secretary of the Corporation.
Section 7. Organization. Meetings of stockholders shall be presided over
by the Chairman of the Board, or in his absence by the President, or in the
absence of the foregoing persons by a chairman designated by the Board of
Directors, or in the absence of such designation by a chairman chosen at the
meeting. The Secretary shall act as secretary of the meeting, but in his absence
the chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 8. Record Date. In order that the Corporation may determine
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for any other lawful
purpose, the Board of Directors of the Corporation may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which record date: (a) in
the case of the determination of stockholders entitled to vote at any meeting of
stockholders or adjournment thereof, shall not be more than sixty nor less than
ten days before the date of such meeting; and (b) in the case of any other
action, shall not be more than sixty days prior to such other action. If no
record date is fixed: (x) the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held; and (y) the record date for determining stockholders
for any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
B-35
<PAGE> 151
Section 9. Report of Business. At each annual stockholders' meeting, one
of the officers of the Corporation shall submit a statement of the business done
during the preceding year, together with a report of the general financial
condition of the Corporation and of the condition of its tangible property.
ARTICLE II
DIRECTORS
Section 1. Power of Directors. The business and affairs of the
Corporation shall be managed by or under the direction of its Board of
Directors. In addition to the authority and powers conferred upon the Board of
Directors of the Corporation by the Delaware General Corporation Law, the
Amended and Restated Certificate of Incorporation and these Amended and Restated
Bylaws, the Board of Directors is hereby authorized and empowered to exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, subject to the provisions of the General Corporation Law, the
Amended and Restated Certificate of Incorporation and these Amended and Restated
Bylaws.
Section 2. Composition of the Board. (a) The number of directors that
shall constitute the Board of Directors of the Corporation shall not be less
than two nor more than eighteen, as shall be determined from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the Board then in office.
(b) The directors shall be divided into three classes and shall serve such
terms of office as provided in the Amended and Restated Certificate of
Incorporation.
(c) A director shall hold office until the annual meeting for the year in
which his term expires and until his successor shall be elected and shall
qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office.
(d) At each annual election, the directors chosen to succeed those whose
terms then expire shall be of the same class as the directors they succeed,
unless, by reason of any intervening changes in the authorized number of
directors, the Board of Directors of the Corporation shall designate one or more
directorships whose term then expires as directorships of another class in order
more nearly to achieve equality of number of directors among the classes.
(e) Notwithstanding the requirement of the Amended and Restated Certificate
of Incorporation that the directors be evenly divided into three classes, in the
event of any change in the authorized number of directors, each director then
continuing to serve as such shall nevertheless continue as a director of the
class of which he is a member until the expiration of his current term, or his
prior death, resignation, disqualification or removal. If any newly created
directorship may, consistent with the requirement of the Amended and Restated
Certificate of Incorporation that the directors be evenly divided into three
classes, be allocated to one or more classes, the Board of Directors of the
Corporation shall allocate it to that of the available classes whose terms of
office are due to expire at the earliest date following such allocation.
Section 3. Meetings of the Board; Notice of Meetings; Waiver of
Notice. Regular meetings of the Board of Directors may be held at such places
within or without the State of Delaware and at such times as the Board of
Directors may from time to time determine, and if so determined, notices thereof
need not be given. Special meetings of the Board of Directors may be held at
such places within or without the State of Delaware and may be called by the
Chairman, the President or a majority of the entire Board of Directors. Written
notice of the time and place of such special meetings shall be given to each
director by the persons calling such meeting by first class or registered mail
at least four days before the meeting or by telephone, telecopy or in person at
least one day before the meeting. Whenever notice is required to be given to any
director, a written waiver thereof, signed by such director, whether before or
after the time stated therein, shall be deemed equivalent to notice. Attendance
at a meeting shall constitute a waiver of any required notice of such meeting,
except when the director attends such meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or
B-36
<PAGE> 152
convened. Neither the business to be transacted at, nor the purpose of, any
meeting of the Board of Directors need be stated in the notice or waiver of
notice of such meeting.
Section 4. Quorum; Vote Requirement. A majority of the directors then in
office shall constitute a quorum for the transaction of business at any meeting.
When a quorum is present, the vote of a majority of the directors present shall
be the act of the Board of Directors, unless a greater vote is required by law,
by the Amended and Restated Certificate of Incorporation, by these Amended and
Restated Bylaws or by a resolution of the Board of Directors.
Section 5. Organization. Meetings of the Board of Directors shall be
presided over by the Chairman of the Board, or in his absence by a President, or
in their absence by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
Section 6. Action of Board Without Meeting. Any action required or
permitted to be taken at a meeting of the Board of Directors or any committee
thereof may be taken without a meeting if a written consent, setting forth the
action so taken, is signed by all the directors or committee members and filed
with the minutes of the proceedings of the Board of Directors or committee. Such
consent shall have the same force and effect as a unanimous affirmative vote of
the Board of Directors or committee, as the case may be.
Section 7. Conference Telephone Meetings. Members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board or any such committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this Section 7 shall constitute presence in person at such
meeting, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
Section 8. Committees. The Board of Directors, by resolution passed by a
majority of all of the directors, may designate one or more committees, each
committee to consist of one or more of the directors. The Board may designate
one or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of the committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the power and authority of
the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; provided that no committee shall have the power or
authority of the Board of Directors in reference to (a) amending the Amended and
Restated Certificate of Incorporation (except that a committee may, to the
extent authorized in the resolution or resolutions providing for the issuance of
shares of stock adopted by the Board of Directors as provided in Section 151(a)
of the Delaware General Corporation Law fix the designations and any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the Corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
Corporation), (b) adopting an agreement of merger or consolidation under
Sections 251 or 252 of the Delaware General Corporation Law, (c) recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
property and assets of the Corporation, (d) recommending to the stockholders a
dissolution of the Corporation or a revocation thereof, or (e) amending these
Amended and Restated Bylaws. In addition, unless the resolution of the Board of
Directors or the Amended and Restated Certificate of Incorporation expressly so
provides, no such committee shall have the power or authority to declare a
dividend, to authorize the issuance of stock, or to adopt a certificate of
ownership and merger pursuant to Section 253 of the Delaware General Corporation
Law. Unless the Board of Directors otherwise provides, each committee designated
by the Board may make, alter and repeal rules for the conduct of its business.
In the absence of such rules, each committee shall
B-37
<PAGE> 153
conduct its business in the same manner as the Board of Directors conducts its
business pursuant to this Article II.
Section 9. Compensation. Directors, as such, shall not receive any stated
salary for their services, but, by resolution of the Board, a specific sum fixed
by the Board plus expenses may be allowed for attendance at each regular or
special meeting of the Board and a quarterly or annual fixed fee may be allowed;
provided, however, that nothing herein contained shall be construed to preclude
any director from serving the Corporation or any parent or subsidiary
corporation thereof in any other capacity and receiving compensation therefor.
ARTICLE III
OFFICERS
Section 1. Executive Structure. The officers of the Corporation shall be
a Chairman of the Board of Directors, one or more Vice Chairmen, one or more
Presidents, one or more Vice Presidents who may be designated an Executive Vice
President or Senior Vice President, a Secretary, a Treasurer and such Assistant
Secretaries and Assistant Treasurers as the Board of Directors may from time to
time deem advisable, and such other officers as the Board of Directors may from
time to time deem advisable and designate. Any two of said offices may be held
by one person except the office of President and Vice President.
Section 2. (a) The Chairman of the Board. The Chairman of the Board, who
shall be chosen from among the Directors, shall be the Chief Executive Officer
of the Corporation and shall have the general powers and duties of supervision
and management of the business of the Corporation, shall preside at all meetings
of the Board of Directors if present, and shall, in general, perform all duties
incident to the office of Chairman of the Board and such other duties as, from
time to time, may be assigned to him by the Board of Directors.
(b) Vice Chairman of the Board. Each Vice Chairman of the Board shall
perform such duties as may be prescribed by the Chairman and the Board of
Directors from time to time.
Section 3. The Presidents. The Presidents shall have active executive
management of various operational functions of the Corporation subject, however,
to the control of the Chairman, the Board of Directors and the stockholders.
They shall, in general, perform such duties as may be assigned by the Chairman,
Board of Directors and the stockholders.
Section 4. The Vice Presidents. Each Vice President shall have such
powers and perform such duties as the Board of Directors may from time to time
prescribe or as the Chairman or any President may from time to time delegate.
Section 5. The Secretary. The Secretary shall keep or cause to be kept in
books provided for that purpose the minutes of the meetings of the stockholders
and of the Board of Directors; shall see that all notices are duly given in
accordance with the provisions of these Amended and Restated By-Laws and as
required by law; shall be custodian of the records and of the seal of the
Corporation and see that the seal is affixed to all documents, the execution of
which on behalf of the Corporation under its seal is duly authorized in
accordance with the provisions of these Amended and Restated By-Laws; and, in
general, shall perform all duties incident to the office of Secretary and such
other duties as may, from time to time, be assigned to him by the Board of
Directors or by the Chairman.
The Assistant Secretaries. Each Assistant Secretary (if one or more
Assistant Secretaries be elected or appointed) shall assist the Secretary in his
duties, and shall perform such other duties as the Board of Directors may from
time to time prescribe or the Chairman may from time to time delegate to him. At
the request of the Secretary, any Assistant Secretary may, in the case of the
absence or inability to act as the Secretary, temporarily act in his place. In
the case of the death of the Secretary, or in the case of his absence or
inability to act without having designated an Assistant Secretary to act
temporarily in his place, the Assistant Secretary so to perform the duties of
the Secretary shall be designated by the Chairman.
B-38
<PAGE> 154
The Treasurer. The Treasurer shall have charge and custody of and be
responsible for, all funds of the Corporation, and shall deposit all such funds
in the name of the Corporation in such banks, trust companies or other
depositories as shall be selected by the Board of Directors; shall receive, and
give receipts for, moneys due and payable to the Corporation from any source
whatsoever; and, in general, shall perform all the duties incident to the office
of Treasurer and such other duties as from time to time may be assigned to him
by the Board of Directors or by the Chairman. The Treasurer shall render to the
Chairman and the Board of Directors, whenever the same shall be required, an
account of all his transactions as Treasurer and of the financial condition of
the Corporation. He shall, if required so to do by the Board of Directors, give
the Corporation a bond in such amount and with such surety or sureties as may be
ordered by the Board of Directors, for the faithful performance of the duties of
his office and for the restoration to the Corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his control
belonging to the Corporation.
The Assistant Treasurers. Each Assistant Treasurer (if one or more
Assistant Treasurers be elected or appointed) shall assist the Treasurer in his
duties, and shall perform such other duties as the Board of Directors may from
time to time prescribe or the Chairman may from time to time delegate to him. At
the request of the Treasurer, any Assistant Treasurer may, in the case of the
absence or inability to act as the Treasurer, temporarily act in his place. In
the case of the death of the Treasurer, or in the case of his absence or
inability to act without having designated an Assistant Treasurer to act
temporarily in his place, the Assistant Treasurer to perform the duties of the
Treasurer shall be designated by the Chairman. Each Assistant Treasurer shall,
if required to do so by the Board of Directors, give the Corporation a bond in
such amount and with such surety or sureties as may be ordered by the Board of
Directors, for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
Section 6. Resignations; Removal; Vacancies. Any officer may resign at any
time upon written notice to the Corporation. The Board of Directors may remove
any officer with or without cause at any time, but such removal shall be without
prejudice to the contractual rights of such officer, if any, with the
Corporation. Any vacancy occurring in any office of the Corporation by reason of
death, resignation, removal or otherwise may be filled by the Board of Directors
at any regular or special meeting.
Section 7. Compensation. The salaries of the officers shall be fixed from
time to time by the Board of Directors, by a Committee of the Board or by any
officer the Board designates. No officer shall be prevented from receiving such
salary by reason of the fact that such officer is also a director of the
Corporation.
ARTICLE IV
STOCK
Section 1. Stock Certificates. Certificates representing shares of stock
of the Corporation shall be in such form as may be approved by the Board of
Directors, which certificates shall be issued to stockholders of the Corporation
in numerical order from the stock book of the Corporation, and each of which
shall bear the name of the stockholder, the class and number of shares
represented, and the date of issue; and which shall be signed by the Chairman,
the President or a Vice President and the Secretary or an Assistant Secretary of
the Corporation or any other officer authorized to sign by the Board of
Directors; and which shall be sealed with the seal of the Corporation. Any or
all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.
Section 2. Transfer of Stock. Shares of stock of the Corporation shall be
transferred only on the books of the Corporation upon surrender to the
Corporation of the certificate or certificates representing the shares to be
transferred accompanied by an assignment in writing of such shares properly
executed by the stockholder of
B-39
<PAGE> 155
record or such stockholder's duly authorized attorney-in-fact and with all taxes
on the transfer having been paid. The Corporation may refuse any requested
transfer until furnished evidence satisfactory to it that such transfer is
proper. The Board of Directors may make such additional rules concerning the
issuance, transfer and registration of stock as it shall so determine. Transfers
of shares of stock of the Corporation shall in all cases comply with the Amended
and Restated Certificate of Incorporation.
Section 3. Stock Ledger. A record shall be kept by the Secretary or by any
other officer, employee or agent designated by the Board of Directors, of the
name of each person, firm or corporation holding capital stock of the
Corporation, the class and number of shares represented by, and the respective
dates of, each certificate for such capital stock, and in case of cancellation
of any such certificate, the respective dates of cancellation.
Section 4. Lost, Stolen or Destroyed Stock Certificates; Issuance of New
Certificates. The Corporation may issue a new certificate of stock in the place
of any certificate theretofore issued by it, alleged to have been lost, stolen
or destroyed, and the Corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the Corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
Section 5. Registered Stockholders. The Corporation may deem and treat the
holder of record of any stock as the absolute owner for all purposes and shall
not be required to take any notice of any right or claim of right of any other
person, except as otherwise provided in the Amended and Restated Certificate of
Incorporation.
ARTICLE V
DEPOSITORIES AND SEAL
Section 1. Depositories. All funds of the Corporation shall be deposited
in the name of the Corporation in such bank, banks, or other financial
institutions as the Board of Directors may from time to time designate and shall
be drawn out on checks, drafts or other orders signed on behalf of the
Corporation by such person or persons as the Board of Directors may from time to
time designate.
Section 2. Seal. The Board of Directors may, in its discretion, provide
for a suitable seal, which seal shall be in the charge of the Secretary.
ARTICLE VI
INDEMNIFICATION
Section 1. Indemnification. (a) Actions Other Than Those by or in the
Right of the Corporation. (i) Subject to Section 1(d) of this Article VI, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Corporation) by reason of the fact that such
person is or was a director or officer of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the Corporation (or such other corporation or
organization), and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
(ii) Subject to Section 1(d) of this Article VI, the Corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that such person is or was
an employee or agent of the Corporation, or is or was serving at the request of
the Corporation as an director, officer, employee or agent of another
corporation,
B-40
<PAGE> 156
partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the Corporation (or such other corporation or organization), and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful.
(iii) The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that such person did not act in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
(b) Action by or in the Right of the Corporation. (i) Subject to Section
1(d) of this Article VI, the Corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection with the defense or settlement of such
action or suit if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Corporation (or such other corporation or organization) and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation (or
such other corporation or organization) unless and only to the extent that the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.
(ii) Subject to Section 1(d) of this Article VI, the Corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that such
person is or was an employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
Corporation (or such other corporation or organization) and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation (or
such other corporation or organization) unless and only to the extent that the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.
(c) Successful Defense of Action. Notwithstanding, and without limitation
of, any other provision of this Article VI, to the extent that a director,
officer, employee or agent or former director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraph (a) or (b) of this Section
1, or in defense of any claim, issue or matter therein, such person shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection therewith.
(d) Determination Required. Any indemnification under paragraph (a) or (b)
of this Section 1 (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent or former director,
officer, employee or agent is proper in the circumstances because such person
has met the applicable standard of conduct set forth in said paragraph. Such
determination shall be made (i) by the Board of Directors by a majority vote of
a quorum consisting of directors who are not or were not parties to the
particular action, suit
B-41
<PAGE> 157
or proceeding, (ii) if such a quorum is not obtainable, by majority vote of a
committee designated by the Board of Directors consisting only of directors who
are not or were not parties to the particular action, suit or proceeding, (iii)
by independent legal counsel in a written opinion, or (iv) by the stockholders.
(e) Advances. Expenses (including attorney's fees) incurred by a director,
officer, employee or agent or former director, officer, employee or agent in
defending or investigating any civil, criminal, administrative or investigative
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent or
former director, officer, employee or agent to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized in this Article. The right provided in the first
sentence of this Section 1(e) is a contract right.
Section 2. Insurance. The Corporation may, when authorized by the Board
of Directors, purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would be required to
indemnify such person against such liability under the provisions of Section 1.
The risks insured under any insurance policies purchased and maintained on
behalf of any person as aforesaid or on behalf of the Corporation shall not be
limited in any way by the terms of this Article VI and to the extent compatible
with the provisions of such policies, the risks insured shall extend to the
fullest extent permitted by law, common or statutory.
Section 3. Nonexclusivity; Duration. The indemnification, rights, and
limitations of liability provided by this Article VI shall not be deemed
exclusive of any other indemnification, rights or limitations of liability to
which any person may be entitled under the Amended and Restated Certificate of
Incorporation, these Amended and Restated Bylaws or any agreement, vote of
stockholders or disinterested directors, or otherwise, either as to action in
such person's official capacity or as to action in another capacity while
holding office, and they shall continue although such person has ceased to be a
director, officer, employee or agent and shall inure to the benefit of such
person's heirs, executors and administrators. The authorization to purchase and
maintain insurance set forth in Section 2 of this Article VI shall likewise not
be deemed exclusive.
Section 4. Other Indemnification. The Corporation's obligation, if any,
to indemnify any person who was or is serving at its request as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan, enterprise or non-profit entity shall be reduced
by any amount such person may collect as indemnification from such other
corporation, partnership, joint venture, trust, employee benefit plan,
enterprise or non-profit entity.
Section 5. Amendment or Repeal. Any repeal or modification of the
foregoing provisions of this Article VI shall not adversely affect any right or
protection hereunder of any person in respect of any act or omission occurring
prior to the time of such repeal or modification.
Section 6. Certain Definitions. For purposes of this Article VI, the
reference to "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving at the request
of the Corporation" shall include any service as a director, officer, employee
or agent of the corporation which imposes duties on, or involves services by,
such director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good faith
and in a manner he reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article VI.
ARTICLE VII
AMENDMENT OF BYLAWS
These Amended and Restated Bylaws may be altered, amended or repealed only
as specified in the Amended and Restated Certificate of Incorporation.
B-42
<PAGE> 158
EXHIBIT D TO PLAN AND
AGREEMENT OF REORGANIZATION
DIRECTORS OF NEW BELK
John M. Belk, Chairman
Sarah Belk Gambrell
Thomas M. Belk, Jr.
H. W. McKay Belk
John R. Belk
David B. Cannon
J. Kirk Glenn, Jr.
Karl G. Hudson, Jr.
John A. Kuhne
B. Frank Matthews, II
B-43
<PAGE> 159
ANNEX C
<TABLE>
<CAPTION>
ESTIMATED NUMBER OF SHARES OF
NEW BELK CLASS A COMMON STOCK
EXISTING BELK SHAREHOLDER TO BE RECEIVED IN REORGANIZATION PERCENTAGE OF NEW BELK
- ------------------------- -------------------------------- ----------------------
<S> <C> <C>
Saralee Griffeth Abbitt...................... 303 0.000507%
Christine M. Anderson........................ 896 0.001500%
Evelyn M. Anderson........................... 40,181 0.067290%
Julia Whitney Austin......................... 75 0.000125%
Frances Hensdale Autry....................... 57,255 0.095883%
Judith A. Azzara............................. 29 0.000049%
Vincent A. Azzara............................ 29 0.000049%
Elizabeth K. Baker........................... 112,003 0.187567%
Giles Patterson Corey Baker.................. 82 0.000137%
Greenville Banks, Jr......................... 1,261 0.002112%
Zuma Deon Lindsey Banks...................... 15,821 0.026495%
A. Neil Bare................................. 25,729 0.043087%
Cheryl A. Beaman............................. 373 0.000624%
John Edward Beaman, Jr....................... 55,902 0.093617%
Michael Hudson Beaman........................ 373 0.000624%
Virginia Hudson Beaman....................... 120,878 0.202430%
William Stuart Beaman........................ 373 0.000624%
T. L. Beckham................................ 111 0.000185%
Martha B. Beery.............................. 20,623 0.034537%
W. B. Beery, III............................. 315,795 0.528851%
William B. Beery, III and Martha B. Beery
Irrevocable Trust.......................... 187,483 0.313971%
Thomas M. Belk, Jr., Custodian for Adelaide
Lucinda Fortune Belk under the N. C.
Uniform Gifts to Minors Act................ 34,761 0.058213%
Thomas M. Belk, Jr., Custodian for Adelaide
Lucinda Fortune Belk under the N. C.
Uniform Transfers to Minors Act............ 34,952 0.058533%
Thomas M. Belk, as Custodian, or Katherine M.
Belk or Katherine Belk Morris, as
substitute custodian in the order named,
for Adelaide Lucinda Fortune Belk under NC
UTTMA...................................... 46,542 0.077942%
Paul H. Belk, Custodian for Andrew Paul Belk
under the N. C. Uniform Transfers to Minors
Act........................................ 519 0.000869%
Ann Everett Belk............................. 18 0.000031%
John R. Belk, Custodian for Anna Dupree Belk
under the N. C. Uniform Gifts to Minors
Act........................................ 36,142 0.060526%
John R. Belk, Custodian for Anna Dupree Belk
under the N. C. Uniform Transfers to Minors
Act........................................ 32,848 0.055009%
Thomas M. Belk, as Custodian, or Katherine M.
Belk or H. W. McKay Belk, as substitute
custodian in the order named, for Anna
Dupree Belk, under NC UTTMA................ 59,339 0.099373%
James Herschel Belk, Custodian for Bruce
Henderson Belk under the Georgia Uniform
Gifts to Minors Act........................ 1,954 0.003272%
</TABLE>
C-1
<PAGE> 160
<TABLE>
<CAPTION>
ESTIMATED NUMBER OF SHARES OF
NEW BELK CLASS A COMMON STOCK
EXISTING BELK SHAREHOLDER TO BE RECEIVED IN REORGANIZATION PERCENTAGE OF NEW BELK
- ------------------------- -------------------------------- ----------------------
<S> <C> <C>
James Herschel Belk, Custodian for Bruce
Henderson Belk under the Georgia Uniform
Transfers to Minors Act.................... 5,267 0.008820%
Henderson Belk, as Custodian, or Paul H. Belk
or Sue Hadley Nichols, as substitute
custodian in the order named, for Bruce
Henderson Belk, under NC UTTMA............. 10,751 0.018004%
Thomas E. Belk, Custodian for Caroline Mason
Belk under the N. C. Uniform Transfers to
Minors Act................................. 2,809 0.004704%
Claudia Watkins Belk Grantor Trust dated
2/23/96.................................... 6,555 0.010977%
Wachovia Bank & Trust Company, N. A., et al,
Trustees U/A dated 12/29/76 with John M.
Belk f/b/o Claudia W. Belk................. 635,977 1.065048%
Donnie Henderson Belk........................ 2,414 0.004043%
John R. Belk, Custodian for Frances Whitner
Belk under the N. C. Uniform Transfers to
Minors Act................................. 51,331 0.085962%
Thomas M. Belk, as Custodian, or Katherine M.
Belk or H. W. McKay Belk, as substitute
custodian in the order named, for Frances
Whitner Belk, under NC UTTMA............... 54,660 0.091537%
Henderson Belk, as Custodian, or Paul H. Belk
or Sue Hadley Nichols, as substitute
custodian in the order named, for Hadley
Elizabeth Belk, under NC UTTMA............. 8,590 0.014385%
H. W. McKay Belk............................. 247,046 0.413719%
H.W. McKay Belk, Trustee U/A dated 2/1/94.... 849,503 1.422632%
H. W. McKay Belk, Custodian for Hamilton
Witherspoon McKay Belk, Jr. under the N. C.
Uniform Gifts to Minors Act................ 36,712 0.061480%
H. W. McKay Belk, Custodian for Hamilton
Witherspoon McKay Belk, Jr. under the N. C.
Uniform Transfers to Minors Act............ 32,975 0.055222%
Thomas M. Belk, as Custodian, or Thomas M.
Belk, Jr. or John R. Belk, as substitute
custodian in the order named, for Hamilton
W. McKay Belk, Jr., under NC UTTMA......... 40,287 0.067467%
Henderson Belk............................... 11,847 0.019840%
Tr. u/w Mary I. Belk f/b/o Henderson Belk, et
al......................................... 287,649 0.481716%
Trustees u/w W. H. Belk for the benefit of
Henderson Belk, et al...................... 228,016 0.381850%
James H. Belk Revocable Trust dated
2/15/96.................................... 188,939 0.316409%
James Herschel Belk, Custodian for James
Herschel Belk, Jr. under the Georgia
Uniform Gifts to Minors Act................ 4,850 0.008122%
James Herschel Belk, Custodian for James
Herschel Belk, Jr. under the Georgia
Uniform Transfers to Minors Act............ 5,267 0.008820%
Henderson Belk, as Custodian, or Paul H. Belk
or Sue Hadley Nichols, as substitute
custodian in the order named, for James
Herschel Belk, Jr., under NC UTTMA......... 10,751 0.018004%
</TABLE>
C-2
<PAGE> 161
<TABLE>
<CAPTION>
ESTIMATED NUMBER OF SHARES OF
NEW BELK CLASS A COMMON STOCK
EXISTING BELK SHAREHOLDER TO BE RECEIVED IN REORGANIZATION PERCENTAGE OF NEW BELK
- ------------------------- -------------------------------- ----------------------
<S> <C> <C>
Thomas E. Belk, Custodian for Joanne Everett
Belk under the N. C. Uniform Transfers to
Minors Act................................. 2,849 0.004771%
John M. Belk and Claudia W. Belk, Trustees
under Agreement dated December 10, 1987.... 7,946,606 13.307898%
Tr. u/w Mary I. Belk f/b/o John M. Belk, et
al......................................... 288,956 0.483904%
Trustees u/w W. H. Belk for the benefit of
John M. Belk, et al........................ 228,016 0.381850%
John R. Belk................................. 194,613 0.325911%
John Robert Belk, Trustee U/A dated
1/17/94.................................... 943,191 1.579528%
John R. Belk, Custodian for John Robert Belk,
Jr. under the N. C. Uniform Gifts to Minors
Act........................................ 35,373 0.059238%
John R. Belk, Custodian for John Robert Belk,
Jr. under the N. C. Uniform Transfers to
Minors Act................................. 35,639 0.059683%
Thomas M. Belk, as Custodian, or Katherine M.
Belk or H. W. McKay Belk, as substitute
custodian in the order named, for John
Robert Belk, Jr., under NC UTTMA........... 60,024 0.100520%
H. W. McKay Belk, Custodian for John Wilson
Belk under the N. C. Uniform Transfers to
Minors Act................................. 7,139 0.011955%
Thomas M. Belk, as Custodian, or Thomas M.
Belk, Jr. or John R. Belk, as substitute
custodian in the order named, for John
Wilson Belk, under NC UTTMA................ 30,027 0.050285%
Karen H. Belk................................ 20,268 0.033942%
Katherine McKay Belk......................... 116,123 0.194467%
Katherine McKay Belk,Trustee U/A dated
October 12, 1993........................... 802,438 1.343814%
Thomas M. Belk, Jr., Custodian for Katherine
McKay Belk under the N. C. Uniform Gifts to
Minors Act................................. 39,280 0.065781%
Thomas M. Belk, Jr., Custodian for Katherine
McKay Belk under the N. C. Uniform
Transfers to Minors Act.................... 32,128 0.053804%
Thomas M. Belk, as Custodian, or Katherine M.
Belk or Katherine Belk Morris, as
substitute custodian in the order named,
for Katherine McKay Belk, under NC UTTMA... 40,640 0.068058%
H. W. McKay Belk, Custodian for Katherine
Whitner Belk under the N. C. Uniform Gifts
to Minors Act.............................. 34,761 0.058213%
H. W. McKay Belk, Custodian for Katherine
Whitner Belk under the N. C. Uniform
Transfers to Minors Act.................... 31,582 0.052889%
Thomas M. Belk, as Custodian, or Thomas M.
Belk, Jr. or John R. Belk, as substitute
custodian in the order named, for Katherine
Whitner Belk, under NC UTTMA............... 41,869 0.070117%
Kimberly D. Belk............................. 21,523 0.036044%
Paul H. Belk, Custodian for Laura Cecelia
Belk under the N. C. Uniform Transfers to
Minors Act................................. 519 0.000869%
</TABLE>
C-3
<PAGE> 162
<TABLE>
<CAPTION>
ESTIMATED NUMBER OF SHARES OF
NEW BELK CLASS A COMMON STOCK
EXISTING BELK SHAREHOLDER TO BE RECEIVED IN REORGANIZATION PERCENTAGE OF NEW BELK
- ------------------------- -------------------------------- ----------------------
<S> <C> <C>
Thomas M. Belk, Jr., Custodian for Margaret
Elizabeth Belk under the N. C. Uniform
Transfers to Minors Act.................... 13,301 0.022275%
Thomas M. Belk, as Custodian, or Katherine M.
Belk or Katherine Belk Morris, as
substitute custodian in the order named,
for Margaret Elizabeth Belk, under NC
UTTMA...................................... 53,773 0.090052%
Mary Claudia Belk Irrevocable Trust dated
1/4/94..................................... 102,070 0.170933%
Claudia W. Belk, Tr. u/a f/b/o Mary Claudia
Belk....................................... 21,862 0.036612%
Wachovia Bank & Trust Company, N. A., et al,
Trustees U/A dated 12/29/76 with John M.
Belk f/b/o Mary Claudia Belk............... 701,535 1.174836%
H. W. McKay Belk, Custodian for Nina Cabell
Belk under the N. C. Uniform Gifts to
Minors Act................................. 42,235 0.070729%
H. W. McKay Belk, Custodian for Nina Cabell
Belk under the N. C. Uniform Transfers to
Minors Act................................. 28,091 0.047043%
Thomas M. Belk, as Custodian, or Thomas M.
Belk, Jr. or John R. Belk, as substitute
custodian in the order named, for Nina
Cabell Belk, under NC UTTMA................ 40,133 0.067209%
Nina F. Belk................................. 24,970 0.041816%
Pamela H. Belk............................... 1,104 0.001849%
Paul H. Belk, Custodian for Patrick Joseph
Belk under the N. C. Uniform Gifts to
Minors Act................................. 7,733 0.012950%
Paul Henderson Belk.......................... 352,828 0.590868%
Sarah F. Belk................................ 23,459 0.039286%
Sarah Margaret Belk.......................... 49,166 0.082337%
Thomas Joel Belk............................. 3,417 0.005722%
Thomas M. Belk, Trustee U/A dated September
15, 1993................................... 3,706,151 6.206559%
Tr. u/w Mary I. Belk f/b/o Thomas M. Belk, et
al......................................... 288,089 0.482452%
Trustees u/w W. H. Belk for the benefit of
Thomas M. Belk, et al...................... 228,016 0.381850%
Thomas Milburn Belk, Jr...................... 247,689 0.414796%
Thomas M. Belk, Jr., Trustee U/A dated
1/18/94.................................... 873,344 1.462558%
Thomas M. Belk, Jr., Custodian for Thomas
Milburn Belk, III under the N. C. Uniform
Gifts to Minors Act........................ 38,154 0.063895%
Thomas M. Belk, Jr., Custodian for Thomas
Milburn Belk, III under the N. C. Uniform
Transfers to Minors Act.................... 33,945 0.056846%
Thomas M. Belk, as Custodian, or Katherine M.
Belk or Katherine Belk Morris, as subsitute
custodian in the order named, for Thomas
Milburn Belk, III, under NC UTTMA.......... 41,197 0.068991%
H. W. McKay Belk, Custodian for William
Daniel Belk under the N. C. Uniform
Transfers to Minors Act.................... 14,382 0.024085%
</TABLE>
C-4
<PAGE> 163
<TABLE>
<CAPTION>
ESTIMATED NUMBER OF SHARES OF
NEW BELK CLASS A COMMON STOCK
EXISTING BELK SHAREHOLDER TO BE RECEIVED IN REORGANIZATION PERCENTAGE OF NEW BELK
- ------------------------- -------------------------------- ----------------------
<S> <C> <C>
Thomas M. Belk, as Custodian, or Thomas M.
Belk, Jr. or John R. Belk, as substitute
custodian in the order named, for William
Daniel Belk, under NC UTTMA................ 55,539 0.093009%
Tr. u/w Mary I. Belk f/b/o W. H. Belk, Jr.,
et al...................................... 285,401 0.477951%
Trustees u/w W. H. Belk for the benefit of W.
H. Belk, Jr., et al........................ 228,016 0.381850%
William Henry Belk, III...................... 268 0.000448%
W. H. Belk, III and Diane Belk, Co-trustees
U/A dated 2/8/88........................... 25,301 0.042371%
The Belk Foundation, Paul B. Wyche, Jr.,
Trustee.................................... 18,797 0.031479%
William A. Benninghoff....................... 7,234 0.012115%
William Allan Benninghoff, Sr. and Shirley R.
Benninghoff, Tenants in Common............. 6,700 0.011220%
Betty Jane Benton............................ 3,188 0.005339%
Olivia Benton................................ 907 0.001519%
Byron L. Bergren............................. 1,142 0.001912%
Alfred F. Bischoff, Jr....................... 1,958 0.003279%
Kenneth H. Bishop............................ 6,652 0.011140%
Fred M. Blackmon............................. 11,180 0.018723%
Andrew Hoyt Borland, Jr...................... 39,914 0.066843%
J. C. Bradford & Co.......................... 28 0.000047%
Winona B. Bradham............................ 48,174 0.080675%
Bob Bratton, Jr. and Deborah Ann Bratton, his
wife, as joint tenants with right of
survivorship............................... 8,023 0.013436%
Eleanor Riggins Brawley...................... 6,427 0.010763%
Rowland Brazzeal............................. 5,461 0.009145%
Lou Jones Bristow............................ 1,996 0.003343%
R. Tildon Brittle............................ 57 0.000095%
Hugh Wilson Broome, III...................... 26,615 0.044571%
Mary Alice Broome............................ 26,671 0.044665%
Brothers Investment Company.................. 1,484,374 2.485828%
Martha Riggins Brown......................... 6,092 0.010202%
Susan W. Brubaker............................ 21,015 0.035193%
Betty F. Buchanan............................ 426 0.000713%
Kenneth D. Bufford........................... 168 0.000281%
Charles Scott Burford........................ 869 0.001455%
Jesse Paul Burford, III...................... 869 0.001455%
Guy L. Byerly, Jr............................ 20,872 0.034954%
David Belk Cannon............................ 1,886,100 3.158584%
Residuary Trust u/w of Mrs. Henry Belk
Cannon..................................... 651,254 1.090632%
Ruth Stowe Carter............................ 4,937 0.008268%
Pamela Franklin Carver....................... 480 0.000804%
David H. Cathcart............................ 114 0.000190%
Jon Christopher Champion..................... 359 0.000601%
Joseph J. Chesson............................ 158 0.000264%
Doris T. Clappier............................ 20,206 0.033838%
Valda Kathleen Collier....................... 874 0.001464%
</TABLE>
C-5
<PAGE> 164
<TABLE>
<CAPTION>
ESTIMATED NUMBER OF SHARES OF
NEW BELK CLASS A COMMON STOCK
EXISTING BELK SHAREHOLDER TO BE RECEIVED IN REORGANIZATION PERCENTAGE OF NEW BELK
- ------------------------- -------------------------------- ----------------------
<S> <C> <C>
Walter C. Cornwell and Fon F. Cornwell, Co-
Trustees under the Walter and Fon Cornwell
Living Trust, dated July 17, 1997.......... 22,818 0.038212%
Belinda Howard Corpening..................... 4,462 0.007472%
Charles G. Couch, Jr......................... 62,115 0.104022%
Margaret Parks Cowan......................... 70,989 0.118883%
Nancy Hudson Cox............................. 64,302 0.107684%
Andrew S. Coxe, II........................... 1,749 0.002929%
Betty White Crandall......................... 12,010 0.020113%
Dorothy Anne Cumbey.......................... 865 0.001449%
NCNB National Bank of North Carolina, Trustee
U/A 7/9/65 -- Sadie Belk Cummings,
Grantor.................................... 687,171 1.150781%
Oscar Douglas Davis, Jr...................... 1,429 0.002393%
Caroline T. Davis, Custodian of Suzanne Marie
Davis, a minor, under the Florida Uniform
Transfers to Minors Act.................... 1,073 0.001797%
Suzanne M. Dedrick........................... 11,527 0.019304%
Louise Barrett Derr.......................... 1,841 0.003083%
JoAnn F. Dollar.............................. 39 0.000065%
William Gary Dommisse as Trustee under Item
IV of the Will of Marvin J. Dommisse,
deceased................................... 20 0.000034%
James H. Doughton............................ 19,016 0.031845%
NationsBank as Trustee for the Robert L.
Doughton II Revocable Trust dated
3/25/97.................................... 63,542 0.106412%
Daisy Doughton Lange and North Carolina
National Bank, Trustees for Robert L.
Doughton, II under Agreement dated July 21,
1965 -- Johny Belk Blackmon, Grantor....... 706,580 1.183284%
North Carolina National Bank, Successor
Trustee u/w J. Horton Doughton for Virginia
D. P. Doughton............................. 40,157 0.067249%
George W. Dowdy, Jr.......................... 386 0.000647%
Sterling Dunlap.............................. 772 0.001293%
Claud L. Efird, Jr........................... 1,749 0.002929%
S. C. Elliott................................ 4,796 0.008032%
Pauline T. Ellis, Trustee U/A dated
3/28/89.................................... 15,797 0.026455%
William David Ellis.......................... 115,064 0.192694%
W. David Ellis, Custodian for Andrew William
Ellis under the S. C. Uniform Transfers to
Minors Act................................. 7,793 0.013051%
W. D. Ellis, Trustee for Andrew William Ellis
U/A
dated February 27, 1986...................... 5,477 0.009172%
W. David Ellis, Custodian for Zachary David
Ellis under the S. C. Uniform Transfers to
Minors Act................................. 7,793 0.013051%
W. D. Ellis, Trustee for Zachary Ellis U/A
dated June 7, 1985......................... 5,477 0.009172%
W. D. Ellis, Trustee for Jon Christopher
Champion U/A dated June 7, 1985............ 5,477 0.009172%
W. D. Ellis, Trustee for Robin Renee Champion
U/A dated June 7, 1985..................... 5,477 0.009172%
W. D. Ellis, Trustee for Judith E. Pollander
U/A dated June 7, 1985..................... 27,023 0.045254%
</TABLE>
C-6
<PAGE> 165
<TABLE>
<CAPTION>
ESTIMATED NUMBER OF SHARES OF
NEW BELK CLASS A COMMON STOCK
EXISTING BELK SHAREHOLDER TO BE RECEIVED IN REORGANIZATION PERCENTAGE OF NEW BELK
- ------------------------- -------------------------------- ----------------------
<S> <C> <C>
Mary Jane Ellison............................ 944 0.001581%
Carol Hudson Eure, Jr........................ 265 0.000444%
Mary Elizabeth and Carol H. Eure, Tenants in
Common..................................... 6,159 0.010314%
Carol McHugh Faulkner........................ 6,148 0.010296%
Terese Rhodes Faulkner....................... 7,911 0.013248%
Edward S. Finley, Jr......................... 1,738 0.002911%
Virginia Doughton Finley..................... 17,279 0.028937%
James A. Flanders............................ 29 0.000049%
Emmett Williamson Fontaine................... 100,132 0.167687%
James Ritchie Fontaine....................... 16,689 0.027948%
Foundation for the Carolinas................. 10,820 0.018120%
Stacy Ryan Fowler............................ 21 0.000035%
William R. Fowler............................ 785 0.001315%
Alvin Richard Franklin....................... 480 0.000804%
Clyde Joseph Franklin........................ 39 0.000065%
Marian L. Fray............................... 7,420 0.012426%
Rosalie Baker Fuller......................... 82 0.000137%
Anthony B. Funari............................ 3,902 0.006535%
Dell B. Funari............................... 37,116 0.062157%
Eva Nancy Gallant............................ 3,795 0.006355%
Julia Gallant................................ 2,742 0.004592%
Harriett Gallant, Trustee u/w Paul M.
Gallant.................................... 21,848 0.036588%
William Erskine Gallant, III................. 3,766 0.006307%
Barbara C. Gallion........................... 1,419 0.002376%
Sarah Belk Gambrell.......................... 9,207,558 15.419569%
Tr. u/w Mary I. Belk f/b/o Sarah Belk
Gambrell, et al............................ 286,290 0.479440%
Trustees u/w W. H. Belk for the benefit of
Sarah Belk Gambrell, et al................. 228,016 0.381850%
Mario Garcia, Trustee, Mary Garcia, Trustee,
Garcia Family Trust........................ 5,468 0.009157%
Charles A. Gardner........................... 3,591 0.006014%
Dorothy Hensdale Gardner..................... 57,255 0.095883%
Elizabeth Baker Garrett...................... 82 0.000137%
Sarah Spears Geddie.......................... 4,143 0.006938%
Betty Catherine Griffeth Geiger.............. 455 0.000762%
Carolyn Snipes Gilliam....................... 874 0.001464%
James K. Glenn, Jr........................... 160,709 0.269134%
John Belk Stevens Trust U/W ITEM III, Section
C f/b/o James Kirk Glenn, Jr., et al....... 195,685 0.327707%
James K. Glenn, III.......................... 5,785 0.009688%
Madlon Chambers Glenn........................ 871 0.001459%
Madlon Hawley Glenn.......................... 5,785 0.009688%
Sara Stevens Glenn........................... 599,648 1.004209%
John Belk Stevens Trust U/W ITEM III, Section
A f/b/o Sara S. Glenn...................... 391,897 0.656296%
</TABLE>
C-7
<PAGE> 166
<TABLE>
<CAPTION>
ESTIMATED NUMBER OF SHARES OF
NEW BELK CLASS A COMMON STOCK
EXISTING BELK SHAREHOLDER TO BE RECEIVED IN REORGANIZATION PERCENTAGE OF NEW BELK
- ------------------------- -------------------------------- ----------------------
<S> <C> <C>
Sara Stevens Glenn, Trustee under the Will of
Nealie Belk Stevens for Sara Stevens
Glenn...................................... 536,760 0.898893%
Catherine H. Godwin.......................... 103,738 0.173726%
Peggy E. Good................................ 315 0.000528%
Gordon Family Limited Partnership............ 155,155 0.259833%
Barbara A. Grant............................. 2,277 0.003813%
Miss Julia L. Grant.......................... 62,342 0.104402%
Thomas Alexander Grant, III.................. 484 0.000811%
John Keith Green............................. 75,654 0.126695%
Keith Smith Green............................ 33,705 0.056445%
Robin Renee Green............................ 359 0.000601%
Agnes A. Greenwood, as Trustee of the........ 6,092 0.010202%
Agnes A. Greenwood Living Trust Agreement
dated October 16, 1995
Robert E. Greiner............................ 302 0.000506%
John Argis Hagins, Jr........................ 31,361 0.052519%
Money Purchase Pension Plan of John A.
Hagins, Jr., P. A.......................... 1,650 0.002764%
Mary E. Hagins............................... 31,370 0.052534%
Mary N. Hagins............................... 9,897 0.016574%
Nora Matthews Hale........................... 18,953 0.031740%
Elizabeth J. Hammond and James L. Hammond,
Joint Tenants.............................. 6,209 0.010398%
Mary E. S. Hanahan........................... 261,372 0.437710%
Love L. Hardaway as Trustee of the Love L.
Hardaway Revocable Trust created U/A dated
April 11, 1991, with Love L. Hardaway as
Grantor.................................... 24,651 0.041282%
Robert E. Hardaway, III, as Trustee of the
Robert E. Hardaway, III Revocable Trust
created U/A dated April 11, 1991 with
Robert E. Hardaway, III as Grantor......... 56,225 0.094158%
Robert Lindsey Hardaway...................... 15,821 0.026495%
Charles C. Harris, III....................... 18 0.000031%
Herbert Hackney Harris....................... 158 0.000264%
Jense Jeffries Harris........................ 473 0.000793%
Julian Clinton Harris........................ 158 0.000264%
James Kennedy Hartsfield..................... 2,854 0.004779%
Bobby E. Helms............................... 2,186 0.003661%
Richard Lawrence Hensdale.................... 57,283 0.095930%
Jerry Miller Herritage....................... 1,749 0.002929%
Pauline P. Hinde............................. 8,575 0.014360%
S. H. Hocutt, Jr............................. 5,834 0.009770%
Jane Lane Hodges............................. 812 0.001360%
Olivia S. Hodges............................. 1,209 0.002025%
Mary Elizabeth Holcomb....................... 2,106 0.003527%
I. N. Howard................................. 56,776 0.095081%
Ruth C. Howard............................... 4,565 0.007645%
Troy M. Howard............................... 1,245 0.002085%
</TABLE>
C-8
<PAGE> 167
<TABLE>
<CAPTION>
ESTIMATED NUMBER OF SHARES OF
NEW BELK CLASS A COMMON STOCK
EXISTING BELK SHAREHOLDER TO BE RECEIVED IN REORGANIZATION PERCENTAGE OF NEW BELK
- ------------------------- -------------------------------- ----------------------
<S> <C> <C>
W. F. Howard, III............................ 1,418 0.002375%
William Freeman Howard, Jr................... 32,822 0.054966%
James T. Hubbard............................. 4,548 0.007616%
Richard W. Hudson, Custodian for Ashley
Claire Hudson under the N. C. Uniform
Transfers to Minors Act.................... 4,889 0.008187%
Richard W. Hudson, Custodian for Jennifer
Anne Hudson under the N. C. Uniform
Transfers to Minors Act.................... 4,889 0.008187%
Karl G. Hudson, Jr........................... 5,451 0.009129%
Karl G. Hudson, III.......................... 103,707 0.173674%
Mike Belk Hudson............................. 736,307 1.233067%
Amos J. Cummings, John L. Green, Jr. and
North Carolina National Bank, Co-Trustees
U/A 8/18/65 -- Mike Belk Hudson, Grantor... 73,677 0.123384%
Marjorie L. Hudson Irrevocable Trust......... 27,924 0.046763%
Richard W. Hudson............................ 94,060 0.157519%
William J. Hudson, IV........................ 63,109 0.105686%
Edward A. Hunter, Jr., Custodian for Angela
Caroline Hunter under the N. C. Uniform
Gifts to Minors Act........................ 946 0.001584%
Edward A. Hunter............................. 7,883 0.013201%
Edward Alton Hunter, Jr...................... 4,730 0.007921%
Edward A. Hunter, Jr., Custodian for Edward
Alton Hunter, IV under the N. C. Uniform
Gifts to Minors Act........................ 946 0.001584%
Geraldine W. Hunter Testamentary Trust....... 3,153 0.005280%
Jennifer Hunter.............................. 788 0.001320%
Phillip C. Hunter............................ 5,834 0.009770%
Stephen J. Huntley........................... 2,963 0.004962%
Janet B. Irwin............................... 158 0.000264%
Harriet Matthews Jackson..................... 35,873 0.060075%
Catherine Wilson Jeffries.................... 788 0.001320%
H. M. Jeffries, Jr........................... 51,242 0.085813%
Jason Byerly Jeffries........................ 158 0.000264%
Lynwood B. Jeffries.......................... 473 0.000793%
James C. Jennings............................ 2,117 0.003545%
Wallace F. Johnson........................... 5,000 0.008373%
Jane Lane Jones.............................. 249 0.000417%
Jane P. Jones................................ 887 0.001485%
Mercer Taylor Jones, as Custodian for Kathryn
Taylor Jones under the North Carolina
Uniform Transfers to Minors Act............ 1,950 0.003266%
Mercer Taylor Jones, as Custodian for
Margaret Riis Jones under the North
Carolina Uniform Transfers to Minors Act... 1,950 0.003266%
Mercer Taylor Jones.......................... 57,014 0.095479%
David Joyner................................. 177 0.000296%
Annabelle Matthews Kelly..................... 19,019 0.031850%
Betty L. Kennedy............................. 3,445 0.005769%
</TABLE>
C-9
<PAGE> 168
<TABLE>
<CAPTION>
ESTIMATED NUMBER OF SHARES OF
NEW BELK CLASS A COMMON STOCK
EXISTING BELK SHAREHOLDER TO BE RECEIVED IN REORGANIZATION PERCENTAGE OF NEW BELK
- ------------------------- -------------------------------- ----------------------
<S> <C> <C>
Robert K. Kerr, Jr........................... 2,280 0.003818%
Robert K. Kerr, III.......................... 57 0.000096%
Billy O. Killian............................. 5,769 0.009661%
Ray A. Killian............................... 1,174 0.001966%
David E. Kimrey.............................. 360 0.000603%
Elizabeth Lynn Kimrey........................ 221 0.000371%
W. H. Kimrey, Jr............................. 360 0.000603%
Margaret Fontaine King....................... 16,411 0.027483%
Evelyn J. Kirby, Bonnie Gail Kirby Boggle and
Karen J. Kirby Mason, as Co-Trustees of the
Edward S. Kirby Family Trust............... 97,564 0.163387%
Herbert J. Knight............................ 2,357 0.003947%
Sarah Belk Gambrell Knight................... 2,111,894 3.536714%
John A. Kuhne................................ 21,760 0.036441%
John A. Kuhne, Jr............................ 35,150 0.058864%
John A. Kuhne, Jr., Custodian for Katharine
Simpson Kuhne under the S. C. Uniform
Transfers to Minors Act.................... 2,314 0.003875%
Lucy Caroline B. Kuhne....................... 37,361 0.062567%
Lucy Simpson Kuhne........................... 289,876 0.485445%
William D. S. Kuhne, Custodian for R. Lauren
Kuhne under the S. C. Uniform Tranfers to
Minors Act................................. 3,794 0.006354%
William D. S. Kuhne.......................... 40,632 0.068045%
Rebecca Love Hardaway LaBarre................ 15,821 0.026495%
Sharon Ridley, Trustee for Estate of Zena J.
Landis..................................... 2,760 0.004622%
NationsBank as Trustee for the Daisy Belk
Doughton Lange Revocable Trust dated
3/25/97.................................... 194,249 0.325302%
Sara Dew Misner and North Carolina National
Bank, Co-Trustees for Daisy Doughton Lange
U/A dated November 5, 1965 -- Johny Belk
Blackmon, Grantor.......................... 482,739 0.808426%
Eric Belk Lange.............................. 2,911 0.004875%
John Belk Lange.............................. 87,609 0.146716%
John Belk Lange, Custodian for Sofia Belk
Lange under the N. C. Uniform Transfers to
Minors Act................................. 1,786 0.002991%
Jane Taylor Lassiter, as Custodian for Ann
Mills Lassiter under the North Carolina
Uniform Transfers to Minors Act............ 1,950 0.003266%
Jane Taylor Lassiter......................... 56,837 0.095183%
Jane Taylor Lassiter, as Custodian for Robert
Harrison Lassiter, Jr. under the North
Carolina Uniform Transfers to Minors Act... 1,950 0.003266%
Leggett Investment Corp...................... 7,488 0.012540%
Miss Armantine M. Leggett.................... 24,566 0.041140%
William E. Leggett, Jr., Substituted Trustee
U/A dated April 4, 1990, with H. G.
Leggett, Jr., f/b/o Cary Elizabeth
Leggett.................................... 3,727 0.006241%
</TABLE>
C-10
<PAGE> 169
<TABLE>
<CAPTION>
ESTIMATED NUMBER OF SHARES OF
NEW BELK CLASS A COMMON STOCK
EXISTING BELK SHAREHOLDER TO BE RECEIVED IN REORGANIZATION PERCENTAGE OF NEW BELK
- ------------------------- -------------------------------- ----------------------
<S> <C> <C>
Armantine M. Leggett, Trustee U/T/A dated
December 21, 1988 f/b/o Frances Claire
Leggett.................................... 2,832 0.004743%
William A. Leggett, Successor Trustee U/A
dated December 29, 1976 w/Fred B. Leggett,
Jr......................................... 4,684 0.007844%
Fred B. Leggett, Jr.......................... 64,026 0.107222%
Fred B. Leggett, III......................... 4,423 0.007407%
H. Gordon Leggett, Jr........................ 10,591 0.017736%
Henry A. Leggett............................. 5,345 0.008951%
William E. Leggett, Jr., Substituted Trustee
U/A dated April 4, 1990, with H. G.
Leggett, Jr., f/b/o Jane Venable Leggett... 3,727 0.006241%
Joan A. Leggett.............................. 838 0.001403%
Armantine M. Leggett, Trustee U/T/A dated
December 21, 1988 f/b/o Merideth Katherine
Leggett.................................... 2,832 0.004743%
Peter A. Leggett............................. 1,396 0.002338%
William E. Leggett, Jr., Substituted Trustee
U/A dated April 4, 1990, with H. G.
Leggett, Jr., f/b/o Reid Gordon Leggett.... 3,727 0.006241%
Estate of Robert A. Leggett, Jr.............. 7,506 0.012570%
Robert A. Leggett, III....................... 4,249 0.007116%
William E. Leggett, Jr., Substituted Trustee
U/A dated April 4, 1990, with H. G.
Leggett, Jr., f/b/o Susan Carter Leggett... 3,727 0.006241%
Fred B. Leggett, Jr., Trustee for Suzanne
Holland Leggett............................ 13,002 0.021774%
Suzanne Holland Leggett and Fred B. Leggett,
Jr., Trustees under the Will of F. B.
Leggett, Deceased, f/b/o Suzanne H.
Leggett.................................... 114,748 0.192164%
Thomas C. Leggett............................ 24,594 0.041187%
William A. Leggett........................... 5,345 0.008951%
William E. Leggett, Jr....................... 12,653 0.021190%
L. E. Lewis.................................. 14,468 0.024229%
Barnett Banks Trust Company, N. A., Dell B.
Funari and E. Jackson Boggs, Co-Personal
Representatives Estate of Edwin Colin
Lindsey.................................... 593,494 0.993903%
B. Neal Long................................. 6,637 0.011115%
Chester Long and Wilda Long.................. 1,866 0.003125%
Emily H. MacLeod............................. 11,069 0.018537%
James Blount MacLeod......................... 13,027 0.021816%
Suzanne Hudson MacLeod....................... 128,452 0.215114%
Carolyn Marlow............................... 230 0.000385%
Charlotte B. Marshall........................ 11,143 0.018661%
Frank Martinez............................... 1,307 0.002189%
Mary Claudia, Inc............................ 15,448 0.025870%
Bobby H. Maslen.............................. 37,201 0.062299%
David Maslen................................. 1,552 0.002599%
Lynn Maslen.................................. 1,774 0.002971%
Sylvia Maslen................................ 1,330 0.002227%
Annabelle Z. Matthews........................ 2,038 0.003413%
</TABLE>
C-11
<PAGE> 170
<TABLE>
<CAPTION>
ESTIMATED NUMBER OF SHARES OF
NEW BELK CLASS A COMMON STOCK
EXISTING BELK SHAREHOLDER TO BE RECEIVED IN REORGANIZATION PERCENTAGE OF NEW BELK
- ------------------------- -------------------------------- ----------------------
<S> <C> <C>
B. Frank Matthews, II........................ 227,523 0.381025%
Betty Choate Matthews........................ 81,787 0.136966%
Carson Henry Belk Matthews................... 29,360 0.049168%
Eugene Robinson Matthews..................... 44,460 0.074456%
Evelyn Flournoy Matthews..................... 1,444 0.002418%
First Union National Bank of N. C., B. Frank
Matthews, II and Annabelle Z. Royster,
CoTrustees under the Will of J. H.
Matthews, Jr............................... 166,707 0.279178%
Mary Elizabeth Matthews...................... 19,842 0.033229%
Oliver P. Matthews, Jr....................... 35,932 0.060174%
Vann Marshall Matthews....................... 17,885 0.029951%
William McGill Matthews, Jr.................. 29,360 0.049168%
William McGill Matthews, V................... 262,549 0.439681%
James K. Glenn, Jr., Trustee under Will of
Daisy Belk Mattox.......................... 1,501,410 2.514358%
Starr McHugh................................. 7,584 0.012701%
Betty B. Melchert............................ 8,194 0.013722%
Mary Fontaine Mericle........................ 15,646 0.026202%
Milburn Investment Company................... 444,212 0.743906%
Jane E. Milford.............................. 315 0.000528%
Sue Leggett Miller........................... 66,185 0.110838%
Sue L. Miller Trust U/A 12/29/76 f/b/o
William Larry Miller, Jr................... 9,237 0.015469%
Daniel J. Mixson............................. 3,516 0.005888%
James D. Mixson.............................. 2,842 0.004759%
Judith P. Mixson............................. 1,073 0.001797%
Ann Monckton................................. 167,628 0.280721%
Montgomery Investment Company................ 2,079,910 3.483151%
Luther T. Moore.............................. 4,848 0.008119%
Henry D. Morgan.............................. 277 0.000464%
James B. Morgan.............................. 304 0.000509%
Marsha Howard Morgan......................... 2,940 0.004924%
Charles Walker Morris........................ 24,970 0.041816%
Mrs. Katherine Belk Morris, Custodian for
Charles Walker Morris, Jr. under the N. C.
Uniform Gifts to Minors Act................ 40,718 0.068189%
Mrs. Katherine Belk Morris, Custodian for
Charles Walker Morris, Jr. under the N. C.
Uniform Transfers to Minors Act............ 36,990 0.061946%
Thomas M. Belk, as Custodian, or Katherine M.
Belk or Thomas M. Belk, Jr., as substitute
custodian in the order named, for Charles
Walker Morris, Jr., under NC UTTMA......... 44,500 0.074523%
Katherine Belk Morris........................ 152,408 0.255232%
Katherine Whitner McKay Belk Morris, Trustee
U/A dated December 28, 1993................ 995,897 1.667793%
Mrs. Katherine Belk Morris, Custodian for
Miss Katherine Belk Morris under the N. C.
Uniform Gifts to Minors Act................ 41,603 0.069671%
</TABLE>
C-12
<PAGE> 171
<TABLE>
<CAPTION>
ESTIMATED NUMBER OF SHARES OF
NEW BELK CLASS A COMMON STOCK
EXISTING BELK SHAREHOLDER TO BE RECEIVED IN REORGANIZATION PERCENTAGE OF NEW BELK
- ------------------------- -------------------------------- ----------------------
<S> <C> <C>
Mrs. Katherine Belk Morris, Custodian for
Miss Katherine Belk Morris under the N. C.
Uniform Transfers to Minors Act............ 36,990 0.061946%
Thomas M. Belk, as Custodian, or Katherine M.
Belk or Thomas M. Belk, Jr., as substitute
custodian in the order named, for Miss
Katherine Belk Morris, under NC UTTMA...... 43,615 0.073040%
Mrs. Katherine Belk Morris, Custodian for
Rebecca Price Morris under the N. C.
Uniform Gifts to Minors Act................ 34,686 0.058087%
Katherine Belk Morris, Custodian for Rebecca
Price Morris under the N.C. Uniform
Transfers to Minors Act.................... 37,714 0.063158%
Thomas M. Belk, as Custodian, or Katherine M.
Belk or Thomas M. Belk, Jr., as substitute
custodian in the order named, for Rebecca
Price Morris, under NC UTTMA............... 50,522 0.084607%
James B. Murrill, III........................ 33,300 0.055766%
Lou Ella J. Mustonen......................... 1,427 0.002390%
Daniel D. Nardozzi........................... 29 0.000049%
Michael E. Nardozzi, Custodian for Jennifer
M. Nardozzi under the Florida Uniform Gifts
to Minors Act.............................. 29 0.000049%
Patricia J. Nardozzi, Custodian for Kevin M.
Nardozzi under the Florida Uniform Gifts to
Minors Act................................. 29 0.000049%
Patricia J. Nardozzi, Custodian for Kristen
E. Nardozzi under the Florida Uniform Gifts
to Minors Act.............................. 29 0.000049%
Michael E. Nardozzi.......................... 29 0.000049%
Michael E. Nardozzi, Custodian for Nancy M.
Nardozzi under the Florida Uniform Gifts to
Minors Act................................. 29 0.000049%
Patricia J. Nardozzi......................... 29 0.000049%
Patricia J. Nardozzi, Custodian for Ryan D.
Nardozzi under the Florida Uniform Gifts to
Minors Act................................. 29 0.000049%
Victoria V. Nardozzi......................... 29 0.000049%
Thomas A. Nipper............................. 804 0.001347%
James A. Nisbet.............................. 2,817 0.004718%
Thomas Richard Nisbet, Jr.................... 2,509 0.004202%
Cornelia Belk Parker......................... 116,832 0.195654%
Ruth D. Parkerson............................ 579 0.000970%
Beth Porter Parks............................ 3,947 0.006610%
Charles E. Parks, III........................ 35,214 0.058972%
George King Parks............................ 80,237 0.134370%
George King Parks, Custodian for Kimberly
Peyton Parks under the Virginia Uniform
Transfers to Minors Act.................... 1,635 0.002738%
Nancy King Parks............................. 58,917 0.098666%
George A. Perrine............................ 5,879 0.009845%
Catherine McHugh Peterson.................... 1,781 0.002983%
</TABLE>
C-13
<PAGE> 172
<TABLE>
<CAPTION>
ESTIMATED NUMBER OF SHARES OF
NEW BELK CLASS A COMMON STOCK
EXISTING BELK SHAREHOLDER TO BE RECEIVED IN REORGANIZATION PERCENTAGE OF NEW BELK
- ------------------------- -------------------------------- ----------------------
<S> <C> <C>
J. R. Phipps, Jr............................. 3,898 0.006528%
Selma C. Piner............................... 2,170 0.003634%
Teri Stone Pirie, Custodian of Kristen Stone
Pirie under the Florida Uniform Gifts to
Minors Act................................. 122 0.000204%
Judith E. Pollander.......................... 20,822 0.034870%
James F. Pollock............................. 8,283 0.013871%
Polly & Co................................... 20,921 0.035036%
Thomas H. Pope............................... 518 0.000867%
Frances Glenn Porter......................... 160,367 0.268561%
Sara Louise Porter........................... 6,659 0.011152%
Stephen Goodwin Porter, Jr................... 6,659 0.011152%
W. M. Raynor................................. 66,946 0.112112%
Robert K. Reel, Jr........................... 564 0.000945%
Evelyn Matthews Rehn......................... 27,915 0.046748%
Page Renger.................................. 171,553 0.287294%
Helen L. Reynolds............................ 698 0.001169%
Alec A. Rhodes............................... 7,911 0.013248%
Cecil David Rhodes, Jr....................... 70,183 0.117533%
Cecil David Rhodes, III...................... 839 0.001405%
Cecil D. Rhodes Remainder Trust.............. 92,714 0.155265%
Lorinn C. Rhodes............................. 7,911 0.013248%
Richard Stockton Rhodes...................... 839 0.001405%
Robert Barnard Rhodes........................ 839 0.001405%
Robert Brady Rhodes.......................... 7,911 0.013248%
Robert Earl Rhodes........................... 14,474 0.024239%
Sandra Jeanne Rhodes......................... 27,423 0.045924%
Thelma E. Rhodes............................. 37,929 0.063518%
Ralph Richardson............................. 1,638 0.002743%
Robinson Investment Company.................. 78,539 0.131526%
Flora McNair Robinson........................ 2,077 0.003478%
Joe Robinson................................. 1,174 0.001966%
John S. Robinson............................. 335 0.000561%
John Shepard Robinson, Jr.................... 2,077 0.003478%
Rachel R. Robinson........................... 13,694 0.022933%
Ted W. Roscoe................................ 29 0.000049%
Annabelle Z. Royster......................... 3,630 0.006079%
Marguerite H. Ruppenthal..................... 1,305 0.002186%
Judith E. Rushton............................ 315 0.000528%
Claire Efird Russo........................... 19,827 0.033204%
Janet Peel Scott............................. 158 0.000264%
Edna Elizabeth Self.......................... 158 0.000264%
Laura Corey Sherratt......................... 82 0.000137%
Joy Benton Shute............................. 907 0.001519%
Douglas Simmerson............................ 27,498 0.046050%
Earl Simmerson............................... 27,498 0.046050%
Simpson Enterprises, Inc..................... 152,775 0.255847%
Elizabeth Parks Simpson...................... 69,185 0.115862%
</TABLE>
C-14
<PAGE> 173
<TABLE>
<CAPTION>
ESTIMATED NUMBER OF SHARES OF
NEW BELK CLASS A COMMON STOCK
EXISTING BELK SHAREHOLDER TO BE RECEIVED IN REORGANIZATION PERCENTAGE OF NEW BELK
- ------------------------- -------------------------------- ----------------------
<S> <C> <C>
Kate McArver Simpson......................... 59,811 0.100163%
Kate McArver Simpson, Lucy Caroline Bowden
Simpson Kuhne and Hazel Claire M. Efird as
Personal Representatives of the Estate of
William Henry Belk Simpson, Deceased....... 459,961 0.770280%
The Belk-Simpson Foundation, Wachovia Bank of
S. C., N. A., as Successor Trustee......... 18,355 0.030738%
Maurice M. Sims and Hazel W. Sims, Tenants in
Common..................................... 237 0.000397%
Harold N. Sisk and Betty A. Sisk, Tenants in
Common..................................... 270 0.000452%
Doris M. Skinner............................. 2,365 0.003961%
Smith Barney, Harris Upham & Co.,
Incorporated............................... 74 0.000123%
Roy Curtis Smith, Jr......................... 1,209 0.002025%
James E. Smithey and Mary Ann Smithey, Joint
Tenants.................................... 1,107 0.001854%
Al M. Snipes Family Trust I.................. 874 0.001464%
Carolyn W. Southerland....................... 17,611 0.029493%
Pamela Peel Spell............................ 158 0.000264%
Pearl J. Spencer............................. 9,537 0.015971%
Lvera Viola Sprague.......................... 3,994 0.006689%
Paul Joseph Sprague.......................... 2,359 0.003951%
Martha L. St. John........................... 12,668 0.021215%
Staban & Co.................................. 20,921 0.035036%
W. L. Starling, Jr........................... 5,544 0.009284%
Van E. Staton................................ 6,489 0.010867%
Alita T. Stephenson.......................... 817 0.001368%
Anne P. Stephenson........................... 670 0.001123%
Ivor P. Stephenson........................... 817 0.001368%
James W. Stephenson, III..................... 12,814 0.021459%
Joe John Stephenson.......................... 11,343 0.018996%
Locketta B. Stephenson....................... 817 0.001368%
Robert F. Stephenson......................... 10,938 0.018317%
J. K. Glenn and Sara Stevens Glenn, Trustees
under Will of A. F. Stevens f/b/o Gretchen
Stevens.................................... 324,755 0.543856%
Frank W. Still............................... 2,010 0.003366%
Ann B. Stocks................................ 158 0.000264%
Teri L. Stone................................ 286 0.000479%
Phyllis E. Stone............................. 1,664 0.002787%
Wayne H. Stone............................... 168 0.000281%
Wayne H. Stone, Jr........................... 173 0.000290%
David H. Stovall, Jr......................... 2,414 0.004043%
Harold V. Sullivan, III...................... 3,923 0.006570%
Katharine Efird Sullivan..................... 20,373 0.034118%
Katherine Gallant Sullivan................... 4,077 0.006828%
Susan Woodward Sutton........................ 32 0.000054%
M. P. Taylor Associates Limited
Partnership................................ 15,647 0.026203%
</TABLE>
C-15
<PAGE> 174
<TABLE>
<CAPTION>
ESTIMATED NUMBER OF SHARES OF
NEW BELK CLASS A COMMON STOCK
EXISTING BELK SHAREHOLDER TO BE RECEIVED IN REORGANIZATION PERCENTAGE OF NEW BELK
- ------------------------- -------------------------------- ----------------------
<S> <C> <C>
Margaret Parks Taylor........................ 12,490 0.020917%
Susan Barrett Taylor......................... 460 0.000770%
A. Farrell Teague............................ 5,425 0.009085%
Teri S. Thomas............................... 614 0.001028%
Karen Hudson Thomas and Calhoun Thomas, III,
Jt. Ten.................................... 2,744 0.004595%
Joe G. Thomason.............................. 10,280 0.017216%
Karl G. Thomason............................. 20,206 0.033838%
Nancy B. Thomason............................ 29,423 0.049274%
Joe G. Thomason, Custodian for Rachel A.
Thomason under the N. C. Uniform Transfers
to Minors Act.............................. 4,963 0.008311%
Joe G. Thomason, Custodian for Sarah A.
Thomason under the N. C. Uniform Transfers
to Minors Act.............................. 4,963 0.008311%
Rebecca Thomasson............................ 301 0.000504%
Bettie Fontaine Thompson..................... 16,689 0.027948%
Daniel P. Thompson, Sr....................... 444 0.000743%
Reaves Robinson Thompson..................... 1,608 0.002693%
Beatrice E. Tomlinson........................ 1,998 0.003346%
James R. Tripp, Jr. Irrevocable Trust........ 31,914 0.053445%
James R. Tripp, Jr........................... 3,298 0.005523%
Elizabeth C. Upchurch........................ 62,115 0.104022%
Mary Matilda Griffeth VanPuffelen............ 455 0.000762%
Mary Matthews Vaughn......................... 22,250 0.037261%
Johnnie Schrum Waits......................... 22,818 0.038212%
Johnsie McF. Wall............................ 8,326 0.013943%
Henry V. Ward................................ 4,401 0.007370%
William A. Welborn........................... 8,242 0.013803%
C. C. Welch.................................. 3,556 0.005955%
Elizabeth Matthews Welton.................... 1,062 0.001778%
Elizabeth Matthews Welton Family Limited
Partnershi................................. 20,079 0.033626%
Elizabeth Matthews Welton Family Limited
Partnership Phase II....................... 231,134 0.387072%
John E. Wertz................................ 1,955 0.003274%
Deborah L. Wesslen........................... 4,249 0.007116%
Armantine M. Leggett, Trustee U/T/A dated
December 21, 1988 f/b/o Ryan Scott
Wesslen.................................... 2,832 0.004743%
Ann P. West.................................. 887 0.001485%
Jean W. West................................. 660 0.001105%
Grace B. Westerlund.......................... 6,700 0.011220%
Margaret Lane Wetzel......................... 249 0.000417%
Dorothy Joyce Wheeler........................ 39 0.000065%
M. Paran Wheeler............................. 57 0.000095%
SunTrust Bank, Augusta, N. A., as Guardian
for Frankie Stevens Whelchel............... 15,708 0.026306%
Joan Cornelia Whelchel....................... 16,866 0.028245%
</TABLE>
C-16
<PAGE> 175
<TABLE>
<CAPTION>
ESTIMATED NUMBER OF SHARES OF
NEW BELK CLASS A COMMON STOCK
EXISTING BELK SHAREHOLDER TO BE RECEIVED IN REORGANIZATION PERCENTAGE OF NEW BELK
- ------------------------- -------------------------------- ----------------------
<S> <C> <C>
SunTrust Bank, Augusta, N. A. and Joan C.
Whelchel as Successor Co-Trustees under
Agreement with Mary Ruth Whelchel.......... 33,083 0.055403%
SunTrust Bank, Augusta, N. A. and Joan C.
Whelchel as Trustees under Agreement dated
October 15, 1997 with Mary Stevens
Whelchel................................... 170,073 0.284815%
John Belk Stevens Trust U/W ITEM III, Section
B f/b/o Mary S. Whelchel................... 391,897 0.656296%
SunTrust Bank, Augusta, N. A. and Joan C.
Whelchel as Successor Co-Trustees under
Agreement with Mary Stevens Whelchel dated
September 15, 1950......................... 515,308 0.862968%
SunTrust Bank, Augusta, N. A. and Joan C.
Whelchel, Successor Co-Trustees under the
Will of Nealie Belk Stevens for Mary
Stevens Whelchel........................... 536,760 0.898893%
SunTrust Bank, Augusta, N. A. and Joan C.
Whelchel as Successor Co-Trustees under
Agreement with Merritt Cofer Whelchel,
Jr......................................... 12,915 0.021628%
SunTrust Bank, Augusta, N. A. and Joan C.
Whelchel as Successor Co-Trustees under
Agreement with Nealie Belk Stevens dated
December 1, 1952........................... 120,046 0.201037%
SunTrust Bank, Augusta, N. A. and Joan C.
Whelchel as Successor Co-Trustees under
Agreement with Sadie Elizabeth Whelchel.... 15,708 0.026306%
A. Grant Whitney, Jr......................... 75 0.000125%
Frank D. Whitney............................. 75 0.000125%
Lillian D. Whitney........................... 75 0.000125%
James Glenn Williams......................... 10,210 0.017098%
SGW Revocable Trust #101, Sally G. Williams &
Paul F. Williams, Trustees U/A 11/8/96....... 193,046 0.323287%
Paul Forrester Williams, Jr.................. 32,661 0.054696%
Doris C. Wilson.............................. 8,613 0.014424%
William L. Wilson............................ 1,159 0.001941%
Suzanne M. Woodbury.......................... 9,237 0.015469%
Ron Woodward................................. 32 0.000054%
Janie Hall Wright............................ 7,839 0.013128%
K. Lee Wright Living Trust, dated July 31,
1996, K Lee Wright, Trustee................ 8,208 0.013746%
Paul B. Wyche, Jr............................ 304 0.000509%
Herbert Youngs............................... 2 0.000003%
TOTAL.............................. 59,713,459 100.000000%
</TABLE>
C-17
<PAGE> 176
ANNEX D
FAIRNESS OPINION OF WILLAMETTE MANAGEMENT ASSOCIATES, INC.
November 25, 1997
Board of Directors of each of the
Belk Companies listed in the Plan and Agreement of Reorganization (the "Belk
Companies")
Dear Members of the Boards:
Willamette Management Associates ("Willamette") has been retained by Belk
Store Services ("BSS") to evaluate (i) the reasonableness of the process used in
determining an Applicable Exchange Ratio for each Belk Company to convert
existing shares of common stock of such Belk Company into shares of Class A
Common Stock, par value $.01 per share ("Class A Common Stock"), of Belk, Inc.
("New Belk") (collectively, the "Valuation Process") and (ii) to render an
opinion as to the reasonableness of the Valuation Process and the fairness of
the Valuation Process, from a financial point of view, to the Existing Belk
Shareholders ("Shareholders"). Except as otherwise noted herein, capitalized
terms used in this letter are defined as set forth in the Plan and Agreement of
Reorganization by and among each Belk Company, Belk Acquisition Co., and New
Belk, dated as of November 25, 1997 (the "Reorganization Agreement").
Willamette is one of the nation's leading independent financial advisory
and business valuation firms. Willamette's principal business is the valuation
of businesses and business interests, including both privately-held and publicly
traded companies, for all purposes, including employee stock ownership plans,
mergers and acquisitions, divestitures, public offerings, gift and estate taxes,
corporate and partnership recapitalizations, dissolutions and other objectives.
Willamette has provided valuations for over 50 clients in the retail industry.
Pursuant to the Reorganization Agreement, each Belk Company (other than
Belk-Simpson) will be merged with and into New Belk and New Belk Sub will be
merged with and into Belk-Simpson, in each case in accordance with the
provisions of the applicable state corporate law of each Belk Company. New Belk
will be the surviving corporation in each such Merger, except that Belk-Simpson
will survive its Merger with New Belk Sub. As a result of the Reorganization,
the separate corporate existence of each Belk Company (other than Belk-Simpson)
will cease, Belk-Simpson will survive its Merger with New Belk Sub as a
wholly-owned subsidiary of New Belk, and the Surviving Belk Subsidiaries will
survive the Mergers as wholly-owned subsidiaries of New Belk.
The Reorganization Agreement provides that each share of Belk Companies
Common Stock issued and outstanding immediately before the Effective Time (other
than treasury shares and shares held by other Belk Companies which, with certain
exceptions described in the Reorganization Agreement, will be canceled) and all
rights in respect thereof shall, at the Effective Time, be converted into and
become exchangeable for a specified number of shares of Class A Common Stock
(for each Belk Company, the "Applicable Exchange Ratio" and for all Belk
Companies, the "Applicable Exchange Ratios"). The Applicable Exchange Ratio for
each Belk Company was determined in accordance with the Valuation Process.
In our capacity as your independent financial advisor, you have
specifically asked us to render a written opinion (the "Opinion") as to:
- the reasonableness of the Valuation Process used to determine the
Applicable Exchange Ratios and allocate shares of Class A Common
Stock in the Reorganization; and
- the fairness of the Valuation Process, from a financial point of
view, to the Existing Belk Shareholders.
We understand our opinion will be used in the context of the Applicable
Exchange Ratios solely to determine financial fairness. No other purpose is
intended or should be inferred.
Willamette relied upon certain assumptions and qualifications in our
determination of the reasonableness of the valuation process. We assumed the
participation of all of the Belk Companies in the Reorganization and did not
attempt to address combinations of less than all of the Belk Companies. We have
also assumed that
D-1
<PAGE> 177
Members of the Boards of Directors
November 25, 1997
Page 2
management of New Belk will act in a prudent manner and attempt to maximize
shareholder wealth. Willamette does not opine to the fairness of the Applicable
Exchange Ratio for any particular Merger or the consideration to be received by
an Existing Belk Shareholder. We have not selected the methods of determining
the Applicable Exchange Ratios, established the Applicable Exchange Ratios, or
attempted to address, among other things, the impact of the Reorganization on
Existing Belk Shareholders who do not participate in the Reorganization; the
fairness of the Reorganization Expenses to be borne by BSS; the expected capital
structure of New Belk or its impact on the performance of New Belk; whether or
not alternative methods of determining the relative value of each Belk Company
also would have provided fair results or results substantially similar to those
of the methodology used; or the fairness or advisability of alternatives to the
Reorganization. We make no recommendation to the Existing Belk Shareholders as
to whether to approve or reject the Merger relating to any specific Belk
Company.
In connection with this Opinion, we have made such reviews, analyses, and
inquiries as we deemed necessary and appropriate under the circumstances. We
reviewed, among other things: (i) the Reorganization Agreement; (ii) the
financial analysis conducted by BSS used to determine the Applicable Exchange
Ratios; (iii) each Belk Company's financial statements for the fiscal years
ended February 1, 1993 through 1997; (iv) corporate budget for New Belk for the
fiscal year 1998 prepared by BSS; (v) certain publicly available information and
financial data on publicly traded companies similar to New Belk; (vi) economic
information and data; (vii) comparative industry data as they relate to New
Belk; and (viii) additional studies, analyses, and investigations as we deemed
appropriate.
Although our thorough discussions with management and review of supporting
documentation give us comfort that our due diligence efforts are appropriate, we
have not conducted a physical examination of all of New Belk's properties or
facilities and we have not obtained or been provided with any independent formal
evaluation of such properties and facilities. We have reviewed the financial
information and other internal data provided to us and other publicly available
information, and while we are unable to verify the accuracy and completeness of
such data and information, we have judged the reasonableness thereof and made
certain adjustments thereto. Our Opinion is necessarily based upon market,
economic, and other conditions as they exist on, and can be evaluated as of, the
date of this letter.
Management has represented to us that there has been no material adverse
change in the business, financial position, or results of operations of the Belk
Companies since August 31, 1997.
Based on all of the foregoing, it is our opinion, as of the date hereof,
that:
- the Valuation Process used to determine the Applicable Exchange
Ratios is reasonable; and
- the Valuation Process is fair, from a financial point of view, to
the Existing Belk Shareholders.
In accordance with recognized professional ethics, our professional fees
for this service are not contingent upon the opinion expressed herein, and
neither Willamette, nor any of its employees, has a present or intended
financial relationship with or interest in any of the Belk Companies.
/s/ WILLAMETTE MANAGEMENT ASSOCIATES
------------------------------------------
Willamette Management Associates, Inc.
D-2
<PAGE> 178
BELK-SIMPSON COMPANY OF PARAGOULD, ARK., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk-Simpson Company of Paragould, Arkansas,
Inc. (the "Company"), to be held on April 16, 1998, at 3:50 p.m., local time, at
the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Arkansas law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 74.2871 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 24,069 shares of New Belk Class A Common Stock which will
represent approximately 0.0401% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by two-thirds of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(1)
<PAGE> 179
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 180
BELK-SIMPSON COMPANY OF PARAGOULD, ARKANSAS, INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK-SIMPSON COMPANY OF PARAGOULD,
ARKANSAS, INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk-Simpson Company of Paragould, Arkansas, Inc. (the "Company")
will be held on April 16, 1998, at 3:50 pm, local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-
4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Arkansas law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 74.2871 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 181
BELK-SIMPSON COMPANY OF PARAGOULD, ARKANSAS, INC.
SUPPLEMENT NO. 1
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 1 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK-SIMPSON COMPANY
OF PARAGOULD, ARKANSAS, INC. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES
THE DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION
CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE IN THE
REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN THE
REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND
THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE
ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED
TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS
SPECIFIED IN THE PROXY STATEMENT/ PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 10
DETERMINATION OF EXCHANGE RATIO............................. 11
COMPARATIVE PER SHARE DATA.................................. 14
SELECTED HISTORICAL FINANCIAL INFORMATION................... 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 16
BUSINESS OF THE COMPANY..................................... 16
SECURITY OWNERSHIP OF THE COMPANY........................... 17
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 182
THE COMPANY
The Company was incorporated as an Arkansas corporation in 1955. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 3:50 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters rights under Arkansas law), will be
converted, without any action on the part of the Shareholder, into the right to
receive 74.2781 shares (the "Exchange Ratio") of Class A Common Stock, par value
$.01 per share, of New Belk (the "New Belk Class A Common Stock"). All of the
shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 3,420 shares of Common Stock
outstanding held of record by nine Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of two-thirds of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 90.5% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 183
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Arkansas Business Corporation Act (the "ABCA"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk is
420,000,000 shares, consisting of: (i) 200,000,000 shares, par value $.01 per
share, of New Belk Class A Common Stock; (ii) 200,000,000 shares, par value $.01
per share, of New Belk Class B Common Stock; and (iii) 20,000,000 shares, par
value $.01 per share, of New Belk Preferred Stock. There are no current plans to
issue New Belk Preferred Stock. The authorized capital stock of the Company
consists of 3,420 shares of Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock held by a New Belk Stockholder who is a Class A Permitted
Holder will also automatically convert into New
3
<PAGE> 184
Belk Class B Common Stock in the event that such New Belk Stockholder no longer
meets the requirements of a Class A Permitted Holder. New Belk Class B Common
Stock has no conversion rights. The Company Articles provide for only one class
of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the ABCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders out of surplus
(defined as net assets minus stated capital) or net profits for the fiscal year
in which the dividend is declared as long as the distributions do not cause (i)
the corporation to be unable to pay its debts as they come due in the usual
course of business, (ii) the corporation's total assets to be less than the sum
of its total liabilities or (iii) the highest liquidation preferences of shares
entitled to such preference to exceed the corporation's net assets. The Company
Bylaws provide that the Board of Directors of the Company (the "Company Board")
may from time to time declare dividends on the Company's
4
<PAGE> 185
outstanding shares in the manner and upon the terms and conditions provided by
law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The ABCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least ten percent
(10%) of all shares entitled to vote at a special meeting. The Company Bylaws
authorize the Chairman, President, Secretary or the Company Board, or any
Shareholder pursuant to the written request of the holders of not less than ten
percent (10%) of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
Under the ABCA, unless the articles of incorporation or the ABCA specifies
a different voting requirement, if the majority of the shares represented at the
meeting and entitled to vote on the subject matter cast an affirmative vote, the
corporate action is deemed to be approved by the shareholders. The Company
Articles do not specify any different voting requirements than as set forth in
the ABCA.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
The ABCA requires an amendment to the articles of incorporation to be
recommended by the board of directors to the shareholders and approved by
66 2/3% of the votes entitled to be cast by any class of shares entitled to vote
as a class. As under the DGCL, the holders of shares of a class or series are
entitled to vote as a separate voting group on a proposed amendment if the
amendment would change certain fundamental rights and preferences of that class
or series. The Company Articles do not specify a greater vote or a vote by
voting groups to amend the Company Articles.
5
<PAGE> 186
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the ABCA, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless the articles of incorporation reserves this
power exclusively to the shareholders. The Company Bylaws provide that the
Company Bylaws may be amended or repealed and new bylaws may be adopted by the
affirmative vote of a majority of the directors then holding office at any
regular or special meeting of the Company Board, or by the affirmative vote of a
majority of the shares outstanding and entitled to vote at any regular or
special meeting of the Shareholders. Furthermore, the Company Board has no power
to adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has concurrent
power by vote of a majority of the directors to make, alter, amend or rescind
the Company Bylaws. The bylaws enacted by the Shareholders may be executed by
action of the Company Board and vice versa; provided, however, the Company Board
may not re-enact, substantially or otherwise, a bylaw which the Shareholders
have repealed or altered, nor may it repeal a bylaw enacted by the Shareholders
which limits the powers of the Company Board or enhances or protects the rights
of Shareholders, without the consent of the Shareholders.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken at an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
The ABCA provides that any action to be taken at a meeting of the
shareholders of a corporation may be taken without a meeting if all the
shareholders entitled to vote on the proposed corporate action sign a written
consent describing such action. The Company Bylaws are consistent with the
foregoing ABCA provision.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
Under the New Belk Certificate, subject to the rights of the holders of any
series of New Belk Preferred Stock then outstanding, newly created directorships
resulting from any increase in the number of directors and any vacancies on the
New Belk Board resulting from death, resignation, disqualification, removal or
other cause must be filled only by the affirmative vote of a majority of the
directors then in office, even though less than a quorum, or by the sole
remaining director, as the case may be, and not by the New Belk Stockholders.
The New Belk Certificate provides that whenever the holders of any one or more
classes or series of New Belk Preferred Stock have the right, voting separately
by class or series, to elect directors at an annual or special meeting, (i) the
election, filling of vacancies and other features of such directorships will be
governed by the terms of the New Belk Certificate or the designation of the New
Belk Preferred Stock applicable to such class or series of the New Belk
Preferred Stock, (ii) the then authorized number of directors of New Belk will
be
6
<PAGE> 187
increased by the number of additional directors to be elected and (iii) the
directors so elected will serve a term which will expire at the annual meeting
of stockholders next succeeding their election or as otherwise specified by the
terms of the New Belk Certificate or the designation of the New Belk Preferred
Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the ABCA
permits a vacancy in the board of directors, other than a vacancy occurring
through shareholder action in removing a director, to be filled by a majority of
the board of directors then in office. The Company Bylaws provide that a vacancy
occurring in the Company Board may be filled by a majority of the remaining
directors, though less than a quorum, or by the sole remaining director, but a
vacancy created by an increase in the authorized number of directors may be
filled only by election at an annual meeting or at a special meeting of the
Shareholders called for that purpose. The Shareholders may elect a director at
any time to fill any vacancy not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The ABCA requires a corporation to have at least three directors except
when there are less than three record shareholders of the corporation. In such a
case, the ABCA requires the corporation to have at least as many directors as
record shareholders. The number of directors may be increased or decreased from
time to time by amendment to the bylaws, but no decrease may have the effect of
shortening the term of any incumbent director. The Company Bylaws require the
Company Board to consist of at least three, but no more than 15, members.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each class expiring at the
annual meeting in successive years beginning with the first class and
progressing to the third class, if any. Thereafter, directors are chosen for a
full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
Neither the ABCA nor the Company Articles provide for the staggering of the
Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the ABCA, a majority of the shareholders entitled to elect directors
may remove one or more directors with or without cause at a meeting called
expressly for that purpose. If a director is elected by a separate class of
shareholders, only the vote of a majority of the shareholders of that class may
remove him.
The Company Bylaws provide that Directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted
7
<PAGE> 188
cumulatively at an annual election. If any directors are so removed, new
directors may be elected at the same meeting. The Company Articles do not
provide for the staggering of the Company Board.
Cumulative Voting. Under the DGCL, cumulative voting of stock applies only
when so provided in the certificate of incorporation or the articles of
incorporation, as the case may be. The ABCA does not contain a statute which
addresses directly cumulative voting. Neither the New Belk Certificate nor the
Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
The ABCA does not contain a statute which addresses directly
conflict-of-interest transactions.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonable believed
that the act was in, or at least not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit director monetary liability for: (i) breaches of the director's duty of
loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity shall be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
The ABCA concerning indemnification and limitation of liability is
generally equivalent to the DGCL. The ABCA provides that a director will not be
personally liable to the corporation for voting affirmatively for the
distribution of assets or repurchase of shares in violation of the ABCA if that
director relied and acted in good faith upon certain records and reports in
casting his vote in favor of the distribution or repurchase.
The Company Bylaws authorize indemnification as provided in the ABCA. In
addition, the Company Bylaws provide that the Company shall indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of the foregoing
capacities; provided, however, that the Company shall not indemnify a director
or officer against liability or litigation expense that he may incur on
8
<PAGE> 189
account of his activities which were, at the time taken, known or believed by
him to be clearly in conflict with the best interest of the Company. The Company
shall likewise and to the same extent indemnify any person who, at the request
of the Company, is or was serving as a director or as an officer of another
corporation, joint venture, trust or other enterprise, as a partner of a
partnership, or as a trustee or administrator under an employee benefit plan.
The Company shall also indemnify the director or officer for reasonable costs,
expenses and attorneys' fees in connection with the enforcement of rights to
indemnification granted therein, if it is so determined in accordance with the
Company Articles that the director or officer is entitled to indemnification
thereunder.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The ABCA requires the affirmative vote of 66 2/3% of the outstanding shares
of each class of shares entitled to vote as a class to approve a merger or
consolidation. The ABCA and DGCL provisions concerning the approval of the sale
of all or substantially all of the assets of a corporation are substantially
similar, except the ABCA requires the affirmative vote of 66 2/3% of the
outstanding shares of the corporation and the DGCL requires the affirmative vote
of a majority of the outstanding shares of the corporation.
Anti-Takeover Provisions. The DGCL contains a business combination statute
which is generally designed to deter hostile takeovers by protecting minority
shareholders in the second stage of freeze-out mergers. Freeze-out mergers are
where the controlling shareholders prevent minority shareholders from receiving
any direct or indirect financial return from the corporation to persuade them to
liquidate their investment in the corporation on terms favorable to the
controlling shareholders. As defined under the DGCL, "business combinations"
generally encompass (i) any merger or consolidation of the corporation or any
direct or indirect majority-owned subsidiary of the corporation with an
interested stockholder, (ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition to or with the interested stockholder of a
substantial percentage of assets of the corporation, (iii) any transaction which
results in the issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder, except in certain circumstances, (iv)
any transaction involving the corporation which has the effect of increasing the
proportionate share of the stock of any class or series, or securities
convertible into the stock of any class or series, of the corporation which is
owned by the interested stockholder, except in certain circumstances or (v) any
receipt by the interested stockholder of the benefit of any loans, advances,
guarantees, pledges or other financial benefits (other than those expressly
permitted in (i) through (iv) above) provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who (i) is the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation and within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested
9
<PAGE> 190
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of shares outstanding those shares owned
by (a) persons who are directors and also officers and (b) employee stock plans
in which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer; or (iii) at or subsequent to such time the business combination is
approved by the board of directors and authorized at an annual or special
meeting of stockholders, and not by written consent, by the affirmative vote of
at least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder.
The ABCA does not contain a business combination statute.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the ABCA provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for 11
months unless a longer period is expressly provided in the appointment form or,
in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe to an additional issue of stock or to any security convertible into
such stock except to the extent the certificate of incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for purchase or receive any part of any
new or additional issue of stock of any class, whether now or hereafter
authorized, or of bonds, debentures or other securities convertible into or
exchangeable for stock. When New Belk makes an offering of options, rights or
warrants to subscribe for shares of any other class or classes of capital stock
(other than New Belk Class A Common Stock) to all holders of a class of New Belk
Common Stock, New Belk shall make simultaneously an identical offering to all
holders of the other classes of New Belk Common Stock other than to any class of
New Belk Common Stock the holders of which, voting as a separate class,
determine that such offering need not be made to such class. Further, New Belk
may grant by contract a preemptive right to purchase, subscribe for or otherwise
acquire stock of any class or series of New Belk or any security convertible
into or exchangeable for, or any warrant, option or right to purchase, subscribe
for or otherwise acquire, stock of any class or series of New Belk, whether now
or hereafter authorized.
The ABCA provides that shareholders have preemptive rights except in
certain circumstances unless otherwise provided in the articles of
incorporation. The Company Articles do not provide otherwise.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, shall, upon written demand under oath stating the
purpose thereof, have the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records, and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder. The ABCA is equivalent to the DGCL.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Section 4-26-1007 of the ABCA ("Section
4-26-1007") has the right to receive in cash the fair value of such
Shareholders' shares of Common Stock determined immediately prior to the Merger.
The following is a summary of Section 4-26-1007 and the procedures for
Shareholders dissenting from the Merger and perfecting such dissenters' rights
of appraisal. This summary is qualified in its entirety by reference to Section
4-26-1007, which is reprinted in full as Annex A to this Prospectus Supplement.
Annex A should be reviewed carefully by any Shareholder who wishes to perfect
such statutory dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH
THE PROCEDURES SET FORTH IN SECTION 4-26-1007 WILL RESULT IN THE LOSS OF
DISSENTERS' RIGHTS.
10
<PAGE> 191
A Shareholder who wishes to perfect his dissenter's rights in the event
that the Merger is effected must:
(a) Deliver to the Company, prior to or at the meeting of shareholders
at which the Reorganization Agreement and the Merger is submitted to a
vote, a written objection to the Merger;
(b) Not have voted in favor of the Reorganization Agreement and the
Merger, and
(c) Within ten days after the date on which the vote on the
Reorganization Agreement and the Merger was taken, make a written demand
stating the number and class of the shares owned by the Shareholder, on New
Belk, for payment of the fair value of his shares as of the day prior to
the date on which the vote was taken approving the Reorganization Agreement
and the Merger.
Any written notice of objection to the Reorganization Agreement and the
Merger pursuant to clause (a) of the immediately preceding paragraph should be
mailed or delivered by a Shareholder to Belk, Inc., 2801 West Tyvola Road,
Charlotte, NC 28217-4500, Attention: Ralph A. Pitts, General Counsel. Because
the written objection must be delivered prior to the time the Shareholder votes
on the Merger, it is recommended, although not required, that a Shareholder
using the mail should use certified or registered mail, return receipt
requested, to confirm that he has made timely delivery. Any Shareholder who
fails to make the demand on New Belk described in clause (c) of the immediately
preceding paragraph within the prescribed ten-day period will be bound by the
terms of the Reorganization Agreement and the Merger.
If within 30 days after the Merger is effected New Belk and the Shareholder
agree upon the value of the Shareholder's shares, New Belk must make payment to
the Shareholder within 90 days after the date the Merger is effected upon the
Shareholder's surrender of his certificate or certificates representing his
shares.
If New Belk and the Shareholder do not agree on the value of the
Shareholder's shares within 30 days after the date the Merger is effected, then,
within 60 days of the expiration of the 30-day period, the Shareholder may file
a petition in Pulaski County Circuit Court asking for a finding and
determination of the fair market value of the shares. The Shareholder will be
entitled to a judgment against New Belk for the amount of the fair value as of
the day prior to the date on which the vote was taken approving the
Reorganization Agreement and the Merger plus interest thereon to the date of the
judgment. The judgment will be payable only upon and simultaneously with the
surrender to New Belk of the certificate or certificates representing the
shares. Unless the Shareholder files a petition within the required time period,
the Shareholder and all persons claiming under him shall be bound by the terms
of the Reorganization Agreement and the Merger.
The fact that a shareholder has dissenters' rights under Section 4-26-1007
of the ABCA will not impair his right to challenge the legality of the Merger
and sue to enjoin the action or enforce any other legal remedy in connection
therewith.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
11
<PAGE> 192
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $3,308,927 $3,308,927 0.6 $(1,757,708) $3,743,064
EBITDA............... 322,989 321,649 7 (1,757,708) 4,009,251
EBIT................. 310,609 309,269 10 (1,757,708) 4,850,398
Net Income........... 243,421 242,582 15 -- 3,638,730
Book Equity.......... 3,701,894 3,691,157 1 -- 3,691,157
</TABLE>
12
<PAGE> 193
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Beth Department Store
of Stuttgart, Ark.,
Inc. 2.0380% X $ 2,236,259 = $ 45,575
===========
Relative Operating Value of Company $ 4,850,398
Relative Operating Value of Other Companies Owned by Company + 45,575
-----------
Total Relative Value of Company = $ 4,895,973
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk's Department
Store of Lancaster,
S.C., Inc. 90.5263% X $ 4,895,973 = $ 4,432,143
===========
Total Relative Value of Company $ 4,895,973
Total Relative Value of Company Owned by Other Belk Companies - 4,432,143
-----------
Net Relative Value of Company = $ 463,830
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 463,830 / $1,156,226,577 = .0401%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.0401% X 59,998,834) / 324 = 74.2871
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
13
<PAGE> 194
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 71.18
Dividends(2).............................................. 20.00
Book value per share(3)................................... 1,082.43
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 71.32
Dividends(2).............................................. 19.31
Book value per share...................................... 930.07
</TABLE>
- ---------------
(1) Based on 3,420 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 3,420 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
14
<PAGE> 195
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 3,341 $ 3,302 $ 3,309
Net income.................................................. 151 194 243
Per common share
Net income (loss)(1)...................................... 44.28 56.70 71.18
Dividends................................................. 15.00 15.00 20.00
Book value(2)............................................. 984.83 1,021.73 1,082.43
Total assets................................................ 3,744 3,803 4,019
Shareholders' equity........................................ 3,368 3,494 3,702
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $2,255 $2,194
Income from operations...................................... 134 164
</TABLE>
- ---------------
(1) Based on 3,420 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 3,420 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
15
<PAGE> 196
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in downtown
Paragould, Arkansas. The Company's store operates in a manner consistent with
the business of the Belk Companies described in the Proxy Statement/Prospectus.
The store is managed out of the Kuhne/Greiner group office in Greenville, South
Carolina.
The Company also holds approximately $650,000 in marketable securities.
Facilities. The Company leases its store building, which contains
approximately 28,000 square feet of floor area, on a month-to-month basis. The
Company may consider in the future a relocation of the existing downtown store
to a shopping center site.
Competition. Specific competitors in the Company's market include Wal-Mart
and Stage Stores.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
16
<PAGE> 197
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer) (a)........... 3,096 90.5%
Thomas M. Belk, Jr. (Director and Executive Officer) (a).... 3,096 90.5%
H. W. McKay Belk (Director and Executive Officer) (a)....... 3,096 90.5%
John R. Belk (Director and Executive Officer) (a)........... 3,096 90.5%
Henderson Belk (Director)................................... 0 *
Sarah Belk Gambrell (Director).............................. 0 *
John A. Kuhne (Director and Executive Officer) (a).......... 3,096 90.5%
R. E. Greiner (Director and Executive Officer).............. 0 *
Welch Bostick, Jr. (Executive Officer)...................... 0 *
Belk's Department Store of Lancaster, S.C., Inc............. 3,096 90.5%
All Directors and Executive Officers as a group (8
persons).................................................. 3,096 90.5%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk
Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207; John A. Kuhne, R. E.
Greiner and Welch Bostock, Jr. -- 14 S. Main Street, Greenville, S.C. 29601;
Belk's Department Store of Lancaster, S.C., Inc. -- 2801 West Tyvola Road,
Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 3,096 shares held by Belk's Department Store of Lancaster, S.C.,
Inc., which shares are voted by the members of the Executive Committee of
the Board of Directors of such Corporation, under authority given by the
directors of such Corporation at the annual meeting of directors held in
March, 1997. The Executive Committee of such Corporation consists of John
M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk and John A.
Kuhne.
17
<PAGE> 198
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 199
BELK-SIMPSON COMPANY OF PARAGOULD, ARK., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 36,646 $ 50,145
Accounts receivable, net.................................. 760,035 922,975
Merchandise inventory..................................... 584,256 562,995
Receivables from affiliates, net.......................... 1,663,735 1,700,003
Deferred income taxes..................................... 22,496 --
Other..................................................... 31,452 33,467
---------- ----------
Total current assets........................................ 3,098,620 3,269,585
Loans receivable from affiliates, net....................... 7,560 7,560
Investments................................................. 590,934 647,399
Property, plant and equipment, net.......................... 84,729 74,949
Other noncurrent assets..................................... 21,139 19,330
---------- ----------
$3,802,982 $4,018,823
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 187,000 $ 197,166
Deferred income taxes..................................... -- 69,150
Accrued income taxes...................................... 1,425 5,572
---------- ----------
Total current liabilities................................... 188,425 271,888
Deferred income taxes....................................... 96,961 18,706
Other noncurrent liabilities................................ 23,293 26,335
---------- ----------
Total liabilities........................................... 308,679 316,929
Shareholders' equity:
Common stock.............................................. 342,000 342,000
Net unrealized gain (loss) on investments, net of income
taxes.................................................. 152,632 185,202
Retained earnings......................................... 2,999,671 3,174,692
---------- ----------
Total shareholders' equity.................................. 3,494,303 3,701,894
---------- ----------
$3,802,982 $4,018,823
========== ==========
</TABLE>
F-2
<PAGE> 200
BELK-SIMPSON COMPANY OF PARAGOULD, ARK., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $3,341,074 $3,302,440 $3,308,927
Operating costs and expenses............................... 3,191,590 3,124,019 3,041,227
---------- ---------- ----------
Income from operations..................................... 149,484 178,421 267,700
---------- ---------- ----------
Other income (expense):
Interest, net............................................ 58,906 81,367 78,202
Dividend income.......................................... 24,947 24,605 39,968
Gain (loss) on disposal of property, plant and
equipment............................................. 3,377 -- --
Gain (loss) on sale of securities........................ 4,838 12,471 840
Miscellaneous, net....................................... (8,826) 76 2,102
---------- ---------- ----------
Total other expense, net................................... 83,242 118,519 121,112
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 232,726 296,940 388,812
Income tax expense (benefit)............................... 81,286 103,035 145,391
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 151,440 193,905 243,421
---------- ---------- ----------
Net earnings............................................... 151,440 193,905 243,421
Retained earnings at beginning of period................... 2,756,926 2,857,066 2,999,671
Dividends paid............................................. (51,300) (51,300) (68,400)
---------- ---------- ----------
Retained earnings at end of period......................... $2,857,066 $2,999,671 $3,174,692
========== ========== ==========
</TABLE>
F-3
<PAGE> 201
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company." The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 202
CONDENSED NOTES TO UNAUDITED HISTORICAL
FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 203
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 4, SUBTITLE 3, CHAPTER 26
ARKANSAS BUSINESS CORPORATIONS ACT
SUBCHAPTER 10 -- MERGER AND CONSOLIDATION
4-26-1007. RIGHTS OF DISSENTING SHAREHOLDERS.
(a) If a shareholder of a corporation which is a part to a merger or
consolidation files with the corporation, prior to or at the meeting of
shareholders at which the plan of merger or consolidation is submitted to a
vote, a written objection to the plan of merger or consolidation and does not
vote in favor thereof, and the shareholder within ten (10) days after the date
on which the vote was taken makes written demand on the surviving or new
domestic or foreign corporation for payment of the fair value of his shares as
of the day prior to the date on which the vote was taken approving the merger or
consolidation, then, if the merger or consolidation is effected, the surviving
or new corporation shall pay to the shareholder, upon surrender of his
certificate or certificates representing the shares, the fair value thereof.
(b) The demand shall state the number and class of the shares owned by the
dissenting shareholder.
(c) Any shareholder failing to make demand within the ten-day period shall
be bound by the terms of the merger or consolidation.
(d) Within ten (10) days after the merger or consolidation is effected, the
surviving or new corporation, as the case may be, shall give notice to each
dissenting shareholder who has made demand as herein provided for the payment of
the fair value of his shares.
(e)(1) If within thirty (30) days after the date on which the merger or
consolidation was effected the value of such shares is agreed upon between the
dissenting shareholder and the surviving or new corporation, payment shall be
made within ninety (90) days after the date on which such merger or
consolidation was effected, upon the surrender of his certificate or
certificates representing those shares.
(2) Upon payment of the agreed value, the dissenting shareholder shall
cease to have any interest in those shares or in the corporation.
(f)(1) If within the period of thirty (30) days the shareholder and the
surviving or new corporation do not so agree, then the dissenting shareholder,
within sixty (60) days after the expiration of the thirty-day period, may file a
petition in the circuit court of the county in which the registered office of
the surviving corporation is located, if the surviving corporation is a domestic
corporation or in the Pulaski County Circuit Court if the surviving corporation
is a foreign corporation, asking for a finding and determination of the fair
value of the shares and shall be entitled to judgment against the surviving or
new corporation for the amount of the fair value as of the day prior to the date
on which the vote was taken approving such merger or consolidation, together
with interest thereon to the date of the judgment.
(2) The judgment shall be payable only upon and simultaneously with the
surrender to the surviving or new corporation of the certificate or certificates
representing the shares.
(3) Upon payment of the judgment, the dissenting shareholder shall cease to
have any interest in the shares or in the surviving or new corporation.
(4) Unless the dissenting shareholder files the petition within the time
herein limited, the shareholder and all persons claiming under him shall be
bound by the terms of the merger or consolidation.
(g) Shares acquired by the surviving or new corporation pursuant to the
payment of the agreed value thereof or to payment of the judgment entered, as in
this section provided, may be held and disposed of by the corporation as in the
case of other treasury shares.
A-1
<PAGE> 204
(h) The provisions of this section shall not apply to a merger if, on the
date of the filing of the articles of merger, the surviving corporation is the
owner of all the outstanding shares of the other domestic or foreign
corporations that are parties to the merger.
HISTORY. Acts 1965, No. 576, sec. 76; A.S.A. 1947, sec. 64-707.
A-2
<PAGE> 205
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................... $ 3,308,927 $243,421 $310,609 $322,989 $3,701,894
Adjustments to eliminate less than
wholly-owned subsidiaries................... -- -- -- -- --
----------- -------- -------- -------- ----------
Adjusted Shareholders' Statement.............. $ 3,308,927 243,421 310,609 322,989 3,701,894
=========== -------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............... -- -- --
Gain/loss on sale of securities............. (526) (840) (840)
Impairment loss............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries.............................. -- -- --
Gain/loss on discontinued operations........ -- -- --
Adjustment to tax expense................... -- -- -- --
-------- -------- --------
Total non-operating items..................... (526) (840) (840)
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities............................. (313) (500) (500)
Adjustment for ownership in other Belk
entities.................................. (10,737)
-------- -------- -------- ----------
Per Model..................................... $242,582 $309,269 $321,649 $3,691,157
======== ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................... $ (50,145)
Negative cash balances reclassified to
accounts payable........................ --
Receivables from affiliates, net.......... (1,700,003)
Loans receivable from affiliates, net..... (7,560)
Liabilities
Notes payable............................. --
Current installments of long-term debt.... --
Current portion of obligations under
capital leases.......................... --
Payables to affiliates, net............... --
Long-term debt, excluding current
installments............................ --
Obligations under capital leases,
excluding current portion............... --
Loans payable to affiliates, net.......... --
-----------
Net debt (cash)............................... (1,757,708)
Adjustments to eliminate less than
wholly-owned subsidiaries................... --
-----------
Per Model..................................... $(1,757,708)
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 206
SUPPLEMENT NO. 1
<PAGE> 207
BELK-SIMPSON COMPANY OF PARAGOULD, ARK., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 3:50 pm, local time, at
the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: ,1998
-------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 1
<PAGE> 208
BELK DEPARTMENT STORE OF STUTTGART, ARK., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk Department Store of Stuttgart, Ark., Inc.
(the "Company"), to be held on April 16, 1998, at 2:40 p.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Arkansas law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 5.5909 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 78,558 shares of New Belk Class A Common Stock which will
represent approximately 0.1309% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by two-thirds of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(2)
<PAGE> 209
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 210
BELK DEPARTMENT STORE OF STUTTGART, ARK., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK DEPARTMENT STORE OF STUTTGART, ARK., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk Department Store of Stuttgart, Ark., Inc. (the "Company") will
be held on April 16, 1998, at 2:40 p.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-
4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Arkansas law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 5.5909 shares of Class A Common Stock, par value $.01 per share, of
New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 211
BELK DEPARTMENT STORE OF STUTTGART, ARK., INC.
SUPPLEMENT NO. 2
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 2 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK DEPARTMENT
STORE OF STUTTGART, ARK., INC. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES
THE DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION
CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE IN THE
REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN THE
REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND
THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE
ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED
TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS
SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 10
DETERMINATION OF EXCHANGE RATIO............................. 11
COMPARATIVE PER SHARE DATA.................................. 14
SELECTED HISTORICAL FINANCIAL INFORMATION................... 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 16
BUSINESS OF THE COMPANY..................................... 16
SECURITY OWNERSHIP OF THE COMPANY........................... 17
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 212
THE COMPANY
The Company was incorporated as an Arkansas corporation in 1947 as
Belk-Jones Company, Inc. The Company changed its name to Belk Department Store
of Stuttgart, Ark., Inc. on August 3, 1996. The mailing address of the Company's
principal executive offices is 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, and its telephone number at that address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 2:40 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger"), and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights under Arkansas law), will be
converted, without any action on the part of the Shareholder, into the right to
receive 5.5909 shares (the "Exchange Ratio") of Class A Common Stock, par value
$.01 per share, of New Belk (the "New Belk Class A Common Stock"). All of the
shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 20,756 shares of Common Stock
outstanding held of record by 23 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of two-thirds of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 85.5% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock
2
<PAGE> 213
vote in favor of the Merger, the vote of such persons, corporations and trusts
in favor of the Merger would be sufficient to approve the Merger under the
governing documents of the Company and applicable state law.
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Arkansas Business Corporation Act (the "ABCA"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk is
420,000,000 shares, consisting of: (i) 200,000,000 shares, par value $.01 per
share, of New Belk Class A Common Stock; (ii) 200,000,000 shares, par value $.01
per share, of New Belk Class B Common Stock; and (iii) 20,000,000 shares, par
value $.01 per share, of New Belk Preferred Stock. There are no current plans to
issue New Belk Preferred Stock. The authorized capital stock of the Company
consists of 42,000 shares of Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A
3
<PAGE> 214
Common Stock are convertible into New Belk Class B Common Stock, in whole or in
part, at any time and from time to time at the option of the holder, on the
basis of one share of New Belk Class B Common Stock for each share of New Belk
Class A Common Stock converted. Shares of New Belk Class A Common Stock held by
a New Belk Stockholder who is a Class A Permitted Holder will also automatically
convert into New Belk Class B Common Stock in the event that such New Belk
Stockholder no longer meets the requirements of a Class A Permitted Holder. New
Belk Class B Common Stock has no conversion rights. The Company Articles provide
for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the ABCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders out of surplus
(defined as net assets minus stated capital) or net profits for the fiscal year
in which the dividend is declared as long as the distributions do not cause (i)
the corporation to be
4
<PAGE> 215
unable to pay its debts as they come due in the usual course of business, (ii)
the corporation's total assets to be less than the sum of its total liabilities
or (iii) the highest liquidation preferences of shares entitled to such
preference to exceed the corporation's net assets. The Company Bylaws provide
that the Board of Directors of the Company (the "Company Board") may from time
to time declare dividends on the Company's outstanding shares in the manner and
upon the terms and conditions provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The ABCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 10% of all
shares entitled to vote at a special meeting. The Company Bylaws authorize the
Chairman, President, Secretary or the Company Board, or any Shareholder pursuant
to the written request of the holders of not less than 10% of all the shares
entitled to vote at the meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
Under the ABCA, unless the articles of incorporation or the ABCA specifies
a different voting requirement, if the majority of the shares represented at the
meeting and entitled to vote on the subject matter cast an affirmative vote, the
corporate action is deemed to be approved by the shareholders. The Company
Articles do not specify any different voting requirements than as set forth in
the ABCA.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
The ABCA requires an amendment to the articles of incorporation to be
recommended by the board of directors to the shareholders and approved by
66 2/3% of the votes entitled to be cast on the amendment by any
5
<PAGE> 216
class of shares entitled to vote as a class. As under the DGCL, the holders of
the outstanding shares of a class or series are entitled to vote as a separate
voting group on a proposed amendment if the amendment would change certain
fundamental rights and preferences of that class or series. The Company Articles
do not specify a greater vote or a vote by voting groups to amend the Company
Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the ABCA, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless the articles of incorporation reserves this
power exclusively to the shareholders. The Company Bylaws provide that the
Company Bylaws may be amended or repealed and new bylaws may be adopted by the
affirmative vote of a majority of the directors then holding office at any
regular or special meeting of the Company Board, or by the affirmative vote of a
majority of the shares outstanding and entitled to vote at any regular or
special meeting of the Shareholders. Furthermore, the Company Board has no power
to adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has concurrent
power by vote of a majority of the directors to make, alter, amend or rescind
the Company Bylaws. The bylaws enacted by the Shareholders may be executed by
action of the Company Board and vice versa; provided, however, the Company Board
may not re-enact, substantially or otherwise, a bylaw which the Shareholders
have repealed or altered, nor may it repeal a bylaw enacted by the Shareholders
which limits the powers of the Company Board or enhances or protects the rights
of Shareholders, without the consent of the Shareholders.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken at an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
The ABCA provides that any action to be taken at a meeting of the
shareholders of a corporation may be taken without a meeting if all the
shareholders entitled to vote on the proposed corporate action sign a written
consent describing such action. The Company Bylaws are consistent with the
foregoing ABCA provision.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
Under the New Belk Certificate, subject to the rights of the holders of any
series of New Belk Preferred Stock then outstanding, newly created directorships
resulting from any increase in the number of directors and any vacancies on the
New Belk Board resulting from death, resignation, disqualification, removal or
other cause must be filled only by the affirmative vote of a majority of the
directors then in office, even though less than a quorum, or by the sole
remaining director, as the case may be, and not by the New Belk Stockholders.
The New Belk Certificate provides that whenever the holders of any one or more
classes or series of New Belk
6
<PAGE> 217
Preferred Stock have the right, voting separately by class or series, to elect
directors at an annual or special meeting, (i) the election, filling of
vacancies and other features of such directorships will be governed by the terms
of the New Belk Certificate or the designation of the New Belk Preferred Stock
applicable to such class or series of the New Belk Preferred Stock, (ii) the
then authorized number of directors of New Belk will be increased by the number
of additional directors to be elected and (iii) the directors so elected will
serve a term which will expire at the annual meeting of stockholders next
succeeding their election or as otherwise specified by the terms of the New Belk
Certificate or the designation of the New Belk Preferred Stock applicable to
such class or series.
Unless otherwise provided in the articles of incorporation, the ABCA
permits a vacancy in the board of directors, other than a vacancy occurring
through shareholder action in removing a director, to be filled by a majority of
the board of directors then in office. The Company Bylaws provide that a vacancy
occurring in the Company Board may be filled by a majority of the remaining
directors, though less than a quorum, or by the sole remaining director, but a
vacancy created by an increase in the authorized number of directors may be
filled only by election at an annual meeting or at a special meeting of the
Shareholders called for that purpose. The Shareholders may elect a director at
any time to fill any vacancy not filled by the filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The ABCA requires a corporation to have at least three directors except
when there are less than three record shareholders of the corporation. In such a
case, the ABCA requires the corporation to have at least as many directors as
record shareholders. The number of directors may be increased or decreased from
time to time by amendment to the bylaws, but no decrease may have the effect of
shortening the term of any incumbent director. The Company Bylaws require the
Company Board to consist of at least three, but no more than 15, members.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each class expiring at the
annual meeting in successive years beginning with the first class and
progressing to the third class, if any. Thereafter, directors are chosen for a
full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
Neither the ABCA nor the Company Articles provide for the staggering of the
Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the ABCA, a majority of the shareholders entitled to elect directors
may remove one or more directors with or without cause at a meeting called
expressly for that purpose. If a director is elected by a separate class of
shareholders, only the vote of a majority of the shareholders of that class may
remove him.
7
<PAGE> 218
The Company Bylaws provide that Directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting. The
Company Articles do not provide for the staggering of the Company Board.
Cumulative Voting. Under the DGCL, cumulative voting of stock applies only
when so provided in the certificate of incorporation or the articles of
incorporation, as the case may be. The ABCA does not contain a statute which
addresses directly cumulative voting. Neither the New Belk Certificate nor the
Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
The ABCA does not contain a statute which addresses directly
conflict-of-interest transactions.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonable believed
that the act was in, or at least not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit director monetary liability for: (i) breaches of the director's duty of
loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity shall be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
The ABCA concerning indemnification is generally equivalent to the DGCL.
The ABCA provides that a director will not be personally liable to the
corporation for voting affirmatively for the distribution of assets or
repurchase of shares in violation of the ABCA if that director relied and acted
in good faith upon certain records and reports in casting his vote in favor of
the distribution or repurchase.
8
<PAGE> 219
The Company Bylaws authorize indemnification as provided in the ABCA. In
addition, the Company Bylaws provide that the Company shall indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of the foregoing
capacities; provided, however, that the Company shall not indemnify a director
or officer against liability or litigation expense that he may incur on account
of his activities which were, at the time taken, known or believed by him to be
clearly in conflict with the best interest of the Company. The Company shall
likewise and to the same extent indemnify any person who, at the request of the
Company, is or was serving as a director or as an officer of another
corporation, joint venture, trust or other enterprise, as a partner of a
partnership, or as a trustee or administrator under an employee benefit plan.
The Company shall also indemnify the director or officer for reasonable costs,
expenses and attorneys' fees in connection with the enforcement of rights to
indemnification granted therein, if it is so determined in accordance with the
Company Articles that the director or officer is entitled to indemnification
thereunder.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The ABCA requires the affirmative vote of 66 2/3% of the outstanding shares
of each class of shares entitled to vote as a class to approve a merger or
consolidation. The ABCA and DGCL provisions concerning the approval of the sale
of all or substantially all of the assets of a corporation are substantially
similar, except the ABCA requires the affirmative vote of 66 2/3% of the
outstanding shares of the corporation and the DGCL requires the affirmative vote
of a majority of the outstanding shares of the corporation.
Anti-Takeover Provisions. The DGCL contains a business combination statute
which is generally designed to deter hostile takeovers by protecting minority
shareholders in the second stage of freeze-out mergers. Freeze-out mergers are
where the controlling shareholders prevent minority shareholders from receiving
any direct or indirect financial return from the corporation to persuade them to
liquidate their investment in the corporation on terms favorable to the
controlling shareholders. As defined under the DGCL, "business combinations"
generally encompass (i) any merger or consolidation of the corporation or any
direct or indirect majority-owned subsidiary of the corporation with an
interested stockholder, (ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition to or with the interested stockholder of a
substantial percentage of assets of the corporation, (iii) any transaction which
results in the issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder, except in certain circumstances, (iv)
any transaction involving the corporation which has the effect of increasing the
proportionate share of the stock of any class or series, or securities
convertible into the stock of any class or series, of the corporation which is
owned by the interested stockholder, except in certain circumstances or (v) any
receipt by the interested stockholder of the benefit of any loans, advances,
guarantees, pledges or other financial benefits (other than those expressly
permitted in (i) through (iv) above) provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who (i) is the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation and within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation.
9
<PAGE> 220
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
The ABCA does not contain a business combination statute.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the ABCA provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
eleven (11) months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe to an additional issue of stock or to any security convertible into
such stock except to the extent the certificate of incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for purchase or receive any part of any
new or additional issue of stock of any class, whether now or hereafter
authorized, or of bonds, debentures or other securities convertible into or
exchangeable for stock. When New Belk makes an offering of options, rights or
warrants to subscribe for shares of any other class or classes of capital stock
(other than New Belk Class A Common Stock) to all holders of a class of New Belk
Common Stock, New Belk shall make simultaneously an identical offering to all
holders of the other classes of New Belk Common Stock other than to any class of
New Belk Common Stock the holders of which, voting as a separate class,
determine that such offering need not be made to such class. Further, New Belk
may grant by contract a preemptive right to purchase, subscribe for or otherwise
acquire stock of any class or series of New Belk or any security convertible
into or exchangeable for, or any warrant, option or right to purchase, subscribe
for or otherwise acquire, stock of any class or series of New Belk, whether now
or hereafter authorized.
The ABCA provides that Shareholders have preemptive rights except in
certain circumstances, unless otherwise provided in the articles of
incorporation. The Company Articles do not provide otherwise.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, shall, upon written demand under oath stating the
purpose thereof, have the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records, and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder. The ABCA is equivalent to the DGCL.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Section 4-26-1007 of the ABCA ("Section
4-26-1007") has the right to receive in cash the fair value of such
Shareholders' shares of Common Stock determined immediately prior to the Merger.
The following is a summary of Section 4-26-1007 and the procedures for
Shareholders dissenting from the Merger and perfecting such dissenters' rights
of appraisal. This summary is qualified in its entirety by reference to Section
4-26-1007,
10
<PAGE> 221
which is reprinted in full as Annex A to this Prospectus Supplement. Annex A
should be reviewed carefully by any Shareholder who wishes to perfect such
statutory dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE
PROCEDURES SET FORTH IN SECTION 4-26-1007 WILL RESULT IN THE LOSS OF DISSENTERS'
RIGHTS.
A Shareholder who wishes to perfect his dissenter's rights in the event
that the Merger is effected must:
(a) Deliver to the Company, prior to or at the meeting of shareholders
at which the Reorganization Agreement and the Merger is submitted to a
vote, a written objection to the Merger;
(b) Not have voted in favor of the Reorganization Agreement and the
Merger, and
(c) Within ten days after the date on which the vote on the
Reorganization Agreement and the Merger was taken, make a written demand
stating the number and class of the shares owned by the Shareholder, on New
Belk, for payment of the fair value of his shares as of the day prior to
the date on which the vote was taken approving the Reorganization Agreement
and the Merger.
Any written notice of objection to the Reorganization Agreement and the
Merger pursuant to clause (a) of the immediately preceding paragraph should be
mailed or delivered by a Shareholder to Belk, Inc., 2801 West Tyvola Road,
Charlotte, NC 28217-4500, Attention: Ralph A. Pitts, General Counsel. Because
the written objection must be delivered prior to the time the Shareholder votes
on the Merger, it is recommended, although not required, that a Shareholder
using the mail should use certified or registered mail, return receipt
requested, to confirm that he has made timely delivery. Any Shareholder who
fails to make the demand on New Belk described in clause (c) of the immediately
preceding paragraph within the prescribed 10-day period will be bound by the
terms of the Reorganization Agreement and the Merger.
If within 30 days after the Merger is effected New Belk and the Shareholder
agree upon the value of the Shareholder's shares, New Belk must make payment to
the Shareholder within 90 days after the date the Merger is effected upon the
Shareholder's surrender of his certificate or certificates representing his
shares.
If New Belk and the Shareholder do not agree on the value of the
Shareholder's shares within 30 days after the date the Merger is effected, then,
within 60 days of the expiration of the 30-day period, the Shareholder may file
a petition in Pulaski County Circuit Court asking for a finding and
determination of the fair market value of the shares. The Shareholder will be
entitled to a judgment against New Belk for the amount of the fair value as of
the day prior to the date on which the vote was taken approving the
Reorganization Agreement and the Merger plus interest thereon to the date of the
judgment. The judgment will be payable only upon and simultaneously with the
surrender to New Belk of the certificate or certificates representing the
shares. Unless the Shareholder files a petition within the required time period,
the Shareholder and all persons claiming under him shall be bound by the terms
of the Reorganization Agreement and the Merger.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
11
<PAGE> 222
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales..................... $3,686,309 $3,686,309 0.6 $(24,474) $ 2,236,259
EBITDA........................ 19,909 (65,799) 7 (24,474) (436,119)
EBIT.......................... (4,873) (90,581) 10 (24,474) (881,336)
Net Income.................... 372,565 (94,361) 15 -- (1,415,415)
Book Equity................... 1,514,772 1,514,772 1 -- 1,514,772
</TABLE>
12
<PAGE> 223
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
PERCENTAGE OF OTHER TOTAL RELATIVE VALUE RELATIVE OPERATING
BELK OF VALUE OF
OTHER BELK COMPANIES COMPANIES OWNED BY OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
N/A N/A% X $ N/A = $ N/A
-----------
Total $ N/A
===========
Relative Operating Value of Company $ 2,236,259
Relative Operating Value of Other Companies Owned by Company + --
-----------
Total Relative Value of Company = $ 2,236,259
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Enterprises,
Inc. 3.6712% X $ 2,236,259 = $ 82,098
Belk's Department
Store of Florence,
S.C., Incorporated 26.5947% X 2,236,259 = 594,726
Belk-Simpson Company
of Paragould,
Arkansas, Inc. 2.0380% X 2,236,259 = 45,575
-----------
Total $ 722,399
===========
Total Relative Value of Company $ 2,236,259
Total Relative Value of Company Owned by Other Belk Companies - 722,399
-----------
Net Relative Value of Company = $ 1,513,860
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
PERCENTAGE OF NEW BELK CLASS
AGGREGATE NET RELATIVE VALUE A
NET RELATIVE VALUE OF OF ALL COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 1,513,860 / $1,156,226,577 = .1309%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.1309% X 59,998,834) / 14,051 = 5.5909
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
13
<PAGE> 224
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 17.95
Dividends(2).............................................. 0.95
Book value per share(3)................................... 72.98
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 5.37
Dividends(2).............................................. 1.45
Book value per share...................................... 70.00
</TABLE>
- ---------------
(1) Based on 20,756 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 20,756 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
14
<PAGE> 225
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $4,540 $4,446 $3,686
Net income.................................................. (253) (190) 373
Per common share
Net income (loss)(1)...................................... (12.20) (9.16) 17.95
Dividends................................................. 0.76 0.84 0.95
Book value(2)............................................. 66.92 55.98 72.98
Total assets................................................ 2,684 2,530 1,697
Shareholders' equity........................................ 1,389 1,162 1,515
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $3,031 $1,530
Income (loss) from operations............................... (168) 109
</TABLE>
- ---------------
(1) Based on 20,756 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding for the years ended January 31, 1995,
February 3, 1996 and February 1, 1997.
(2) Based on 20,756 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
15
<PAGE> 226
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
To the extent a discussion of the financial condition and results of
operations of the Company for any of the fiscal years ended January 31, 1995,
February 3, 1996 or February 1, 1997 or for either of the nine-month periods
ended November 2, 1996 or November 1, 1997 is necessary to identify certain
trends or conditions that differ from the combined Belk Companies and that are
material to Shareholders' understanding of the financial condition or results of
operations of the Company, such discussion is included below. The discussion
which follows is based upon and should be read in conjunction with the
historical financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus Supplement.
Income from operations increased for the nine months ended November 1, 1997
compared to the same period in 1996. Income from operations for the nine months
ended November 2, 1996 included the loss on operations of the Texarkana, Texas
store.
Comparable store sales decreased in fiscal years 1995 and 1996 due to
declining revenues at the Texarkana, Texas store, which was closed in August,
1996.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in downtown
Stuttgart, Arkansas. The Company's store operates in a manner consistent with
the business of the Belk Companies described in the Proxy Statement/Prospectus.
The Company is managed out of the Kuhne/Greiner group office in Greenville,
South Carolina.
Facilities. The Company leases its store building, which contains
approximately 19,000 square feet of floor area. The current term of the lease
expires in 2000. The Company believes that the building is adequate to meet its
current needs.
Competition. The Company's principal competitor in the market is Wal-Mart.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
16
<PAGE> 227
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d).............................................. 11,785 56.8%
Thomas M. Belk, Jr. (Director and Executive Officer)
(a)(c)(d)................................................. 8,526 41.1%
H. W. McKay Belk (Director and Executive Officer)
(a)(c)(d)................................................. 8,522 41.1%
John R. Belk (Director and Executive Officer) (a)(c)(d)..... 8,522 41.1%
Sarah Belk Gambrell (Director).............................. 5,600 27.0%
Sarah Gambrell Knight (Director)............................ 300 1.4%
Leroy Robinson (a).......................................... 1,773 8.5%
Katherine McKay Belk (a).................................... 3,042 14.7%
Katherine Belk Morris (a)................................... 1,821 8.8%
John A. Kuhne (Executive Officer) (d)....................... 423 2.0%
R. E. Greiner (Executive Officer)........................... 0 *
Welch Bostick, Jr. (Executive Officer)...................... 0 *
Thomas M. Belk, Trustee U/A dated September 15, 1993........ 1,773 85.5%
Belk's Department Store of Florence, S.C., Incorporated..... 5,520 26.6%
All Directors and Executive Officers as a group (8
persons).................................................. 17,741 85.5%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson, Katherine McKay Belk and Katherine Belk
Morris -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk
Gambrel -- 300 Cherokee Road, Charlotte, N.C. 28207; Sarah Gambrell
Knight -- 810 Colville Road, Charlotte, N.C. 28207; John A. Kuhne, R. E. Greiner
and Welch Bostick, Jr. -- 14 S. Main Street, Greenville, S.C. 29601; Belk's
Department Store of Florence, S.C., Incorporated and Thomas M. Belk, Trustee U/A
dated September 15, 1993 -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 1,773 shares held by Thomas M. Belk, Trustee U/A dated September
15, 1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(b) Includes 80 shares held in several Trusts established by the Will of W. H.
Belk for the benefit of his children. Voting and investment power of the
trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(c) Includes 5,520 shares held by Belk's Department Store of Florence, S.C.,
Incorporated and 762 shares held by Belk Enterprises, Inc., which shares
are voted by the members of the Executive Committee of the Board of
Directors of each such Corporation, under authority given by the directors
of each such Corporation at the annual meeting of directors held in March,
1997. The Executive Committee of each such Corporation consists of John M.
Belk, Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
17
<PAGE> 228
(d) Includes 423 shares held by Belk-Simpson Company of Paragould, Arkansas,
Inc., which shares are voted by the members of the Executive Committee of
the Board of Directors of such Corporation, under authority given by
directors of such Corporation at the annual meeting of directors held in
March 1997. The Executive Committee of such Corporation consists of John M.
Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk and John A.
Kuhne.
18
<PAGE> 229
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 230
BELK DEPARTMENT STORE OF STUTTGART, ARK., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 43,094 $ 40,512
Accounts receivable, net.................................. 1,017,272 613,749
Merchandise inventory..................................... 1,247,198 440,920
Refundable income taxes................................... -- 26,720
Deferred income taxes..................................... 7,497 11,052
Other..................................................... 46,296 21,766
---------- ----------
Total current assets........................................ 2,361,357 1,154,719
Loans receivable from affiliates, net....................... -- 7,900
Investments................................................. 11,413 3,750
Property, plant and equipment, net.......................... 135,149 112,627
Deferred income taxes....................................... -- 415,824
Other noncurrent assets..................................... 22,343 2,395
---------- ----------
$2,530,262 $1,697,215
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable............................................. $ 301,677 $ --
Accounts payable and accrued expenses..................... 375,217 129,958
Payables to affiliates, net............................... 301,034 23,939
Accrued income taxes...................................... 5,305 --
---------- ----------
Total current liabilities................................... 983,233 153,897
Deferred income taxes....................................... 4,636 --
Loans payable to affiliates, net............................ 342,100 --
Other noncurrent liabilities................................ 38,311 28,546
---------- ----------
Total liabilities........................................... 1,368,280 182,443
Shareholders' equity:
Common stock.............................................. 481,200 2,075,600
Retained earnings......................................... 680,782 (560,828)
---------- ----------
Total shareholders' equity.................................. 1,161,982 1,514,772
---------- ----------
$2,530,262 $1,697,215
========== ==========
</TABLE>
F-2
<PAGE> 231
BELK DEPARTMENT STORE OF STUTTGART, ARK., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales................................................. $4,540,488 $4,445,578 $ 3,686,310
Operating costs and expenses.............................. 4,693,079 4,526,647 3,774,462
---------- ---------- -----------
Income from operations.................................... (152,591) (81,069) (88,152)
---------- ---------- -----------
Other income (expense):
Interest, net........................................... (48,938) (60,476) (47,069)
Dividend income......................................... 1,254 942 1,580
Gain (loss) on disposal of property, plant and
equipment............................................ -- -- 91,399
Gain (loss) on sale of securities....................... 4,750 -- (5,691)
Miscellaneous, net...................................... 280 4,718 (4,009)
---------- ---------- -----------
Total other expense, net.................................. (42,654) (54,816) 36,210
---------- ---------- -----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities....... (195,245) (135,885) (51,942)
Income tax expense (benefit).............................. 58,032 54,199 (424,507)
---------- ---------- -----------
Net earnings.............................................. (253,277) (190,084) 372,565
Retained earnings at beginning of period.................. 1,157,364 888,268 680,782
Dividends paid............................................ (15,820) (17,402) (19,775)
Retained earnings adjustments............................. -- -- (1,594,400)
---------- ---------- -----------
Retained earnings at end of period........................ $ 888,267 $ 680,782 $ (560,828)
========== ========== ===========
</TABLE>
F-3
<PAGE> 232
BELK DEPARTMENT STORE OF STUTTGART, ARK., INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company." The Company's fiscal year ends on the Saturday closest to each
January 31. Fiscal years 1997 and 1996 ended on February 1, 1997, February 3,
1996, and January 31, 1995 respectively.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders equity of the subsidiaries are included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholder's equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
F-4
<PAGE> 233
BELK DEPARTMENT STORE OF STUTTGART, ARK., INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. (BSS) in obtaining
merchandising, architectural, legal, accounting, internal audit, accounts
payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1995 and 1996 amounts have been reclassified in order to be
consistent with classifications adopted in 1997. These reclassifications have no
effect on the Company's total shareholders' equity or net earnings as previously
reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements
F-5
<PAGE> 234
BELK DEPARTMENT STORE OF STUTTGART, ARK., INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
issued for all fiscal periods starting after December 15, 1995 and requires the
recognition of impairment losses on long-lived assets when book values exceed
expected future cash flows.
(12) MERGER
As of August 3, 1996, Belk Department Store of Stuttgart, Ark., Inc.
(Stuttgart) was merged into Belk-Jones Company, Inc. -- Texarkana, Ark.
(Texarkana) in a stock for stock exchange. Since this merger was between
corporations under common control, it has been accounted for at historical cost
in a manner similar to that in a pooling of interests. The name of the surviving
corporation was changed to Belk Department Store of Stuttgart, Ark., Inc.
The financial statements for the years ended February 3, 1996 and January
31, 1995 represent a combination of Stuttgart and Texarkana, and are presented
for comparative purposes only.
F-6
<PAGE> 235
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 4, SUBTITLE 3, CHAPTER 26
ARKANSAS BUSINESS CORPORATIONS ACT
STATE OF ARKANSAS
SUBCHAPTER 10 -- MERGER AND CONSOLIDATION
4-26-1007. RIGHTS OF DISSENTING SHAREHOLDERS.
(a) If a shareholder of a corporation which is a party to a merger or
consolidation files with the corporation, prior to or at the meeting of
shareholders at which the plan of merger or consolidation is submitted to a
vote, a written objection to the plan of merger or consolidation and does not
vote in favor thereof, and the shareholder within ten (10) days after the date
on which the vote was taken makes written demand on the surviving or new
domestic or foreign corporation for payment of the fair value of his shares as
of the day prior to the date on which the vote was taken approving the merger or
consolidation, then, if the merger or consolidation is effected, the surviving
or new corporation shall pay to the shareholder, upon surrender of his
certificate or certificates representing the shares, the fair value thereof.
(b) The demand shall state the number and class of the shares owned by the
dissenting shareholder.
(c) Any shareholder failing to make demand within the ten-day period shall
be bound by the terms of the merger or consolidation.
(d) Within ten (10) days after the merger or consolidation is effected, the
surviving or new corporation, as the case may be, shall give notice to each
dissenting shareholder who has made demand as herein provided for the payment of
the fair value of his shares.
(e)(1) If within thirty (30) days after the date on which the merger or
consolidation was effected the value of such shares is agreed upon between the
dissenting shareholder and the surviving or new corporation, payment shall be
made within ninety (90) days after the date on which such merger or
consolidation was effected, upon the surrender of his certificate or
certificates representing those shares.
(2) Upon payment of the agreed value, the dissenting shareholder shall
cease to have any interest in those shares or in the corporation.
(f)(1) If within the period of thirty (30) days the shareholder and the
surviving or new corporation do not so agree, then the dissenting shareholder,
within sixty (60) days after the expiration of the thirty-day period, may file a
petition in the circuit court of the county in which the registered office of
the surviving corporation is located, if the surviving corporation is a domestic
corporation or in the Pulaski County Circuit Court if the surviving corporation
is a foreign corporation, asking for a finding and determination of the fair
value of the shares and shall be entitled to judgment against the surviving or
new corporation for the amount of the fair value as of the day prior to the date
on which the vote was taken approving such merger or consolidation, together
with interest thereon to the date of the judgment.
(2) The judgment shall be payable only upon and simultaneously with the
surrender to the surviving or new corporation of the certificate or certificates
representing the shares.
(3) Upon payment of the judgment, the dissenting shareholder shall cease to
have any interest in the shares or in the surviving or new corporation.
(4) Unless the dissenting shareholder files the petition within the time
herein limited, the shareholder and all persons claiming under him shall be
bound by the terms of the merger or consolidation.
(g) Shares acquired by the surviving or new corporation pursuant to the
payment of the agreed value thereof or to payment of the judgment entered, as in
this section provided, may be held and disposed of by the corporation as in the
case of other treasury shares.
A-1
<PAGE> 236
(h) The provisions of this section shall not apply to a merger if, on the
date of the filing of the articles of merger, the surviving corporation is the
owner of all the outstanding shares of the other domestic or foreign
corporations that are parties to the merger.
A-2
<PAGE> 237
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statement of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
---------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement.................... $3,686,309 $ 372,565 $ (4,873) $ 19,909 $1,514,772
Adjustments to eliminate less than wholly-owned
subsidiaries................................. -- -- -- -- --
---------- --------- -------- -------- ----------
Adjusted Shareholders' Statement............... $3,686,309 372,565 (4,873) 19,909 1,514,772
========== --------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E................ (62,655) (91,399) (91,399)
Gain/loss on sale of securities.............. 3,901 5,691 5,691
Impairment loss.............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries............................... -- -- --
Gain/loss on discontinued operations......... -- -- --
Adjustment to tax expense.................... (408,172) -- -- --
--------- -------- --------
Total non-operating items...................... (466,926) (85,708) (85,708)
--------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities.............................. -- -- --
Adjustment for ownership in other Belk
entities................................... -- -- -- --
--------- -------- -------- ----------
Per Model...................................... $ (94,361) $(90,581) $(65,799) $1,514,772
========= ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER SHAREHOLDERS'
STATEMENT
Assets
Cash & cash equivalents.................... $ (40,513)
Negative cash balances reclassified to
accounts payable......................... --
Receivables from affiliates, net........... --
Loans receivable from affiliates, net...... (7,900)
Liabilities
Notes payable.............................. --
Current installments of long-term debt..... --
Current portion of obligations under
capital leases........................... --
Payables to affiliates, net................ 23,939
Long-term debt, excluding current
installments............................. --
Obligations under capital leases, excluding
current portion.......................... --
Loans payable to affiliates, net........... --
----------
Net debt (cash)................................ (24,474)
Adjustments to eliminate less than wholly-owned
subsidiaries................................. --
----------
Per Model...................................... $ (24,474)
==========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 238
SUPPLEMENT NO. 2
<PAGE> 239
BELK DEPARTMENT STORE OF STUTTGART, ARK., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 2:40 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
-------------------
-------------------------------
Signature
-------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 2
<PAGE> 240
BELK-LINDSEY STORES, INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk-Lindsey Stores, Inc. (the "Company"), to
be held on April 16, 1998, at 12:00 p.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $1.00 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Florida law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 5.7075 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 1,605,537 shares of New Belk Class A Common Stock which will
represent approximately 2.6759% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage paid
(3)
<PAGE> 241
envelope. If you plan to attend the Special Meeting, you may vote in person if
you wish, even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 242
BELK-LINDSEY STORES, INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK-LINDSEY STORES, INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk-Lindsey Stores, Inc. (the "Company") will be held on April 16,
1998, at 12:00 p.m., local time, at the offices of Belk Stores Services, Inc.,
2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for the following
purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $1.00 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Florida law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 5.7075 shares of Class A Common Stock, par value $.01 per share, of
New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 243
BELK-LINDSEY STORES, INC.
SUPPLEMENT NO. 3
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 3 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK-LINDSEY STORES,
INC. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE DISCUSSION IN THE
PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED HEREIN ASSUMES THAT
ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION. IF ANY ONE OR MORE
BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE INFORMATION
CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 11
DETERMINATION OF EXCHANGE RATIO............................. 13
COMPARATIVE PER SHARE DATA.................................. 15
SELECTED HISTORICAL FINANCIAL INFORMATION................... 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 17
General................................................... 17
Results of Operations..................................... 17
Comparison of Nine Months Ended November 1, 1997 and
November 2, 1996........................................ 17
Comparison of Fiscal Years Ended February 1, 1997 and
February 3, 1996........................................ 18
Comparison of Fiscal Years Ended February 3, 1996 and
January 31, 1995........................................ 18
Seasonality and Quarterly Fluctuations.................... 19
Liquidity and Capital Resources........................... 19
Impact of Inflation....................................... 20
BUSINESS OF THE COMPANY..................................... 20
SECURITY OWNERSHIP OF THE COMPANY........................... 22
INDEX TO HISTORICAL FINANCIAL STATEMENTS.................... F-1
Report of KPMG Peat Marwick LLP, Independent Auditors..... F-2
Balance Sheets............................................ F-3
Statements of Operations.................................. F-4
Statements of Shareholders' Equity........................ F-5
Statements of Cash Flows.................................. F-6
Notes to Financial Statements............................. F-7
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 244
THE COMPANY
The Company was incorporated as a Florida corporation in 1956. The mailing
address of the Company's principal executive offices is 2801 West Tyvola Road,
Charlotte, NC 28217-4500, and its telephone number at that address is (704)
357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 12:00 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $1.00 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under Florida law),
will be converted, without any action on the part of the Shareholder, into the
right to receive 5.7075 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk (the "New Belk Class A Common Stock"). All
the shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 702,673 shares of Common Stock
outstanding held of record by 90 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 89.4% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 245
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each shareholder who does not exercise
appraisal rights as described herein will become a holder of New Belk Common
Stock. The rights of the Shareholders will thereafter be governed by Delaware
Law, including Delaware General Corporation Law (the "DGCL"), the New Belk
Certificate and the New Belk Bylaws. The following is a summary of the material
differences between the rights of the Shareholders and the rights of the New
Belk Stockholders pursuant to the differences between the DGCL and the Florida
Business Corporation Act (the "FBCA"), between the New Belk Certificate and the
Articles of Incorporation of the Company (the "Company Articles") and between
the New Belk Bylaws and the Bylaws of the Company (the "Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 1,409,244 shares
of Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder (as
defined in the New Belk Certificate), whether by sale, assignment, gift,
bequest, appointment or otherwise, such share will be converted automatically
into a share of New Belk Class B Common Stock. Shares of New Belk Class A Common
Stock are convertible into New Belk Class B Common Stock, in whole or in part,
at any time and from time to time at the option of the holder, on the basis of
one share of New Belk Class B Common Stock for each share of New Belk Class A
Common Stock converted. Shares of New Belk Class A Common Stock held by a New
Belk Stockholder who is a Class A
3
<PAGE> 246
Permitted Holder will also automatically convert into New Belk Class B Common
Stock in the event that such New Belk Stockholder no longer meets the
requirements of a Class A Permitted Holder. New Belk Class B Common Stock has no
conversion rights. The Company Articles provide for one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution, as the case may be,
New Belk makes the same dividend or distribution with respect to each other
class of outstanding New Belk Common Stock. In the case of dividends or other
distributions payable in shares of a class of New Belk Common Stock, including
distributions pursuant to stock splits or divisions of a class of New Belk
Common Stock which occur after the first issuance of a class of New Belk Common
Stock, only shares of New Belk Class A Common Stock may be distributed with
respect to New Belk Class A Common Stock and only shares of New Belk Class B
Common Stock may be distributed with respect to New Belk Class B Common Stock.
Whenever a dividend or distribution, including distributions pursuant to stock
splits or divisions of New Belk Common Stock, is payable in shares of New Belk
Class A Common Stock or New Belk Class B Common Stock, the number of shares of
each class of New Belk Common Stock payable per share of such class of New Belk
Common Stock must be equal in number. In the case of dividends or other
distributions consisting of other voting securities of New Belk or of voting
securities of any corporation which is a wholly-owned subsidiary of New Belk,
New Belk must declare and pay such dividends in two separate classes of such
voting securities, identical in all respects, except that (i) the voting rights
of each such security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each such security paid to the holders of
New Belk Class A Common Stock and (ii) such security paid to the holders of New
Belk Class A Common Stock must convert into the security paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock. In the case
of dividends or other distributions consisting of securities convertible into,
or exchangeable for, voting securities of New Belk or voting securities of
another corporation which is a wholly-owned subsidiary of New Belk, such
convertible or exchangeable securities and the underlying securities must be
identical in all respects (including, without limitation, the conversion or
exchange rate), except that (i) the voting rights of each security underlying
the convertible or exchangeable security paid to the holders of New Belk Class B
Common Stock must be one-tenth of the voting rights of each security underlying
the convertible or exchangeable security paid to the holders of the New Belk
Class A Common Stock and (ii) such underlying securities paid to the holders of
New Belk Class A Common Stock must convert into the underlying securities paid
to the holders of New Belk Class B Common Stock upon the same terms and
conditions applicable to the conversion of New Belk Class A Common Stock into
New Belk Class B Common Stock and must have the same restrictions on transfer
and ownership applicable to the transfer and ownership of the New Belk Class A
Common Stock.
Pursuant to the FBCA, a corporation subject to restrictions in the articles
of incorporation, may make distributions to shareholders as long as giving
effect to the distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to be less than the sum of its total liabilities plus
(unless the articles of incorporation permit otherwise) the amount that would be
needed if the corporation dissolved at the time of the payment of the dividend
to satisfy
4
<PAGE> 247
the preferential rights upon dissolution of shareholders whose preferential
rights are superior to those receiving the distribution.
The Company Bylaws provide that the Board of Directors of the Company (the
"Company Board") may from time to time declare dividends on the Company's
outstanding shares in the manner and upon the terms and conditions provided by
law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The FBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 10%, unless a
greater percentage not to exceed 50% is required by the articles of
incorporation, of all votes entitled to be cast on the proposed corporate act to
call a special meeting. The Company Bylaws authorize the Chairman, President,
Secretary, the Company Board and any shareholder pursuant to the written request
of the holders of not less than 10% of all the shares entitled to vote at the
meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
Under the FBCA, unless the articles of incorporation or the FBCA specifies
a different voting requirement, if the votes cast within the voting group in
favor of the corporate action exceed the votes cast in opposition to the
corporate action at a duly held meeting at which a quorum is present, the
corporate action is deemed to be approved by the shareholders. The Company
Articles do not specify any different voting requirements than those set forth
in the FBCA.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class, or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment would be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
5
<PAGE> 248
Under the FBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the FBCA
requires that an amendment to the articles of incorporation must be recommended
by the board of directors to the shareholders and must be approved (i) by a
majority (unless the articles of incorporation or the board of directors require
a greater vote or a vote by voting groups) of the votes entitled to be cast on
the amendment by any voting group with respect to which the amendment would
create dissenters' rights and (ii) when a quorum is present, by all other voting
groups entitled to vote on the amendment through casting more affirmative than
opposing votes. As under the DGCL, the holders of the outstanding shares of a
class or series are entitled to vote as a separate voting group (if shareholder
voting is otherwise required by the FBCA) on a proposed amendment if the
amendment would change certain fundamental rights and preferences of that class
or series. The Company Articles do not specify a greater vote or a vote by
voting groups to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The FBCA permits the board of directors of a corporation to amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or FBCA
reserves this power exclusively to the shareholders in whole or part or (ii) the
shareholders in amending or repealing a particular bylaw provided expressly that
the board of directors may not amend or repeal that bylaw. The shareholders of
the corporation may amend or repeal the bylaws of the corporation even though
such bylaws may be amended or repealed by the board of directors of the
corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
The provisions of the FBCA concerning action by written consent are
equivalent to the DGCL. The Company Articles do not change the state law
requirement.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding
6
<PAGE> 249
having the right to vote for such directors, order an election to be held to
fill any such vacancies or newly created directorships or to replace the
directors chosen by the directors then in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the FBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum of the board and if the vacancy is one that the directors are
authorized to fill, then the directors may fill the vacancy by the affirmative
vote of a majority of all the directors remaining in office. Whenever the
holders of shares of any voting group are entitled to elect a class of one or
more directors by the provisions of the articles of incorporation, vacancies in
such class may be filled by holders of shares of that voting group or by a
majority of the directors then in office elected by such voting group or by a
sole remaining director so elected. If no director elected by such voting group
remains in office, unless the articles of incorporation provide otherwise,
directors not elected by such voting group may fill vacancies. The Company
Articles are silent with respect to filling vacancies.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation. If the
number of directors is set by the certificate of incorporation, then that number
may be changed only by an amendment to the certificate of incorporation. The New
Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The FBCA requires a corporation to have at least one director. The number
of directors is set by the articles of incorporation or the bylaws and may be
increased or decreased by amendment or in the manner provided in the articles of
incorporation or the bylaws. The Company Bylaws require the Company Board to
consist of at least three, but no more than 15, members.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The FBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director must be a natural person and at
least 18 years of age but does not have to be a resident of Florida or a
shareholder of the corporation unless otherwise provided for in the articles of
incorporation or bylaws. The Company Bylaws do not require directors of the
Company to be residents of Florida or shareholders of the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each class expiring at the
annual meeting in successive years beginning with the first class and
progressing to the third class, if any. Thereafter, directors are chosen for a
full term to succeed those whose terms expire.
7
<PAGE> 250
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The FBCA concerning the classification of the board of directors is
equivalent to the DGCL. The Company Articles do not provide for the staggering
of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the FBCA, the shareholders may remove one or more directors with or
without cause unless the articles of incorporation provide that directors may be
removed only for cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under both the DGCL and the FBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation. Neither the New Belk Certificate nor the Company
Articles provide for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the FBCA generally permits transactions involving a
Florida corporation and an interested director of that corporation if: (i) the
fact of such relationship or interest is disclosed or known to the board of
directors or committee which authorizes, approves or ratifies the contract or
transaction by a vote or consent sufficient for the purpose without counting the
votes or consents of such interested directors; (ii) the fact of such
relationship or interest is disclosed or known to the shareholders entitled to
vote and they authorize, approve or ratify such contract or transaction by vote
or written consent; or (iii) the contract or transaction is fair and reasonable
as to the corporation at the time it is authorized by the board, a committee or
the shareholders.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the
8
<PAGE> 251
corporation with respect to any claim, issue or matter, unless a court shall
deem it proper, and then such indemnification may be made only to the extent
that such court shall determine. The DGCL requires a corporation to indemnify an
agent of the corporation to the extent the agent was successful in the defense
of any proceeding, on the merits or otherwise, to which the agent was a party
because the agent is or was an agent of the corporation or is or was serving at
the corporation's request as an agent of another foreign or domestic corporation
or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
The FBCA concerning indemnification is similar in all material respects to
the DGCL. However, the FBCA differs from the DGCL in terms of the extent to
which a director may limit his personal liability. Under the FBCA, a director is
not personally liable for monetary damages to the corporation or any other
person for any statement, vote, decision or failure to act, regarding corporate
management or policy unless the director breached or failed to perform his
duties as a director and the director's breach of, or failure to perform, those
duties constitutes (i) a violation of the criminal law, unless the director had
reasonable cause to believe his conduct was lawful or had no reasonable cause to
believe his conduct was unlawful, (ii) a transaction from which the director
derived an improper personal benefit, either directly or indirectly, (iii) a
circumstance involving unlawful distributions, (iv) in a proceeding by or in the
right of the corporation to procure a judgment in its favor or by or in the
right of a shareholder, conscious disregard for the best interest of the
corporation, or willful misconduct, or (v) in a proceeding by or in the right of
someone other than the corporation or a shareholder, recklessness or an act or
omission which was committed in bad faith or with malicious purpose or in a
manner exhibiting wanton and willful disregard of human rights, safety or
property.
The Company Bylaws authorize indemnification as provided in the FBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company shall not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of partnership, or as a trustee
or administrator under an employee benefit plan. The Company will also indemnify
the director or officer for reasonable costs, expenses and attorneys' fees in
connection with the enforcement rights to indemnification granted therein, if it
is so determined in accordance with the Company Articles that the director or
officer is entitled to indemnification thereunder.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical
9
<PAGE> 252
outstanding or treasury share after the merger or consolidation and (iii) either
no shares of the surviving corporation and no securities convertible into such
stock are to be issued in the merger or consolidation or the number of shares to
be issued by the surviving corporation in the merger or consolidation does not
exceed 20% of the shares outstanding immediately prior to the merger or
consolidation. The DGCL also requires approval by majority vote of the
stockholders eligible to vote to approve the sale of all or substantially all of
the assets of the corporation other than in the usual and regular course of
business.
The FBCA concerning the approval of mergers is similar in all material
respects to the DGCL, except that the FBCA provides for only two criteria which
the surviving corporation must meet before it is exempt from the requirement of
approval of the merger by its shareholders: (i) the articles of incorporation of
the surviving corporation must not differ from its articles before the merger;
and (ii) each shareholder of the surviving corporation whose shares were
outstanding immediately prior to the effective date of the merger must hold the
same number of shares, with identical designations, preferences, limitations and
relative rights, immediately after the merger. The FBCA and DGCL provisions
concerning shareholder approval of the sale of substantially all of the assets
of a corporation are similar in all material respects.
Anti-Takeover Provisions. The DGCL and the FBCA contain business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL and
the FBCA, "business combinations" and "affiliated transactions," respectively,
generally encompass the following: (i) any merger or consolidation of the
corporation or any direct or indirect majority-owned subsidiary of the
corporation with an interested shareholder; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition to or with the interested
stockholder of a substantial percentage of assets of the corporation; (iii) any
transaction which results in the issuance or transfer by the corporation of any
stock of the corporation to the interested stockholder, except in certain
circumstances; (iv) any transaction involving the corporation which has the
effect of increasing the proportionate share of the stock of any class or
series, or securities convertible into the stock of any class or series, of the
corporation which is owned by the interested stockholder, except in certain
circumstances; or (v) any receipt by the interested stockholder of the benefit
of any loans, advances, guarantees, pledges or other financial benefits (other
than those expressly permitted in (i) through (iv) above) provided by or through
the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) an
affiliate or associate of the corporation and within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation. The FBCA
defines "interested shareholder" as any person who is the beneficial owner of
more than 10% of the outstanding voting shares of the corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
10
<PAGE> 253
The FBCA provides that, except in certain circumstances, an affiliated
transaction must be approved by the affirmative vote of the holders of 66 2/3%
of the voting shares other than the shares beneficially owned by the interested
shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the FBCA provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The FBCA concerning preemptive rights is equivalent to the DGCL. The
Company Articles do not grant preemptive rights to any Shareholder.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the FBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) excerpts from minutes of any
meeting of the board of directors, records of any action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; (iii) the record of shareholders; and
(iv) any other books or records.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Section 607.1302 of the FBCA has the
right to receive in cash the fair value of such Shareholder's shares of Common
Stock determined immediately prior to the Merger, excluding any appreciation or
depreciation in value in anticipation of the Merger. The following is a summary
of Section 607.1302 of the FBCA and the procedures for Shareholders dissenting
from the Merger and perfecting such dissenters' rights of appraisal. This
summary is qualified in its
11
<PAGE> 254
entirety by reference to Section 607.1302 of the FBCA, which is reprinted in
full as Annex A to this Prospectus Supplement. Annex A should be reviewed
carefully by any Shareholder who wishes to perfect such statutory dissenters'
rights. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN SECTION
607.1302 OF THE FBCA WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
A Shareholder may dissent as to all or less than all of the shares of
Common Stock that are registered in his or her name. Any Shareholder intending
to enforce the right to dissent (i) must not vote in favor of the Reorganization
Agreement, and (ii) must file a written notice of intent to demand payment for
his or her shares (the "Objection Notice") with the Company, 2801 West Tyvola
Road, Charlotte, NC 28217-4500, Attention: Ralph A. Pitts, General Counsel,
before the vote on the proposal to approve the Reorganization Agreement and the
transactions contemplated thereby is taken at the meeting. The Objection Notice
must state that the Shareholder intends to demand payment for his or her shares
of Common Stock if the Merger is effected. A VOTE AGAINST APPROVAL OF THE
REORGANIZATION AGREEMENT AND THE MERGER, IN AND OF ITSELF, WILL NOT CONSTITUTE
AN OBJECTION NOTICE SATISFYING THE REQUIREMENTS OF THE FBCA.
If the Reorganization Agreement and the Merger are approved by the
Shareholders at the Special Meeting, each Shareholder who has properly filed an
Objection Notice and not voted in favor of the Reorganization Agreement and the
Merger will be notified by the Company of such approval within 10 days of the
Special Meeting. Within 20 days following receipt of such notice, any
Shareholder electing to dissent must file a notice of such election, stating the
Shareholder's name, address, the number, classes and series of shares as to
which the Shareholder dissents, and a demand for payment of the fair value of
such shares ("Election Notice"), and deposit certificates representing the
Common Stock as to which such Election Notice is given with the Company.
Within 10 days following the expiration of the period in which Shareholders
may file their Election Notices or 10 days after the Merger is consummated,
whichever is later (but in no case later than 90 days following the date the
Shareholders approve the Reorganization Agreement and the Merger), the Company
must make a written offer to each Shareholder who has properly filed an Election
Notice to pay an amount which the Company estimates to be a fair value for the
Shareholder's shares. This offer will be accompanied by certain of the Company's
financial statements. If the Merger is not consummated within 90 days following
the date of approval of the Reorganization Agreement and the Merger, any offer
to pay by the Company to dissenting shareholders will be conditional upon
consummation of the Merger. Any Shareholder who accepts such offer within 30
days will receive payment for the dissenting Shareholder's shares within 90 days
of such offer to pay or consummation of the Merger, whichever is later.
In the event (i) that the Company fails to make any payment offer within
the time period set forth above or (ii) a dissenting Shareholder fails to accept
such offer within 30 days and makes a written demand for payment to the Company
within 60 days following the consummation of the Merger, the Company must
institute proceedings in state circuit court in St. Lucie County, Florida (the
"Court") requesting that the fair value of such dissenting Shareholder's shares
be determined. If the Company fails to file such action, any such dissenting
Shareholder will have the right to file an action in such Shareholder's own name
for determination as to the fair value of such Shareholder's shares. All
dissenting Shareholders who have not accepted payment offers by the Company must
be made a party to such court action. The court may, in its discretion, appoint
an appraiser to receive evidence and recommend a decision on the question of
fair value. The judgment may, in the discretion of the court, include a fair
rate of interest. The Company will bear the costs and expenses of the
proceeding, as determined by the court, except that the court may assess any
portion of the costs and expenses against any or all dissenting Shareholders who
rejected the Company's offer to pay for their shares, if the court finds that
the rejection of the Company's offer was arbitrary, vexatious or not in good
faith. The court's determination of the expenses of the proceeding will include
reasonable compensation for, and expenses of, the appraisers, but will not
include attorneys' or experts' fees and expenses for any party. If the fair
value of the shares as determined by the court materially exceeds the amount the
Company offered for the shares, the court may, in its discretion, award to any
Shareholder who is a party to the action attorneys' fees and compensation for
experts employed by the Shareholder in the proceeding.
12
<PAGE> 255
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ----------- ----------- -------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $89,591,732 $89,591,732 0.6 $(13,667,001) $67,422,040
EBITDA............... 21,807,460 3,748,276 7 (13,667,001) 39,904,933
EBIT................. 19,985,687 1,926,503 10 (13,667,001) 32,932,031
Net Income........... 12,126,977 958,123 15 -- 14,371,845
Book Equity.......... 49,538,411 48,910,683 1 -- 48,910,683
</TABLE>
13
<PAGE> 256
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk-Simpson Company,
Greenville, South
Carolina 22.6323% X $43,580,286 = $ 9,863,221
-----------
Total $ 9,863,221
===========
Relative Operating Value of Company $67,422,040
Relative Operating Value of Other Companies Owned by Company + 9,863,221
-----------
Total Relative Value of Company = $77,285,261
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Enterprises,
Inc. 56.1613% X $77,285,261 = $43,404,407
Belk of Waycross,
Ga., Inc. .9672 X 77,285,261 = 747,503
Belk Brothers Company 2.4114% X 77,285,261 = 1,863,657
Belk of Statesboro,
Ga., Inc. .4269% X 77,285,261 = 329,931
-----------
Total $46,345,498
===========
Total Relative Value of Company $77,285,261
Total Relative Value of Company Owned by Other Belk Companies - 46,345,498
-----------
Net Relative Value of Company = $30,939,763
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$30,939,763 / $1,156,226,577 = 2.6759%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(2.6759% X 59,998,834) / 281,303 = 5.7075
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
14
<PAGE> 257
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share, and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the notes thereto, contained elsewhere in this Prospectus Supplement and
unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS
ENDED FEBRUARY 1, ENDED NOVEMBER 1,
1997 1997
----------------- -----------------
<S> <C> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $17.26 $ 1.15
Dividends(2).............................................. 0.26 0.26
Book value per share(3)................................... 70.50 71.39
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96 0.29
Dividends(2).............................................. 0.26 0.22
Book value per share(5)................................... 12.52 12.65
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 5.48 1.63
Dividends(2).............................................. 1.48 1.27
Book value per share...................................... 71.46 72.18
</TABLE>
- ---------------
(1) Based on 702,673 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding during the year ended February 1, 1997
and the nine-month period ended November 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 702,673 shares
of Common Stock, the number of shares of Common Stock outstanding at the end
of the periods presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying the New Belk pro forma combined book value per share and New
Belk pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
15
<PAGE> 258
SELECTED HISTORICAL FINANCIAL INFORMATION
The following selected historical financial information of the Company
presented below under the captions "Selected Statement of Income Data" and
"Selected Balance Sheet Data" for, and as of the end of, each of the years in
the five-year period ended February 1, 1997, are derived from the financial
statements of the Company. The financial statements as of February 1, 1997 and
for the year then ended have been audited by KPMG Peat Marwick LLP, independent
certified public accountants. Such financial statements, and the report thereon,
are included elsewhere in this Prospectus Supplement. The selected data
presented below for, and as of the end of, each of the years in the four-year
period ended February 3, 1996 and for the nine-month periods ended November 2,
1996 and November 1, 1997, and as of November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited data reflects, in the
judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
The information presented below under the caption "Selected Operating Data" is
unaudited.
Selected historical combined and pro forma financial data for the Belk
Companies is included in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
----------------------------------------------------------------------- -------------------------
FEBRUARY 2, FEBRUARY 1, JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1993 1994 1995 1996 1997 1996 1997
------------ ------------ ------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED STATEMENT OF INCOME:
Revenues............. $134,926,143 $127,163,297 $117,678,112 $105,285,005 $90,167,700 $60,895,636 $57,489,697
Cost of goods sold... 95,002,474 91,660,737 83,542,112 72,993,019 62,875,001 43,314,545 39,439,488
Depreciation and
amortization....... 3,334,800 3,305,822 2,914,430 2,618,645 1,821,773 1,392,776 1,077,926
Income (loss) from
continuing
operations......... 2,753,558 (492,253) (1,672,429) 670,523 12,126,977 10,158,243 810,741
Net income (loss).... 2,753,558 (216,587) (1,672,429) 670,523 12,126,977 10,158,243 810,741
Income (loss) per
share(1)........... 3.92 (0.31) (2.38) 0.95 17.26 14.46 1.15
Dividends per
share.............. -- -- -- -- 0.26 0.26 0.26
Weighted average
number of shares
outstanding ....... 702,673 702,673 702,673 702,673 702,673 702,673 702,673
SELECTED BALANCE SHEET DATA:
Accounts
receivable -- net... $ 19,147,975 $ 18,231,022 $ 16,004,890 $ 14,523,053 $14,221,102 $12,588,094 $11,625,470
Merchandise
inventories........ 34,863,759 31,403,701 30,268,311 24,884,473 20,792,057 23,932,459 21,770,254
Working capital...... 45,235,051 40,044,212 39,676,281 36,404,047 42,617,870 35,101,202 41,496,213
Total assets......... 81,742,139 70,221,668 65,635,428 63,007,188 74,337,001 60,464,761 64,623,305
Short-term debt...... -- -- -- -- 5,000,000 -- --
Long-term debt....... 20,800,000 15,400,000 12,673,125 8,583,375 -- -- --
Capitalized lease
obligations........ 3,255,333 2,901,973 2,575,307 1,525,448 1,371,408 1,409,919 1,243,177
Shareholders'
equity............. $ 39,223,468 $ 38,150,905 $ 36,478,476 $ 37,594,129 $49,538,411 $47,569,676 $50,166,457
Book value per
share(2)........... $ 55.82 $ 54.29 $ 51.91 $ 53.50 $ 70.50 $ 67.70 $ 71.39
SELECTED OPERATING DATA:
Number of stores at
end of period...... 26 24 21 20 17 17 16
Comparable store net
revenue increases
(decreases)........ (2.4)% 0.5% (2.6)% (4.4)% 1.0% 0.0% 5.0%
</TABLE>
- ---------------
(1) Based on the weighted average number of shares of Common Stock outstanding
at the end of each period presented.
(2) Based on the number of shares of Common Stock outstanding at the end of each
period presented.
16
<PAGE> 259
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is a discussion of the historical financial condition and
results of operations of Belk-Lindsey Stores, Inc. for each of the fiscal years
ended January 31, 1995, February 3, 1996, and February 1, 1997 and for each of
the nine-month periods ended November 2, 1996 and November 1, 1997 which should
be read in conjunction with the historical financial statements, including the
notes thereto, included elsewhere in this Proxy Statement/Prospectus.
GENERAL
Certain Components of Net Income. Revenues include sales from retail
operations and leased departments. Cost of goods sold include cost of
merchandise, buying, and occupancy expense. Selling, general, and administrative
expense ("SG&A") includes payroll, advertising, credit, and depreciation
expense.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship to revenues of certain items in the Company's statements of income
and other pertinent financial data.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
--------------------------------------- -------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995(A) 1996(A) 1997(A) 1996 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues.................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold.......................... 71.0 69.3 69.7 71.1 68.6
Selling, general and administrative
expenses.................................. 29.5 29.0 28.2 31.5 29.1
Income (loss) from operations............... (0.5) 1.7 1.1 (4.1) 2.3
Interest expense, net....................... 1.4 1.3 0.4 0.5 0.2
Income tax expense (benefit)................ (0.9) 0.1 8.3 9.8 0.4
Net income (loss)........................... (1.4) 0.6 13.4 16.7 1.4
Comparable stores revenues increase
(decrease)................................ (2.6) (4.4) 1.0 0.0 5.0
Number of stores
Opened.................................... 0 0 0 0 0
Closed.................................... 4 1 3 3 1
Total -- end of period...................... 21 20 17 17 16
</TABLE>
- ---------------
(a) The fiscal years ended February 1, 1997 and January 31, 1995 consisted of 52
weeks. The fiscal year ended February 3, 1996 consisted of 368 days.
COMPARISON OF NINE MONTHS ENDED NOVEMBER 1, 1997 AND NOVEMBER 2, 1996
Revenues. The Company's revenues for the nine months ended November 1,
1997 decreased 5.6%, or $3.4 million, compared to the same period in 1996 from
$60.9 million to $57.5 million. The decrease was primarily attributable to the
closing of three stores which contributed to a decrease in revenues of $5.9
million. Comparable store revenues increased 5.0% for the nine months ended
November 1, 1997 compared to the same period in 1996. The increase in comparable
store revenues is primarily attributed to an increase in revenues from the newly
remodeled Gainesville Oaks Mall and Leesburg Lake Square stores.
Cost of Goods Sold. As a percentage of revenues, cost of goods sold
decreased from 71.1% for the nine months ended November 2, 1996 to 68.6% for the
nine months ended November 1, 1997 due to better inventory management and lower
markdowns. Cost of goods sold decreased 8.9%, or $3.9 million, from $43.3
million for the nine months ended November 2, 1996 to $39.4 million for the nine
months ended November 1, 1997 primarily due to a decrease in revenues.
Selling, General and Administrative Expenses. As a percentage of revenues,
SG&A decreased from 31.5% of revenues for the nine months ended November 2, 1996
to 29.1% for the nine months ended ended
17
<PAGE> 260
November 1, 1997. SG&A decreased 12.8%, or $2.5 million, from $19.2 million for
the nine months ended ended November 2, 1996 to $16.7 million for the nine
months ended November 1, 1997. The decrease is primarily attributable to the
closed stores, which contributed $2.2 million of the decrease. Excluding the
impact of the closed stores, SG&A decreased 1.8% or $0.3 million. This decrease
was attributable to decreases in payroll and depreciation expense offset by an
increase in bad debt expense, net.
Interest Expense, Net. Interest expense, net decreased 68.3%, or $0.2
million, from 0.5% of revenues for the nine months ended November 2, 1996 to
0.2% of revenues for the nine months ended November 1, 1997. This decrease was
primarily attributable to a decrease in average outstanding borrowings.
Income Taxes. The effective income tax rate was 23.3% for the nine months
ended November 1, 1997 and 37.1% for the nine months ended November 2, 1996. The
Company's effective income tax rate of 23.3% for the nine months ended ended
November 1, 1997 differs from the federal income tax statutory rate of 34.0%
principally because of permanent differences related to deferred compensation
insurance.
Net Income. Net income decreased $9.3 million to 1.4% of revenues for the
nine months ended ended November 1, 1997 compared to 16.7% of revenues for the
nine months ended November 2, 1996. A gain of $18.9 million on the sale of
property and fixtures of the closed stores was recognized in the nine months
ended November 2, 1996.
COMPARISON OF FISCAL YEARS ENDED FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
Revenues. The Company's revenues decreased 14.4%, or $15.1 million, from
$105.3 million in fiscal year 1996 to $90.2 million in fiscal year 1997. The
decrease was primarily attributable to the closing of four stores. The four
stores contributed a decrease in revenues of $13.7 million. On a comparable
store basis, revenues increased 1.0% compared to the first 52 weeks of fiscal
year 1996.
Cost of Goods Sold. As a percentage of revenues, cost of goods sold
increased from 69.3% in fiscal year 1996 to 69.7% in fiscal year 1997 primarily
due to merchandise increases resulting from higher markdowns. Cost of goods sold
decreased 13.9%, or $10.1 million, from $73.0 million in fiscal year 1996 to
$62.9 million in fiscal year 1997 primarily due to a decrease in revenues. The
decrease in cost of goods sold associated with the closed stores was $9.5
million. Cost of goods sold for the comparable stores decreased 1.1% or $0.6
million.
Selling, General and Administrative Expenses. As a percentage of revenues,
SG&A decreased from 29.0% fiscal year 1996 to 28.2% in fiscal year 1997. SG&A
decreased 16.8%, or $5.1 million primarily due to the impact of the closed
stores, which contributed $4.9 million of the decrease. Excluding the impact of
the closed stores, SG&A decreased 1.1% or $0.2 million. This decrease was
attributable to decreases in payroll expense realized through efficiencies
implemented in the retail department stores and depreciation expense, partially
offset by an increase in bad debt expense, net.
Interest Expense, Net. Interest expense, net was 1.3% of revenues in
fiscal year 1996 as compared to 0.4% of revenues in fiscal year 1997. This
decrease was primarily attributable to a decrease in average outstanding
borrowings.
Income Taxes. The effective income tax rate decreased to 38.2% in fiscal
year 1997 from 13.7% in fiscal year 1996. The Company's effective income tax
rate of 13.7% for fiscal year 1996 differed from the federal income tax
statutory rate of 34.0% principally because of permanent differences related to
deferred compensation insurance and adjustments made to revalue the deferred tax
assets related to net operating carryovers.
Net Income. Net income increased $11.5 million to 13.4% of revenues in
fiscal year 1997 compared to 0.6% of revenues in fiscal year 1996. A gain of
$18.9 million on the sale of property and fixtures of the closed stores was
recognized in fiscal year 1997.
COMPARISON OF FISCAL YEARS ENDED FEBRUARY 3, 1996 AND JANUARY 31, 1995
Revenues. The Company's revenues decreased 10.5%, or $12.4 million, from
$117.7 million in fiscal year 1995 to $105.3 million in fiscal year 1996. The
decrease was primarily attributable to the closing of four
18
<PAGE> 261
stores. The four stores contributed a decrease in revenues of $8.9 million.
Adjusting for the additional days in fiscal year 1996, comparable store revenues
decreased 4.4% in fiscal year 1996 largely because of a decrease in revenues at
the Gainesville Shopping Center store, which was converted to an outlet center
in May, 1995.
Cost of Goods Sold. As a percentage of revenues, cost of goods sold
decreased from 71.0% in fiscal year 1995 to 69.3% in fiscal year 1996. Cost of
merchandise decreases were experienced due to better inventory management and
lower markdowns. Cost of goods sold decreased 12.6%, or $10.5 million, from
$83.5 million in fiscal year 1995 to $73.0 million in fiscal year 1996 primarily
due to a decrease in revenues. The four closed stores contributed a decrease in
cost of goods sold of $7.0 million.
Selling, General and Administrative Expenses. SG&A decreased 12.2%, or
$4.2 million, from 29.5% of revenues in fiscal year 1995 to 29.0% of revenues in
fiscal year 1996. The decrease is primarily attributable to the closed stores,
which contributed $3.4 million of the decrease. Excluding the impact of the
closed stores, SG&A decreased 2.5% or $0.8 million. This decrease was primarily
attributable to decreases in selling payroll and advertising expense.
Interest Expense, Net. Interest expense, net was 1.3% of revenues in
fiscal year 1996 as compared to 1.4% of revenues in fiscal year 1995. Interest
expense was $1.4 million in fiscal year 1996 as compared to $1.6 million in
fiscal year 1995.
Income Taxes. The effective income tax rate decreased from 38.9% in fiscal
year 1995 to 13.7% in fiscal year 1996. The Company's effective income tax rate
of 13.7% in fiscal year 1996 differed from the federal income tax statutory rate
of 34.0% principally because of permanent differences related to deferred
compensation insurance.
Net Income. Net income increased $2.3 million to 0.6% of revenues in
fiscal year 1996 compared to (1.4%) of revenues in fiscal year 1995.
SEASONALITY AND QUARTERLY FLUCTUATIONS
The Company has historically experienced and expects to continue to
experience seasonal fluctuations in its revenues, operating income, and net
income. The highest revenue period for the Company is the fourth quarter which
includes the Christmas selling season. A disproportionate amount of the
Company's revenues and a substantial amount of the Company's operating and net
income are realized during the fourth quarter. If for any reason the Company's
revenues were below seasonal norms during the fourth quarter, the Company's
annual results of operations could be adversely affected. The Company's
inventory levels generally reach their highest in anticipation of increased
revenues during these months.
The following table illustrates the seasonality of revenues by quarter as a
percentage of the full year for the fiscal years indicated.
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
First quarter............................................... 25.2% 24.8% 25.8%
Second quarter.............................................. 21.9 21.1 22.5
Third quarter............................................... 19.1 19.5 19.2
Fourth quarter.............................................. 33.8 34.6 32.5
</TABLE>
The Company's quarterly results of operations could also fluctuate
significantly as a result of a variety of factors, including the timing of new
store openings and remodelings.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash on hand, cash flow from
operations and borrowings under credit facilities.
During the nine months ended November 1, 1997 and November 2, 1996, net
cash used by operations was $36 thousand and $8.7 million, respectively. The
decrease in cash used by operations for the nine months ended November 1, 1997
is attributable to an increase in net income (excluding the gain on sale of
property
19
<PAGE> 262
and equipment for the nine months ended November 2, 1996) and a decrease in
accounts receivable from customers. This decrease was partially offset by an
increased use of cash to fund an additional investment in inventory and income
taxes.
In fiscal year 1997, the Company had sufficient cash flows from operations
and credit facilities to fund its working capital needs and capital
expenditures. Net cash provided (used) by operations was $4.0 million, $5.5
million, and $(3.2) million for the 1995, 1996, and 1997 fiscal years,
respectively. The increase in cash flow from operations in fiscal year 1996 was
primarily attributable to increased net income and a reduction in merchandise
inventory as a result of store closings. The decrease in cash flow from
operations in fiscal year 1997 is primarily attributable to a decrease in net
income (excluding the gain on sale of property and equipment in fiscal year
1997).
Investing activities included capital expenditures, primarily for new,
relocated, and remodeled stores and sales of property and equipment related to
store closings. Capital expenditures, primarily for new and remodeled stores,
amounted to $2.1 million in the first nine months of fiscal years 1998 and 1997.
Capital expenditures amounted to $0.6 million, $2.6 million and $3.1 million for
the 1995, 1996 and 1997 fiscal years, respectively. In fiscal year 1995, the
Belk Lindsey Lake Square Mall store was expanded to 67,000 square feet. In
fiscal year 1996, the Belk Lindsey of Oaks Mall store was remodeled and the
Orlando Colonial, Cocoa, Sarasota Gulf Gate and Port Charlotte stores were
closed. In fiscal year 1997, the Daytona Volusia Mall and Orlando Florida Mall
stores were closed resulting in net proceeds on the sale of property and
fixtures of $19.9 million. The Ocala, Florida store was remodeled during the
nine months ended November 1, 1997.
Financing activities included payments or additional borrowings on credit
facilities and capital lease obligations. The Company's total indebtedness at
November 1, 1997 was $1.2 million of capital lease obligations, comprised of
$0.2 million of current installments on capital lease obligations and $1.0
million of capital lease obligations.
RECENT DEVELOPMENTS
On March 3, 1998, the Company redeemed 50,000 shares of Common Stock owned
by the Estate of E. C. Lindsey for an aggregate price of $3.5 million. The
Company funded the redemption of the shares with cash on hand. The Exchange
Ratio has not been adjusted to reflect such transaction, nor any other
transactions occurring after February 1, 1998.
IMPACT OF INFLATION
While it is difficult to determine the precise effects of inflation,
management does not believe inflation had a material impact on the financial
statements for the periods presented.
BUSINESS OF THE COMPANY
General. The Company operates 14 retail department stores in the following
locations in Florida: Crystal River Mall in Crystal River; Bell Air Plaza in
Daytona Beach; Orange Blossom Mall in Fort Pierce; Oaks Mall in Gainesville;
Lakeland Square Mall and Southgate Shopping Center in Lakeland; Lake Square Mall
and Palm Plaza Shopping Center in Leesburg; Melbourne Square Mall in Melbourne;
Paddock Mall in Ocala; Ormond Beach Shopping Center in Ormond Beach; Lake Shore
Mall in Sebring; Miracle City Mall in Titusville; and Northgate Mall in Winter
Haven. The stores at Paddock Mall in Ocala and Oaks Mall in Gainesville were
recently renovated. The stores are managed out of the Bergren group office in
Gainesville, Florida. The Company also operates the Bergren group office in a
facility adjacent to the Gainesville Shopping Center store. The Bergren group
office provides buying advertising, accounting, personnel and other services to
stores in the Bergren group area.
The Company also operates two clearance centers in Florida at the
Gainesville Shopping Center in Gainesville and Haines City Mall in Haines City.
The clearance centers generally sell items that are out of season or are
otherwise unsuitable for sale at the traditional Belk department stores.
20
<PAGE> 263
The Company sold two stores in fiscal year 1997. The Company's store in the
Florida Mall in Orlando was sold to Florida Mall Associates for $14,000,000, and
the store in the Volusia Mall in Daytona Beach was sold to Dillard Department
Stores for $5,900,000. The net proceeds realized by the Company from the sale of
these stores was approximately $19,800,000.
Facilities. The Company owns the store property and building, together
with an adjacent parking area, at Orange Blossom Mall in Fort Pierce, Lakeland
Square in Lakeland and Melbourne Square Mall in Melbourne. The Company leases
the store buildings at all other locations. The leases have termination dates
ranging from 1999 through 2015. Six stores do not have any remaining options to
renew; however, the Company believes that options to extend at market rates will
be available. The floor space of the owned and leased stores ranges from 13,000
to 100,000 square feet. The Company believes its facilities are adequate to meet
its current needs.
Competition. Specific competitors in the Company's market include
Burdine's, Dillard, Penney and Sears.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
21
<PAGE> 264
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)........................................... 443,581 63.1%
Thomas M. Belk, Jr. (Director and Executive Officer)
(a)(d)(e)................................................. 424,458 60.4%
H. W. McKay Belk (Director and Executive Officer)
(a)(d)(e)(f).............................................. 425,052 60.5%
John R. Belk (Director and Executive Officer) (a)(d)(e)..... 424,552 60.4%
Henderson Belk (Director) (b)(c)............................ 13,692 1.9%
David Belk Cannon (Director) (h)............................ 4,219 *
James K. Glenn, Jr. (Director) (g).......................... 4,594 *
Byron L. Bergren (Director and Executive Officer)........... 200 *
Dell B. Funari (Director) (i)............................... 160,488 22.8%
R. E. Hardaway, III (Director) (j).......................... 14,170 2.0%
Leroy Robinson (Director) (a)............................... 2,901 *
James Madden (Executive Officer)............................ 0 *
Barnett Banks Trust Company, N.A., Dell B. Funari and E.
Jackson Boggs, Co-Personal Representatives of Estate of
Edwin Colin Lindsey....................................... 153,985 21.9%
Belk Enterprises, Inc....................................... 394,630 56.2%
All Directors and Executive Officers as a group (11
persons).................................................. 628,501 89.4%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk and Leroy Robinson -- 2801 West Tyvola Road, Charlotte, N.C.
28217-4500; David Belk Cannon -- 1607 W. Floyd Baker Blvd., Gaffney, S.C. 29341;
James K. Glenn, Jr. -- P.O. Box 2736, Winston-Salem, N.C. 27102; Dell B.
Funari -- 2807 Bayshore Blvd., Tampa, Fla. 33629; R. E. Hardaway, III -- 3419
Beach Drive, Tampa, Fla. 33629; Byron L. Bergren and James Madden -- 1312 N.
Main Street, Gainesville, Fla. 32601; Barnett Banks Trust Company, N.A., Dell B.
Funari and E. Jackson Boggs, Co-Personal Representatives of Estate of Edwin
Colin Lindsey -- P.O. Box 44301, Jacksonville, FL 32231-4301; Belk Enterprises,
Inc. -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 2,901 shares held by Thomas M. Belk, Trustee U/A dated September
15, 1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(b) Includes 12,550 shares held in several Trusts established by the Will of W.
H. Belk for the benefit of his children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
22
<PAGE> 265
(c) Includes 1,142 shares held in several Trusts established by the Will of
Mary I. Belk for the benefit of her children. Voting and investment power
of the Trusts for John M. Belk and Thomas M. Belk is shared by John M.
Belk, Sarah Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and
investment power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and
Henderson Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson
Belk, W. H. Belk, Jr. and Irwin Belk.
(d) Includes 394,630 shares held by Belk Enterprises, Inc., 3,000 shares held
by Belk of Statesboro, Ga., Inc. and 6,796 shares held by Belk of Waycross,
Ga., Inc. which shares are voted by the members of the Executive Committee
of the Board of Directors of each such Corporation, under authority given
by the directors of each such Corporation at the annual meeting of
directors held in March, 1997. The Executive Committee of each such
Corporation consists of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk.
(e) Includes 16,944 shares held by J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
(f) Includes 594 shares held by H. W. McKay Belk as custodian for his minor
children.
(g) Includes 906 shares held by John Belk Stevens Trust U/W ITEM III, Section C
f/b/o James Kirk Glenn, Jr., et al, 1,844 shares held by John Belk Stevens
Trust U/W ITEM III, Section B f/b/o Mary S. Whelchel and 1,844 shares held
by John Belk Stevens Trust U/W ITEM III, Section A f/b/o Sara S. Glenn.
Voting and investment power is vested in James K. Glenn, Jr., the Trustee
of each Trust.
(h) Includes 1,469 shares held by Residuary Trust U/W Mrs. Henry Belk Cannon.
The Trustees, David Belk Cannon and John C. Daughtridge, have voting and
investment power with respect to such shares.
(i) Includes 153,985 shares held by Barnett Banks Trust Company, N. A., Dell B.
Funari and E. Jackson Boggs, Co-Personal Representatives Estate of Edwin
Colin Lindsey. The Co-Personal Representatives named have voting and
investment power with respect to such shares.
(j) Includes 4,319 shares held by R. E. Hardaway, III's wife, Love Hardaway.
23
<PAGE> 266
INDEX TO HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of KPMG Peat Marwick LLP, Independent Auditors....... F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statements of Shareholders' Equity.......................... F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 267
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
Belk-Lindsey Stores, Inc.:
We have audited the accompanying balance sheet of Belk-Lindsey Stores,
Inc., as of February 1, 1997, and the related statements of operations,
shareholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Belk-Lindsey Stores, Inc. at
February 1, 1997, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
As discussed in note 1 to the financial statements, the Company adopted
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of," during fiscal year 1997.
KPMG Peat Marwick LLP
Charlotte, North Carolina
November 14, 1997
F-2
<PAGE> 268
BELK-LINDSEY STORES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 1,236,201 $10,998,480 $ 3,518,927
Accounts receivable, net............................ 14,523,053 14,221,102 11,625,470
Merchandise inventory............................... 24,884,473 20,792,057 21,770,254
Receivables from affiliates......................... 7,000,223 14,911,207 12,408,320
Prepaid income taxes................................ 54,100 -- 688,763
Deferred income taxes............................... 382,692 38,862 38,484
Prepaid expenses and other current assets........... 1,270,654 989,697 462,193
----------- ----------- -----------
Total current assets.................................. 49,351,396 61,951,405 50,512,411
Deferred income taxes................................. 2,043,761 1,662,329 1,646,146
Investments........................................... 627,728 627,728 627,728
Property and equipment, net........................... 10,057,210 9,350,358 10,412,175
Other noncurrent assets............................... 927,093 745,181 1,424,845
----------- ----------- -----------
Total assets.......................................... $63,007,188 $74,337,001 $64,623,305
=========== =========== ===========
LIABILITIES, DEFERRED INCOME AND SHAREHOLDERS' EQUITY
Current liabilities:
Line of credit...................................... $ -- $ 5,000,000 $ --
Accounts payable.................................... 6,759,519 6,995,985 5,757,118
Accrued expenses.................................... 2,061,711 1,938,953 3,074,012
Payables to affiliates.............................. 2,282,324 4,249,009 --
Accrued income taxes................................ -- 978,613 --
Current installments of long-term debt and capital
lease obligations................................ 1,843,795 170,975 185,068
----------- ----------- -----------
Total current liabilities............................. 12,947,349 19,333,535 9,016,198
Long-term debt and capital lease obligations,
excluding current installments...................... 8,265,028 1,200,433 1,058,109
Deferred compensation................................. 3,556,274 3,546,892 3,607,571
Other noncurrent liabilities.......................... 484,408 568,562 633,302
----------- ----------- -----------
Total liabilities..................................... 25,253,059 24,649,422 14,315,180
----------- ----------- -----------
Deferred income....................................... 160,000 149,168 141,668
----------- ----------- -----------
Shareholders' equity:
Common stock, $1 par value; authorized 1,409,224
shares; issued and outstanding 702,673 shares.... 702,673 702,673 702,673
Paid in capital..................................... 3,422,362 3,422,362 3,422,362
Retained earnings................................... 33,469,094 45,413,376 46,041,422
----------- ----------- -----------
Total shareholders' equity............................ 37,594,129 49,538,411 50,166,457
----------- ----------- -----------
Total liabilities, deferred income and shareholders'
equity.............................................. $63,007,188 $74,337,001 $64,623,305
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 269
BELK-LINDSEY STORES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
----------------------------------------- -------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
------------ ------------ ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues...................... $117,678,112 $105,285,005 $90,167,700 $60,895,636 $57,489,697
Cost of goods sold (including
occupancy and buying
expenses)................... 83,542,112 72,993,019 62,875,001 43,314,545 39,439,488
Selling, general and
administrative expenses..... 34,751,915 30,515,830 25,398,307 19,158,809 16,703,491
Impairment charges............ -- -- 944,116 944,116 --
------------ ------------ ----------- ----------- -----------
Income (loss) from
operations.................. (615,915) 1,776,156 950,276 (2,521,834) 1,346,718
Interest expense, net......... (1,633,607) (1,388,600) (377,292) (279,801) (88,560)
Gain (loss) on sale of
property and equipment...... (365,659) 164,749 18,903,683 18,898,369 7,599
Other income (expense), net... (121,226) 224,536 131,728 55,509 (209,016)
------------ ------------ ----------- ----------- -----------
Income (loss) before income
taxes....................... (2,736,407) 776,841 19,608,395 16,152,243 1,056,741
Income taxes.................. (1,063,978) 106,318 7,481,418 5,994,000 246,000
------------ ------------ ----------- ----------- -----------
Net income (loss)............. $ (1,672,429) $ 670,523 $12,126,977 $10,158,243 $ 810,741
============ ============ =========== =========== ===========
Earnings (loss) per share..... $ (2.38) $ 0.95 $ 17.26 $ 14.46 $ 1.15
============ ============ =========== =========== ===========
Weighted average shares....... 702,673 702,673 702,673 702,673 702,673
============ ============ =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 270
BELK-LINDSEY STORES, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
-------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at February 1, 1994 (unaudited)....... $702,673 $ 3,422,362 $34,471,000 $38,596,035
Net loss (unaudited).......................... -- -- (1,672,429) (1,672,429)
-------- ----------- ----------- -----------
Balance at January 31, 1995 (unaudited)....... 702,673 3,422,362 32,798,571 36,923,606
Net income (unaudited)........................ -- -- 670,523 670,523
-------- ----------- ----------- -----------
Balance at February 3, 1996................... 702,673 3,422,362 33,469,094 37,594,129
Cash dividends................................ -- -- (182,695) (182,695)
Net income.................................... -- -- 12,126,977 12,126,977
-------- ----------- ----------- -----------
Balance at February 1, 1997................... 702,673 3,422,362 45,413,376 49,538,411
Cash dividends (unaudited).................... -- -- (182,695) (182,695)
Net income (unaudited)........................ -- -- 810,741 810,741
-------- ----------- ----------- -----------
Balance at November 1, 1997 (unaudited)....... $702,673 $ 3,422,362 $46,041,422 $50,166,457
======== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 271
BELK-LINDSEY STORES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
--------------------------------------- --------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
----------- ----------- ----------- ------------ -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)...................... $(1,672,429) $ 670,523 $12,126,977 $ 10,158,243 $ 810,741
Adjustments to reconcile net income
(loss) to net cash provided (used) by
operating activities:
Deferred income taxes.................. (552,860) (138,206) 725,262 515,367 16,561
Deferred income........................ (10,000) (9,168) (10,832) (8,332) (7,500)
Depreciation and amortization.......... 2,914,430 2,618,645 1,821,773 1,392,776 1,077,926
Loss (gain) on sale of property and
equipment............................ 365,659 (164,749) (18,903,683) (18,898,369) (7,599)
Impairment charges..................... -- -- 944,116 944,116 --
(Increase) decrease in:
Accounts receivable, net............. 2,226,132 1,481,837 301,951 1,934,959 2,595,632
Merchandise inventory................ 1,135,390 5,383,838 4,092,416 952,014 (978,197)
Receivables from affiliates.......... (475,560) (4,242,339) (7,910,984) (3,682,116) 2,502,887
Prepaid income taxes................. (403,194) 564,993 54,100 -- (688,763)
Other assets......................... 322,088 157,736 462,869 137,542 (152,160)
Increase (decrease) in:
Accounts payable and accrued
expenses........................... 453,704 (1,308,113) 113,708 (1,210,396) (103,808)
Payables to affiliates............... (587,613) -- 1,966,685 (2,282,324) (4,249,009)
Accrued income taxes................. -- -- 978,613 1,240,322 (978,613)
Deferred compensation and other
liabilities........................ 283,638 430,668 74,772 105,153 125,419
----------- ----------- ----------- ------------ -----------
Net cash provided (used) by operating
activities............................. 3,999,385 5,445,665 (3,162,257) (8,701,045) (36,483)
----------- ----------- ----------- ------------ -----------
Cash flows from investing activities:
Purchases of property and equipment.... (614,523) (2,591,056) (3,090,889) (2,102,039) (2,141,305)
Proceeds from sale of property and
equipment............................ 587,836 38,837 19,935,535 19,932,127 9,161
----------- ----------- ----------- ------------ -----------
Net cash provided (used) by investing
activities............................. (26,687) (2,552,219) 16,844,646 17,830,088 (2,132,144)
----------- ----------- ----------- ------------ -----------
Cash flows from financing activities:
Net proceeds from (payments on) line of
credit............................... -- -- 5,000,000 -- (5,000,000)
Principal payments on long-term debt
and capital lease obligations........ (3,053,541) (4,310,635) (8,737,415) (8,698,909) (128,231)
Dividends paid......................... -- -- (182,695) (182,695) (182,695)
----------- ----------- ----------- ------------ -----------
Net cash used by financing activities.... (3,053,541) (4,310,635) (3,920,110) (8,881,604) (5,310,926)
----------- ----------- ----------- ------------ -----------
Net increase (decrease) in cash and cash
equivalents............................ 919,157 (1,417,189) 9,762,279 247,439 (7,479,553)
Cash and cash equivalents at beginning of
period................................. 1,734,233 2,653,390 1,236,201 1,236,201 10,998,480
----------- ----------- ----------- ------------ -----------
Cash and cash equivalents at end of
period................................. $ 2,653,390 $ 1,236,201 $10,998,480 $ 1,483,640 $ 3,518,927
=========== =========== =========== ============ ===========
Supplemental disclosures of cash flow
information:
Interest paid............................ $ 1,699,665 $ 1,467,826 $ 882,495 $ 888,036 $ 1,137,392
Income taxes paid........................ 115,300 54,100 5,910,100 4,266,900 1,896,815
Supplemental information regarding
noncash investing and financing
activities:
Decrease in capital lease obligation and
buildings under capital lease, net..... $ -- $ 828,969 $ -- $ -- $ --
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 272
BELK-LINDSEY STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
COMPANY OPERATIONS
Belk-Lindsey Stores, Inc. (the "Company") operates retail department stores
in Florida.
FISCAL YEAR
Starting in fiscal year 1996, the Company's fiscal year ends on the
Saturday closest to each January 31. Fiscal years 1996 and 1997 ended on
February 3, 1996 and February 1, 1997, and included 368 and 365 days,
respectively. Fiscal year 1995 ended on Tuesday, January 31, 1995 and included
364 days.
UNAUDITED FINANCIAL STATEMENTS
The financial statements as of February 3, 1996 and for the years ended
January 31, 1995 and February 3, 1996, and as of and for the periods ended
November 2, 1996 and November 1, 1997 are unaudited. In the opinion of
management, such financial statements reflect all adjustments necessary to
present fairly the Company's financial position, results of operations and cash
flows. The financial statements for the interim periods ended November 2, 1996
and November 1, 1997 are not necessarily indicative of the results of operations
for a full fiscal year.
REVENUES
Revenues include sales from retail operations and leased departments, net
of returns.
COST OF GOODS SOLD
Cost of goods sold includes occupancy and buying expenses. Occupancy
expenses include rent, utilities and real estate taxes. Buying expenses include
payroll and travel expenses associated with the buying function.
MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market as
determined by the retail inventory method.
FINANCE CHARGES
Selling, general and administrative expenses in the statements of
operations are reduced by finance charge income arising from customer accounts
receivable. Finance charge revenue amounted to approximately $2,170,000,
$1,794,000 and $1,785,000 in fiscal years 1995, 1996 and 1997, respectively.
PROPERTY AND EQUIPMENT, NET
Property and equipment owned by the Company is stated at cost less
accumulated depreciation. Property and equipment leased by the Company under
capital leases is stated at an amount equal to the present value of the minimum
lease payments less accumulated amortization. Depreciation and amortization are
provided utilizing straight-line and various accelerated methods over the
shorter of estimated asset lives or related lease terms.
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred income tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement bases
and the respective tax bases of the assets and liabilities and operating loss
and tax credit
F-7
<PAGE> 273
BELK-LINDSEY STORES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized.
PRE-OPENING COSTS
Store pre-opening costs are expensed as incurred.
CASH EQUIVALENTS
Cash equivalents include liquid investments with an original maturity of 90
days or less.
ADVERTISING
Advertising costs are expensed as incurred and amounted to $4,525,420,
$3,766,700 and $3,333,831 in fiscal years 1995, 1996 and 1997, respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
The Company adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
during the first quarter of fiscal year 1997. This Statement requires that
long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of any asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceeds the fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.
(2) ACCOUNTS RECEIVABLE, NET
Customer receivables arise primarily under open-end revolving credit
accounts used to finance purchases of merchandise from the Company. These
accounts have various billing and payment structures, including varying minimum
payment levels and finance charge rates. Installments of deferred payment
accounts receivable maturing after one year are included in current assets in
accordance with industry practice.
The Company provides an allowance for doubtful accounts which is determined
based on a number of factors, including the risk characteristics of the
portfolio, historical charge-off patterns and management judgment.
F-8
<PAGE> 274
BELK-LINDSEY STORES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Accounts receivable, net consists of:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Customer receivables............................ $14,573,345 $14,538,865 $12,189,522
Other........................................... 598,197 301,445 240,560
Less allowance for doubtful accounts............ (648,489) (619,208) (804,612)
----------- ----------- -----------
Accounts receivable, net........................ $14,523,053 $14,221,102 $11,625,470
=========== =========== ===========
</TABLE>
Changes in allowance for doubtful accounts are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
--------------------------------------- -------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance, beginning of period... $ 819,128 $ 744,145 $ 648,489 $ 648,489 $ 619,208
Charged to expense............. 674,640 624,495 841,608 628,143 967,354
Net uncollectible balances
written off.................. (749,623) (720,151) (870,889) (628,143) (781,950)
--------- --------- --------- --------- ---------
Balance, end of period......... $ 744,145 $ 648,489 $ 619,208 $ 648,489 $ 804,612
========= ========= ========= ========= =========
</TABLE>
(3) INVESTMENTS
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values are recorded at original cost
when ownership is less than 20%. Any such investments owned 20% or more but not
greater than 50% are accounted for on the equity method. Investments that were
previously accounted for on the cost method may become qualified for use of the
equity method. The carrying amount of those investments are adjusted to reflect
the investor's share of the income, losses and dividends received from the
investees.
Gains and losses on sales of securities are recognized when realized on a
specific identification basis.
(4) PROPERTY AND EQUIPMENT, NET
Details of property and equipment are as follows:
<TABLE>
<CAPTION>
ESTIMATED FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
LIVES 1996 1997 1997
--------- ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Land................................ N/A $ 9,274 $ 9,272 $ 9,272
Buildings........................... 30-50 16,253,567 12,667,465 12,870,857
Furniture, fixtures and equipment... 5-7 15,667,193 13,640,363 13,831,888
Construction in progress............ N/A 1,335,954 102,511 1,409,038
------------ ------------ ------------
33,265,988 26,419,611 28,121,055
Less accumulated depreciation and
amortization...................... (23,208,778) (17,069,253) (17,708,880)
------------ ------------ ------------
Property and equipment, net......... $ 10,057,210 $ 9,350,358 $ 10,412,175
============ ============ ============
</TABLE>
F-9
<PAGE> 275
BELK-LINDSEY STORES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(5) ACCRUED EXPENSES
Accrued expenses are comprised of the following:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Salaries, wages and employee benefits.............. $ 794,168 $ 831,875 $ 502,698
Rent............................................... 449,818 476,480 543,960
Taxes, other than income........................... 283,960 114,646 145,583
Interest........................................... 137,009 94,520 682,396
Other.............................................. 396,756 421,432 1,199,375
---------- ---------- ----------
$2,061,711 $1,938,953 $3,074,012
========== ========== ==========
</TABLE>
(6) BORROWINGS
Long-term debt and capital lease obligations consist of the following:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Unsecured term loan agreement payable in
installments through 2003; interest at LIBOR
(5.65% at November 1, 1997) plus 50 basis
points.......................................... $ 8,583,375 $ -- $ --
Capital lease agreement through 2003.............. 1,525,448 1,371,408 1,243,177
----------- ---------- ----------
10,108,823 1,371,408 1,243,177
Less current installments......................... (1,843,795) (170,975) (185,068)
----------- ---------- ----------
Long-term debt and capital lease obligations,
excluding current installments.................. $ 8,265,028 $1,200,433 $1,058,109
=========== ========== ==========
</TABLE>
The Company has a $5,000,000 unsecured line of credit agreement, with a
bank at an interest rate quoted by the bank (which historically has been
approximately 80 points above LIBOR.) The amounts outstanding at February 3,
1996, February 1, 1997 and November 1, 1997 were $0, $5,000,000 and $0,
respectively.
(7) LEASES
The Company leases certain stores, warehouse facilities and equipment. The
majority of these leases will expire within the next 10 years. The leases
usually contain renewal options and provide for payment by the leasee of real
estate taxes and other expenses, and, in certain instances, increased rentals
based on percentages of sales.
F-10
<PAGE> 276
BELK-LINDSEY STORES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments under noncancelable leases as of February 1,
1997 were as follows:
<TABLE>
<CAPTION>
FISCAL YEAR CAPITAL OPERATING
- ----------- ---------- ----------
<S> <C> <C>
1998........................................................ $ 304,408 $1,017,318
1999........................................................ 304,408 933,704
2000........................................................ 304,408 773,010
2001........................................................ 304,408 671,730
2002........................................................ 304,408 626,483
After 2002.................................................. 304,408 3,910,478
---------- ----------
Total............................................. 1,826,448 $7,932,723
==========
Less imputed interest....................................... 455,040
----------
Present value of minimum lease payments..................... 1,371,408
Less current portion........................................ 170,975
----------
$1,200,433
==========
</TABLE>
Rental expense for all operating leases consists of the following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Buildings:
Minimum rentals.................................. $1,723,387 $1,569,947 $1,645,099
Contingent rentals............................... 347,848 247,903 340,302
Equipment.......................................... 306,015 288,495 143,462
---------- ---------- ----------
Total rental expense..................... $2,377,250 $2,106,345 $2,128,863
========== ========== ==========
</TABLE>
Contingent rentals are determined on the basis of a percentage of sales in
excess of stipulated minimums for certain store facilities.
(8) INCOME TAXES
Federal and state income tax expense (benefit) is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
--------------------------------------- -------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
Federal.................. $ (511,118) $ 244,524 $ 5,946,708 $ 3,134,182 $201,113
State.................... -- -- 809,448 2,344,451 28,326
----------- --------- ----------- ----------- --------
(511,118) 244,524 6,756,156 5,478,633 229,439
Deferred:
Federal.................. (498,853) (23,075) 467,547 1,990,818 9,887
State.................... (54,007) (115,131) 257,715 (1,475,451) 6,674
----------- --------- ----------- ----------- --------
(552,860) (138,206) 725,262 515,367 16,561
----------- --------- ----------- ----------- --------
Income taxes............... $(1,063,978) $ 106,318 $ 7,481,418 $ 5,994,000 $246,000
=========== ========= =========== =========== ========
</TABLE>
F-11
<PAGE> 277
BELK-LINDSEY STORES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation between income taxes computed using the effective income
tax rate and the federal statutory income tax rate of 34% for the fiscal years
1995 and 1996 and 35% for fiscal year 1997 is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Income tax at the statutory federal rate........... $ (930,378) $264,126 $6,862,938
State income taxes, net of federal income tax
benefit.......................................... (35,645) (18,803) 704,328
Recovery of valuation allowance.................... -- (127,682) --
Other.............................................. (97,955) (11,323) (85,848)
----------- -------- ----------
Income taxes....................................... $(1,063,978) $106,318 $7,481,418
=========== ======== ==========
</TABLE>
Deferred taxes based upon differences between the financial statement and
tax bases of assets and liabilities and available tax carryforwards consists of:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
(UNAUDITED)
<S> <C> <C>
Deferred tax assets:
Benefit plan costs........................................ $1,338,223 $1,334,695
Capitalized leases........................................ 354,871 328,212
Allowance for doubtful accounts........................... 244,026 233,008
Inventory capitalization.................................. 138,667 113,310
Tax carryovers............................................ 700,997 --
Other..................................................... 171,407 198,987
---------- ----------
Gross deferred tax assets................................... 2,948,191 2,208,212
---------- ----------
Deferred tax liabilities:
Prepaid pension cost...................................... 221,872 176,533
Property and equipment.................................... 299,866 29,963
Other..................................................... -- 300,525
---------- ----------
Gross deferred tax liabilities.............................. 521,738 507,021
---------- ----------
Net deferred tax assets..................................... $2,426,453 $1,701,191
========== ==========
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the temporary differences becoming deductible. Management
considers the scheduled reversals of deferred tax liabilities, projected future
income, and tax planning strategies in making this assessment.
(9) BENEFIT PLANS
The Company participates in the Belk Pension Plan, a defined benefit
multi-employer plan, that covers substantially all of the employees of the Belk
companies. Pension expense allocated to the Company was $194,982, $117,487 and
$141,286 for fiscal years 1995, 1996 and 1997, respectively. Because the Belk
Pension Plan is a multi-employer plan, allocation of plan assets to the Company
is not practical.
The Company also participates in the Belk Employee's Group Medical Plan,
that provides medical benefits to substantially all employees of the Belk
companies. This Plan is "self-funded" for medical benefits through a 501(c) (9)
Trust. The Company participates in the Group Life Insurance Plan that provides
life insurance to its employees, and is fully insured through a contract issued
by an insurance company.
F-12
<PAGE> 278
BELK-LINDSEY STORES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Contributions by the Company under the Belk Employees' Group Medical Plan and
the Group Life Insurance Plan amounted to approximately $911,000, $954,000 and
$858,000 in fiscal years 1995, 1996 and 1997, respectively.
The Company participates in the Belk Profit Sharing Plan, a contributory,
defined contribution multi-employer plan that provides benefits for
substantially all employees of the Belk companies. The cost of the plan
generally represents 10% of profits, as defined, and amounted to $0, $52,272 and
$169,268 in fiscal years 1995, 1996 and 1997, respectively.
The Company participates in the Supplemental Executive Retirement Plan
(SERP), a non-qualified defined benefit retirement plan that provides retirement
and death benefits to certain qualified executives of the Company. Total SERP
costs charged to operations were $330,510, $312,059 and $223,441, in fiscal
years 1995, 1996 and 1997, respectively. The effective discount rate used in
determining the net periodic SERP cost was 8.5% for fiscal years 1995 and 1996,
and 7.25% for fiscal year 1997. Actuarial gains and losses are amortized over
the average remaining service lives of the participants.
Certain eligible employees also participate in a non-qualified Deferred
Compensation Plan (DCP). Participants in the plan have elected to defer a
portion of their regular compensation subject to certain limitations prescribed
by the DCP. The Company is required to pay interest on the employees' deferred
compensation at various rates between 9% and 15%. Total interest expense related
to this plan and charged to operations was $193,635, $214,443 and $217,342, in
fiscal years 1995, 1996 and 1997, respectively.
The Company provides postretirement benefits to certain retired employees
in the form of medical and life insurance premiums. The Company recorded
approximately $93,000, $129,000 and $84,000 as selling, general and
administrative expense in fiscal years 1995, 1996 and 1997, respectively.
(10) RELATED PARTY TRANSACTIONS
The Belk Center, Inc. services the Company's customer accounts receivable.
The Company paid The Belk Center, Inc. approximately $1,282,000, $1,208,000 and
$1,071,000 during fiscal years 1995, 1996 and 1997, respectively, for these
services.
Various other selling, general, administrative and transaction processing
services are provided by Belk Stores Services, Inc. ("BSS"). The Company paid
BSS approximately $2,423,000, $2,304,000 and $1,598,000 during fiscal years
1995, 1996 and 1997, respectively, for these services, not including the
transaction processing services. The Company paid approximately $1,575,000,
$1,513,000 and $1,481,000 during fiscal years 1995, 1996 and 1997, respectively,
for transaction processing fees.
The Company had a demand deposit with an affiliated company at February 3,
1996 and February 1, 1997 of $0 and $6,000,000, respectively, which is included
in cash and cash equivalents in the accompanying balance sheets.
The Company may participate in operational, investing and financing
activities with other Belk companies.
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS
For financial instruments which are short-term in nature, such as cash and
cash equivalents, accounts receivable, receivables from affiliates, accounts
payable, payables to affiliates, accrued expenses and line of credit, carrying
values approximate fair values. The carrying values of the Company's variable
rate long-term debt and capital lease obligations are reasonable estimates of
fair value.
F-13
<PAGE> 279
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 36, CHAPTER 607
CORPORATIONS
STATE OF FLORIDA
607.1301. DISSENTERS' RIGHTS; DEFINITIONS
The following definitions apply to ss. 607.1302 and 607.1320:
(1) "Corporation" means the issuer of the shares held by a dissenting
shareholder before the corporate action or the surviving or acquiring
corporation by merger or share exchange of that issuer.
(2) "Fair value," with respect to a dissenter's shares, means the
value of the shares as of the close of business on the day prior to the
shareholders' authorization date, excluding any appreciation or
depreciation in anticipation of the corporate action unless exclusion would
be inequitable.
(3) "Shareholders' authorization date" means the date on which the
shareholders vote authorizing the proposed action was taken, the date on
which the corporation received written consents without a meeting from the
requisite number of shareholders in order to authorize the action, or, in
the case of a merger pursuant to s. 607.1104, the day prior to the date on
which a copy of the plan of merger was mailed to each shareholder of record
of the subsidiary corporation.
607.1302. RIGHT OF SHAREHOLDERS TO DISSENT
(1) Any shareholder of a corporation has the right to dissent from, and
obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(a) Consummation of a Plan of merger to which the corporation is a
party:
1. If the shareholder is entitled to vote on the merger, or
2. If the corporation is a subsidiary that is merged with its
parent under s. 607.1104, and the shareholders would have been entitled
to vote on action taken, except for the applicability of s. 607.1104;
(b) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation, other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange pursuant to s. 607.1202, including a sale in dissolution but not
including sale pursuant to court order or sale for cash pursuant to a plan
by which all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within 1 year after the date of sale;
(c) A provided in s. 607.0902(11), the approval of a control-share
acquisition;
(d) Consummation of a plan of share exchange to which the corporation
is a party as the corporation the shares of which will be acquired, if the
shareholder is entitled to vote on the plan;
(e) Any amendment of the articles of incorporation if the shareholder
is entitled to vote on the amendment and if such amendment would adversely
affect such shareholder by:
1. Altering or abolishing any preemptive rights attached to any of
his shares;
2. Altering or abolishing the voting rights pertaining to any of
his shares, except as such rights may be affected by the voting rights
of new shares then being authorized of any existing or new class or
series of shares;
3. Effecting an exchange, cancellation, or reclassification of any
of his shares, when such exchange, cancellation, or reclassification
would alter or abolish his voting rights or alter his
A-1
<PAGE> 280
percentage of equity in the corporation, or effecting a reduction or
cancellation of accrued dividends or other arrearages in respect to such
shares;
4. Reducing the stated redemption price of any of his redeemable
shares, altering or abolishing any provision relating to any sinking
fund for the redemption or purchase of any of his shares, or making any
of his shares subject to redemption when they are not otherwise
redeemable;
5. Making noncumulative, in whole or in part, dividends of any of
his preferred shares which had theretofore been cumulative;
6. Reducing the stated dividend preference of any of his referred
shares; or
7. Reducing any stated preferential amount payable on any of his
preferred shares upon voluntary or involuntary liquidation; or
(f) Any corporate action taken, to the extent the articles of
incorporation provide that a voting or nonvoting shareholder is entitled to
dissent and obtain payment of his shares.
(2) A shareholder dissenting from any amendment specified in paragraph
(1)(e) has the right to dissent only as to those of his shares which are
adversely affected by the amendment.
(3) A shareholder may dissent as to less than all the shares registered in
his name. In that event, his rights shall be determined as if the shares as to
which he has dissented and his other shares were registered in the names of
different shareholders.
(4) Unless the articles of incorporation otherwise provide, this section
does not apply with respect to a plan of merger or share exchange or a proposed
sale or exchange of property, to the holders of shares of any class or series
which, on the record date fixed to determine the shareholders entitled to vote
at the meeting of shareholders at which such action is to be acted upon or to
consent to any such action without a meeting, were either registered on a
national securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of Securities
Dealers, Inc., or held of records by not fewer than 2,000 shareholders.
(5) A shareholder entitled to dissent and obtain payment for his shares
under this section may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
607.1320. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS.
(1)(a) If a proposed corporate action creating dissenters' rights under s.
607.1302 is submitted to a vote at a shareholders' meeting, the meeting notice
shall state that shareholders are or may be entitled to assert dissenters'
rights and be accompanied by a copy of ss. 607.1301, 607.1302, and 607.1320. A
shareholder who wishes to assert dissenters' rights shall:
1. Deliver to the corporation before the vote is taken written notice
of his intent to demand payment for his shares if the proposed action is
effectuated, and
2. Not vote his shares in favor of the proposed action. A proxy or
vote against the proposed action does not constitute such a notice of
intent to demand payment.
(b) If proposed corporate action creating dissenters' rights under s.
607.1302 is effectuated by written consent without a meting, the corporation
shall deliver a copy of ss. 607.1301, 607.1302, and 607.1320 to each shareholder
simultaneously with any request for his written consent or, if such a request is
not made, within 10 days after the date the corporation received written
consents without a meeting from the requisite number of shareholders necessary
to authorize the action.
(2) Within 10 days after the shareholder's authorization date, the
corporation shall give written notice of such authorization or consent or
adoption of the plan of merger, as the case may be, to each shareholder who
filed a notice of intent to demand payment for his shares pursuant to paragraph
(1)(a) or, in the case of action
A-2
<PAGE> 281
authorized by written consent, to each shareholder excepting any who voted for,
or consented in writing to, the proposed action.
(3) Within 20 days after the giving of notice to him, any shareholder who
elects to dissent shall file with the corporation a notice of such election,
stating his name and address, the number, classes, and series of shares as to
which he dissents, and a demand for payment of the fair value of his shares. Any
shareholder failing to file such election to dissent within the period set forth
shall be bound by the terms of the proposed corporate action. Any shareholder
filing an election to dissent shall deposit his certificates for certificated
shares with the corporation simultaneously with the filing of the election to
dissent. The corporation may restrict the transfer of uncertificated shares from
the date of shareholder's election to dissent is filed with the corporation.
(4) Upon filing a notice of election to dissent, the shareholder shall
thereafter be entitled only to payment as provided in this section and shall not
be entitled to vote or to exercise any other rights of a shareholder. A notice
of election may be withdrawn in writing by the shareholder at any time before an
offer is made by the corporation, as provided in subsection (5), to pay for his
shares. After such offer, no such notice of election may be withdrawn unless the
corporation consents thereto. However, the right of such shareholder to be paid
the fair value of his shares shall cease, and he shall be reinstated to have all
his rights as a shareholder as of the filing of his notice of election,
including any intervening preemptive rights and the right to payment of any
intervening divided or other distribution of, or any such rights have expired or
any such dividend or distribution other than in cash has been completed, in lieu
thereof, at the election of the corporation, the fair value thereof in cash as
determined by the board as of the time of such expiration or completion, but
without prejudice otherwise to any corporate proceedings that may have been
taken in the interim, if:
(a) Such demand is withdrawn as provided in this section;
(b) The proposed corporate action is abandoned or rescinded or
shareholders revoke the authority to effect such action.
(c) No demand or petition of the determination of fair value by a
court has been made or filed within the time provided in this section; or
(d) A court of competent jurisdiction determines that such shareholder
is not entitled to the relief provided by this section.
(5) Within 10 days after the expiration of the period in which shareholders
may file their notices of election to dissent, or within 10 days after such
corporate action is effected, whichever is later (but in no case later than 90
days from the shareholders' authorization date), the corporation shall make a
written offer to each dissenting shareholder who has made demand as provided in
this section to pay an amount the corporation estimates to be the fair value of
such shares. If the corporate action has not been consummated before the
expiration of the 90-day period after the shareholders' authorization date, the
offer may be made conditional upon the consummation of such action. Such notice
and offer shall be accompanied by:
(a) A balance sheet of the corporation, the shares of which the
dissenting shareholder holds, as of the latest available date and not more
than 12 months prior to the making of such offer; and
(b) A profit and loss statement of such corporation of the 12-month
period ended on the date of such balance sheet or, if the corporation was
not in existence throughout such 12- month period, for the portion thereof
during which it was in existence.
(6) If within 30 days after the making of such offer any shareholder
accepts the same payment for his shares shall be made within 90 days after the
making of such offer or the consummation of the proposed action, whichever is
later. Upon payment of the agreed value, the dissenting shareholder shall cease
to have any interest in such shares.
(7) If the corporation fails to make such offer within the period specified
therefor in subsection (5) or if it makes the offer and any dissenting
shareholder or shareholders fail to accept the same within the period of
A-3
<PAGE> 282
30 days thereafter, then the corporation, within 30 days after receipt of
written demand from any dissenting shareholder given within 60 days after the
date on which such period of 60 days may, file an action in any court of
competent jurisdiction in the county in this state where the registered office
of the corporation is located requesting that the fair value of such shares be
determined. The court shall also determine whether each dissenting shareholder,
as to whom the corporation requests the court to make such determination, is
entitled to receive payment for his shares. If the corporation fails to
institute the proceeding as herein provided, any dissenting shareholder may do
so in the name of the corporation. All dissenting shareholders (whether or not
residents of this state), other than shareholders who have agreed with the
corporation as to the value of their shares, shall be made parties to the
proceeding as an action against their shares. The corporation shall serve a copy
of the initial pleading in such proceeding upon each dissenting shareholder who
is a resident of this state in the manner provided by law for the service of a
summons and complaint and upon each nonresident dissenting shareholder either by
registered or certified mail and publication or in such other manner as is
permitted by law. The jurisdiction of the court in plenary and exclusive. All
shareholders who are proper parties to the proceeding are entitled to judgment
against the corporation for the amount of the fair value of their shares. The
court may, if it so elects, appoint one or more persons as appraisers to receive
evidence and recommend a decision on the question of fair value. The appraisers
shall have such power and authority as is specified in the order of their
appointment or an amendment thereof. The corporation shall pay each dissenting
shareholder the amount found to be due him within 10 days after final
determination of the proceedings. Upon payment of the judgment, the dissenting
shareholder shall cease to have any interest in such shares.
(8) The judgment may, at the discretion of the court, include a fair rate
of interest, to be determined by the court.
(9) The costs and expenses of any such proceedings shall be determined by
the court and shall be assessed against the corporation, but all or any part of
such costs and expenses may be apportioned and assessed as the court deems
equitable against any or all of the dissenting shareholders who are parties to
the proceeding, to whom the corporation has made an offer to pay for the shares,
if the court finds that the action of such shareholders in failing to accept
such offer was arbitrary, vexatious, or not in good faith. Such expenses shall
include reasonable compensation for, and reasonable expenses of, the appraisers,
but shall exclude the fees and expenses of counsel for, and experts employed by,
any party. If the fair value of the shares, as determined, materially exceeds
the amount which the corporation offered to pay therefor or if no offer was
made, the court in its discretion may award to any shareholder who is a party to
the proceeding such sum as the court determines to be reasonable compensation to
any attorney or expert employed by the shareholder in the proceeding.
(10) Shares acquired by a corporation pursuant to payment of the agreed
value thereof or pursuant to payment of the judgment entered therefor, as
provided in this section, may be held and disposed of by such corporation as
authorized but unissued shares of the corporation, except that, in the case of a
merger, they may be held and disposed of as the plan of merger otherwise
provides. The shares of the surviving corporation into which the shares of such
dissenting shareholders would have been converted had they assented to the
merger shall have the status of authorized but unissued shares of the surviving
corporation.
A-4
<PAGE> 283
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
------------ ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement....... $ 90,167,700 $12,126,977 $ 19,985,687 $ 21,807,460 $49,538,411
Adjustments to eliminate less than
wholly-owned subsidiaries....... -- -- -- -- --
Less: leased sales................ (575,968) -- -- -- --
------------ ----------- ------------ ------------ -----------
Adjusted Shareholders'
Statement....................... $ 89,591,732 12,126,977 19,985,687 21,807,460 49,538,411
============ ----------- ------------ ------------ -----------
Adjustments for non-operating
items:
Gain/loss on disposal of PP&E... (11,691,142) (18,903,683) (18,903,683)
Gain/loss on sale of
securities.................... -- -- --
Impairment loss................. 583,897 944,116 944,116
Equity in earnings of
unconsolidated subsidiaries... -- -- --
Gain/loss on discontinued
operations.................... -- -- --
Adjustment to tax expense....... -- -- --
----------- ------------ ------------
Total non-operating items......... (11,107,245) (17,959,567) (17,959,567)
----------- ------------ ------------
Other Adjustments:
Adjustment for dividends
received from other Belk
entities...................... (61,609) (99,617) (99,617) --
Adjustment for ownership in
other Belk entities........... -- -- -- (627,728)
----------- ------------ ------------ -----------
Per Model......................... $ 958,123 $ 1,926,503 $ 3,748,276 $48,910,683
=========== ============ ============ ===========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents....... $(10,998,522)
Negative cash balances
reclassified to accounts
payable.................... 43
Receivables from affiliates,
net........................ (8,796,716)
Loans receivable from
affiliates, net............ (243,214)
Liabilities
Notes payable................. 5,000,000
Current installments of
long-term debt............. --
Current portion of obligations
under capital leases....... 170,975
Payables to affiliates, net... --
Long-term debt, excluding
current installments....... --
Obligations under capital
leases, excluding current
portion.................... 1,200,433
Loans payable to affiliates,
net........................ --
------------
Net debt (cash)................... (13,667,001)
Adjustments to eliminate less than
wholly-owned subsidiaries....... --
------------
Per Model......................... $(13,667,001)
============
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 284
SUPPLEMENT NO. 3
<PAGE> 285
BELK-LINDSEY STORES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 3:50 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: ,1998
---------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 3
<PAGE> 286
BELK'S DEPARTMENT STORE OF ALBANY, GEORGIA
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk's Department Store of Albany, Georgia (the
"Company"), to be held on April 16, 1998, at 10:50 a.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Georgia law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 22.9234 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 160,601 shares of New Belk Class A Common Stock which will
represent approximately 0.2677% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(4)
<PAGE> 287
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 288
BELK'S DEPARTMENT STORE OF ALBANY, GEORGIA
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK'S DEPARTMENT STORE OF ALBANY, GEORGIA:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk's Department Store of Albany, Georgia (the "Company") will be
held on April 16, 1998, at 10:50 a.m., local time, at the offices of Belk Stores
Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for
the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Georgia law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 22.9234 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 289
BELK'S DEPARTMENT STORE OF ALBANY, GEORGIA
SUPPLEMENT NO. 4
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 4 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK'S DEPARTMENT
STORE OF ALBANY, GEORGIA (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE
DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED
HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION.
IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE
INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE ALSO
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 13
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 290
THE COMPANY
The Company was incorporated as a Georgia corporation in 1938. The mailing
address of the Company's principal executive offices is 2801 West Tyvola Road,
Charlotte, North Carolina 28217-4500, and its telephone number at that address
is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 10:50 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
common stock owned by other Belk companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under Georgia law),
will be converted, without any action on the part of the Shareholder, into the
right to receive 22.9234 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk (the "New Belk Class A Common Stock"). All
of the shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 14,400 shares of Common Stock
outstanding held of record by 32 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 80.2% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 291
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Georgia Business Corporation Code (the "GBCC"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 14,400 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock held by a New Belk Stockholder who is a Class A Permitted
Holder will also automatically convert into New
3
<PAGE> 292
Belk Class B Common Stock in the event that such New Belk Stockholder no longer
meets the requirements of a Class A Permitted Holder. New Belk Class B Common
Stock has no conversion rights. The Company Articles provide for only one class
of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the GBCC, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as the
effect of such distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to be less than the sum of its total liabilities plus
(unless the articles of incorporation permit otherwise) the amount that would be
needed if the corporation dissolved at the time of the payment of the dividend
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
4
<PAGE> 293
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The GBCC permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 25%, or such
greater or lesser percentages as may be provided in the articles of
incorporation or bylaws, of all votes entitled to be cast on the proposed
corporate action to call a special meeting. The Company Bylaws authorize the
Chairman, President, Secretary, the Company Board and any Shareholder pursuant
to the written request of the holders of not less than 10% of all the shares
entitled to vote at the meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the GBCC, unless the articles of incorporation, the bylaws or
the provisions regarding meetings in the GBCC specify a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the shareholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
Under the GBCC, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the GBCC
requires an amendment to the articles of incorporation to be recommended by the
board of directors to the
5
<PAGE> 294
shareholders and approved by a majority (unless the articles of incorporation or
the board of directors requires a greater vote or a vote by voting groups) of
the votes entitled to be cast on the amendment by any voting group. As under the
DGCL, the holders of the outstanding shares of a class or series are entitled to
vote as a separate voting group (if shareholder voting is otherwise required by
the GBCC) on a proposed amendment if the amendment would change certain
fundamental rights and preferences of that class or series. The Company Articles
do not specify a greater vote or a vote by voting groups to amend the Company
Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the GBCC, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or the
GBCC reserves this power exclusively to the shareholders in whole or part or
(ii) the shareholders in amending or repealing a particular bylaw provided
expressly that the board of directors may not amend or repeal that bylaw. The
shareholders of the corporation may amend or repeal the bylaws of the
corporation even though such bylaws may be amended or repealed by the board of
directors of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board, or by the affirmative vote of a majority of the shares
outstanding and entitled to vote at any regular or special meeting of the
Shareholders. Further, the Company Bylaws provide that the Company Board has no
power to adopt a bylaw: (i) requiring more than a majority of the voting shares
for a quorum at a meeting of the Shareholders, except where higher percentages
are required by law; (ii) providing for the management of the Company otherwise
than by the Company Board or its executive committees; (iii) increasing or
decreasing the number of directors; or (iv) classifying and staggering the
election of directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the GBCC, any action that may be taken by an annual or special
meeting of shareholders may be taken without a meeting and without prior notice,
if all holders of outstanding shares entitled to vote on such action or, if so
provided in the articles of incorporation, by persons entitled to vote at a
meeting shares having voting power to cast not less than the minimum number (or
numbers, in the case of voting groups) of votes that would be necessary to
authorize or take the action at which all shareholders entitled to vote were
present and voted sign the written consent(s) describing such action. The
Company Bylaws permit any action which may be taken at a meeting of the
Shareholders to be taken without a meeting if a consent in writing, setting
forth the action so taken, is signed by all of the persons who would be entitled
to vote upon such action at a meeting and filed with the Secretary of the
Company.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding
6
<PAGE> 295
having the right to vote for such directors, order an election to be held to
fill any such vacancies or newly created directorships or to replace the
directors chosen by the directors then in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation or a bylaw
approved by the shareholders, the GBCC permits a vacancy in the board of
directors to be filled by the shareholders or by the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board and if
the vacancy is one that the directors are authorized to fill, then the directors
may fill the vacancy by the affirmative vote of a majority of all the directors
remaining in office.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors may be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The GBCC requires a corporation to have at least one director. The articles
of incorporation or the bylaws may authorize the shareholders or the board of
directors to change the number of directors. If the articles of incorporation or
the bylaws establish a variable range for the size of directors, the number of
directors may be changed, within the prescribed range, by the shareholders or,
if the articles of incorporation so provide, by the board of directors. The
Company Bylaws require the Company Board to consist of at least three, but no
more than 15, directors.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
Under the GBCC, a director must be a natural person and at least 18 years
of age, but does not have to be a resident of Georgia or a shareholder of the
corporation unless otherwise provided for in the articles of incorporation. The
Company Articles do not require directors of the Company to be residents of
Georgia or shareholders of the Company. The GBCC also allows the articles of
incorporation or the bylaws to provide for additional qualifications of
directors.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each
7
<PAGE> 296
class expiring at the annual meeting in successive years beginning with the
first class and progressing to the third class, if any. Thereafter, directors
are chosen for a full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
Under the GBCC, the articles of incorporation may allow for staggering the
terms of directors by dividing the total number of directors into two or three
groups, with each group containing one-half or one-third of the total. The term
of each group expires in each successive year beginning with the first group and
progressing to the third group, if any. Thereafter, directors are chosen for a
term of two or three years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
According to the GBCC, unless the articles of incorporation or bylaws
provide that directors may be removed only for cause, the shareholders may
remove one or more directors with or without cause. If a director is elected by
a voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove him. If cumulative voting is not authorized, a
director may be removed only if the number of votes cast to remove him exceeds
the number of votes cast not to remove him.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under both the DGCL and the GBCC, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the GBCC generally permits transactions involving a
Georgia corporation and an interested director of that corporation if: (i) the
transaction received the affirmative vote of a majority (but not less than two)
of those qualified directors on the board of directors or on a duly empowered
committee thereof who voted on the transaction after required disclosure to
them; (ii) if a majority of the votes entitled to be cast by the holders of all
qualified shares were cast in favor of the transaction after (a) notice to
shareholders describing the director's conflicting interest transaction, (b)
provision of the information with regard to any unqualified shares and (c)
required disclosure to the shareholders who voted on the transaction (to the
extent the information was not known by them); or (iii) the transaction, judged
in the circumstances at the time of commitment, is established to have been fair
to the corporation.
8
<PAGE> 297
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the GBCC, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the GBCC (i) in connection with a
proceeding by or in the right of the corporation, except for reasonable expenses
incurred in connection with the proceeding if it is determined that the director
or officer has met the relevant standard of conduct under the GBCC or (ii) in
connection with any proceeding with respect to conduct for which he was adjudged
liable on the basis that personal benefit was improperly received by him,
whether or not involving action in his official capacity. A Georgia corporation
must indemnify a director or officer who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party because he
was a director or officer of the corporation against reasonable expenses
incurred by the director or officer in connection with the proceeding.
The Company Bylaws authorize indemnification as provided in the GBCC. In
addition, the Company Bylaws provide that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture,
9
<PAGE> 298
trust or other enterprise, as a partner of a partnership or as a trustee or
administrator under an employee benefit plan. The Company will also indemnify a
director or officer for reasonable costs, expenses and attorneys' fees in
connection with the enforcement of rights to indemnification granted therein, if
it is so determined in accordance with the Company Articles that the director or
officer is entitled to indemnification thereunder. The Company Articles provide
that to the fullest extent permitted by the GBCC, a director will not be
personally liable to the Company or any of its Shareholders or otherwise for
monetary damages for breach of duty of care or other duty as a director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The GBCC concerning the approval of mergers and share exchanges is similar
in all material respects to the DGCL, except action by the shareholders of the
surviving corporation is not required if the number and kind of shares
outstanding immediately after the merger or share exchange, plus the number and
kind of shares issuable as a result of the merger or share exchange and by the
conversion of securities issued pursuant to the merger or share exchange or the
exercise of rights and warrants issued pursuant to the merger or share exchange
does not exceed the total number and kind of shares of the surviving or
acquiring corporation authorized by its articles of incorporation immediately
before the merger or share exchange. The GBCC and DGCL provisions concerning the
approval of the sale of all or substantially all of the assets of a corporation
are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the GBCC include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined in the DGCL and the
GBCC, "business combinations" generally encompass (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder, (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation,
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder,
except in certain circumstances, (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested stockholder, except
in certain circumstances or (v) any receipt by the interested stockholder of the
benefit of any loans, advances, guarantees, pledges or other financial benefits
(other than those expressly permitted in (i) through (iv) above) provided by or
through the corporation.
The DGCL defines an "interested stockholder" as any person who (i) is the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation and within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation. Under the
GBCC, an "interested shareholder" is any person who owns 10% of the outstanding
voting shares or is an affiliate of the corporation owning 10% of the
outstanding voting shares within the prior two years, and a "continuing
director" is a director not associated or affiliated with any interested
shareholder.
10
<PAGE> 299
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
According to the GBCC, if at least three continuing directors serve on the
board of directors, then those directors must unanimously approve the business
combination. If three continuing directors do not serve on the board of
directors, then 66 2/3% of the continuing directors must recommend the business
combination and a majority of shareholders entitled to cast a vote must approve
the business combination. Also, except under certain circumstances, no mergers
may occur between a corporation and an interested shareholder within five years
of the date the shareholder became an interested shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the GBCC provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The GBCC concerning preemptive rights is equivalent to the DGCL. The
Company Articles do not contain any provision with respect to preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the GBCC, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the
11
<PAGE> 300
purpose and the records the shareholder desires to inspect, (iii) the records
are directly connected with the purpose and (iv) the shareholder gives the
corporation written notice of the demand at least five business days before the
date on which the shareholder wishes to inspect and copy such records. Such
documents include: (i) excerpts from minutes of any meeting of the board of
directors, records of any action of a committee of the board of directors while
acting in place of the board of directors on behalf of the corporation, minutes
of any meeting of the shareholders and records of action taken by the
shareholders or board of directors without a meeting; (ii) accounting records of
the corporations; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the GBCC ("Article 13") has
the right to receive in cash the fair value of such Shareholder's shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN
ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
To exercise appraisal rights under Article 13, a holder of Common Stock
must (i) deliver to the Company before the taking of the vote of Shareholders on
the Reorganization Agreement written notice of his intent to demand payment for
his shares if the Merger is effected and (ii) not vote his shares in favor of
the Reorganization Agreement. A Shareholder who does not satisfy these two
requirements is not entitled to payment for his shares under Article 13. In
addition, any Shareholder who returns a signed proxy but fails to provide
instructions as to the manner in which such shares are to be voted will be
deemed to have voted in favor of the Reorganization Agreement and will not be
entitled to assert dissenters' rights of appraisal.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial Shareholder and he notifies the Company
in writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of such a partial dissenter are determined as if
the shares as to which he dissents and his other shares are registered in the
names of different Shareholders.
If the Reorganization Agreement is approved at the Special Meeting, the
Company must deliver a written dissenters' notice (the "Dissenters' Notice") to
all Shareholders who satisfied the notice requirements of Article 13. The
Dissenters' Notice must be sent within 10 days after the Effective Time and must
(i) state where the demand for payment must be sent and where and when
certificates for shares must be deposited, (ii) inform holders of uncertificated
shares to what extent transfer of those shares will be restricted after the
demand for payment is received, (iii) set a date by which the Company must
receive the demand for payment (which date may not be fewer than 30 nor more
than 60 days after the Dissenters' Notice is delivered) and (iv) be accompanied
by a copy of Article 13.
A record Shareholder who receives the Dissenters' Notice must demand
payment and deposit his certificates in accordance with the Dissenters' Notice.
Such Shareholder will retain all other rights of a Shareholder until those
rights are canceled or modified by the consummation of the Merger. A record
Shareholder who does not demand payment or deposit his share certificates where
required, each by the date set in the Dissenters' Notice, is not entitled to
payment for his shares under Article 13.
Within 10 days of the later of the Effective Time or receipt of a payment
demand, the Company must offer to pay each dissenting Shareholder who complied
with Article 13 the amount the Company estimates to be the fair value of his
shares, plus accrued interest from the Effective Time. Such offer of payment
must be accompanied by (i) certain recent Company financial statements, (ii) the
Company's estimate of the fair value of the shares and interest due, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Article 13 and (v) a copy of Article
13. If the Shareholder
12
<PAGE> 301
accepts the Company's offer by written notice to the Company within 30 days
after the Company's offer, the Company must make payment within 60 days after
the later of the making of the offer or the Effective Time.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing share certificates, the Company must return the
deposited certificates. If, after such return, the Merger is consummated, the
Company must send a new Dissenters' Notice and repeat the payment procedure
described above.
A dissenting Shareholder may notify the Company in writing of his own
estimate of the fair value of his shares and the interest due, and may demand
payment of his estimate, if (i) he believes that the amount offered by the
Company is less than the fair value of his shares or that the interest due has
been calculated incorrectly or (ii) the Company, having failed to consummate the
Merger, does not return the deposited certificates within 60 days after the date
set for demanding payment. A dissenting Shareholder waives his right to demand
payment unless he notifies the Company of his demand in writing within 30 days
after the Company makes or offers payment for his shares. If the Company does
not offer payment within 10 days of the later of the Effective Time or receipt
of a payment demand, then (i) the Shareholder may demand the financial
statements and other information of the Company, and the Company must provide
such information within 10 days after receipt of the written demand and (ii) the
Shareholder may notify the Company of his own estimate of the fair value of his
shares and the amount of interest due, and may demand payment of that estimate.
If a demand for payment by a Shareholder remains unsettled, the Company
must commence a nonjury equity valuation proceeding in the appropriate court, as
specified in Article 13, within 60 days after receiving the payment demand and
must petition the court to determine the fair value of the shares and accrued
interest. If the Company does not commence a valuation proceeding within 60
days, the Company is required to pay each dissenting Shareholder whose demand
remains unsettled, the amount demanded. The Company is required to make all
dissenting Shareholders whose demands remain unsettled parties to the proceeding
and to serve a copy of the petition upon each dissenting Shareholder. The court
may appoint appraisers to receive evidence and to recommend a decision on fair
value. Each dissenting Shareholder made a party to the proceeding is entitled to
judgment for the fair value of his shares plus interest to the date of judgment.
In an appraisal proceeding commenced under Article 13, the court must
determine the costs of the proceeding, excluding fees and expenses of attorneys
and experts for the respective parties, and must assess those costs against the
Company, except that the court may assess the costs against all or some of the
dissenting Shareholders to the extent the court finds they acted arbitrarily,
vexatiously or not in good faith in demanding payment under Article 13. The
court also may assess the fees and expenses of attorneys and experts for the
respective parties against the Company if the court finds the Company did not
substantially comply with the requirements of Article 13, or against either the
Company or a dissenting Shareholder if the court finds that such party acted
arbitrarily, vexatiously or not in good faith with respect to the rights
provided by Article 13.
If the court finds that the services of the attorneys for any dissenting
Shareholder were of substantial benefit to other dissenting Shareholders
similarly situated, and that the fees for those services should not be assessed
against the Company, the court may award those attorneys reasonable fees out of
the amounts awarded the dissenting Shareholders who were benefited. No action by
any dissenting Shareholder to enforce dissenters' rights may be brought more
than three years after the Effective Time, regardless of whether notice of the
Merger and of the right to dissent was given by the Company in compliance with
the provisions of Article 13.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated
13
<PAGE> 302
multiples and taking the highest of: (i) the Company's adjusted sales during the
period from February 4, 1996 to February 1, 1997 (the "Measurement Period")
multiplied by six-tenths, less Net Debt (calculated in accordance with Annex B
of this Prospectus Supplement under "Components of Net Debt (Cash) per
Shareholders' Statement") at the end of the Measurement Period; (ii) the
Company's adjusted earnings before interest, taxes, depreciation and
amortization ("EBITDA") during the Measurement Period multiplied by seven, less
Net Debt at the end of the Measurement Period; (iii) the Company's adjusted
earnings before interest and taxes ("EBIT") during the Measurement Period
multiplied by 10, less Net Debt at the end of the Measurement Period; (iv) the
Company's adjusted net income during the Measurement Period multiplied by 15;
and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ----------- ----------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales.................. $10,009,566 $10,009,566 0.6 $1,543,206 $4,462,534
EBITDA..................... 646,880 578,919 7 1,543,206 2,509,227
EBIT....................... 336,763 268,802 10 1,543,206 1,144,814
Net Income................. 146,792 99,667 15 -- 1,495,005
Book Equity................ 6,063,368 5,443,676 1 -- 5,443,676
</TABLE>
14
<PAGE> 303
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk of Americus,
Ga., Inc. 34.5790% X $ 2,375,853 = $ 821,546
Belk of Dawson, Ga.,
Inc. 5.1414% X 862,681 = 44,354
Belk of Waycross,
Ga., Inc. .1179% X 43,828,148 = 51,673
-----------
Total $ 917,573
===========
Relative Operating Value of Company $ 5,443,676
Relative Operating Value of Other Companies Owned by Company + 917,573
-----------
Total Relative Value of Company = $ 6,361,249
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Enterprises,
Inc. 1.8611% X $ 6,361,249 = $ 118,389
Hudson-Belk Company,
Raleigh, NC. .1667% X 6,361,249 = 10,604
Belk of Thomaston,
Ga., Inc. 1.6667% X 6,361,249 = 106,023
Belk of Toccoa, Ga.,
Inc. 10.3056 X 6,361,249 = 655,565
Belk of Waycross,
Ga., Inc. 37.3472 X 6,361,249 = 2,375,749
-----------
Total $ 3,266,330
===========
Total Relative Value of Company $ 6,361,249
Total Relative Value of Company Owned by Other Belk Companies -- 3,266,330
-----------
Net Relative Value of Company = $ 3,094,920
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 3,094,920 / $1,156,226,577 = .2677%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.2677% X 59,998,834) / 7,006 = 22.9234
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
15
<PAGE> 304
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 305
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share, dividends per
share and book value per share data of the Company, unaudited pro forma combined
per share data of New Belk and unaudited pro forma equivalent per share data of
New Belk giving effect to the Reorganization. The data set forth below should be
read in conjunction with the historical financial statements of the Company,
including the condensed notes thereto, contained elsewhere in this Prospectus
Supplement and unaudited pro forma combined financial statements of New Belk,
including the notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 10.19
Dividends(2).............................................. 1.00
Book value per share(3)................................... 421.07
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 22.01
Dividends(2).............................................. 5.96
Book value per share...................................... 287.00
</TABLE>
- ---------------
(1) Based on 14,400 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share numbers above
are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 14,400 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share, New Belk pro
forma combined dividends per share and New Belk pro forma combined earnings
per share from continuing operations by the Exchange Ratio for the Merger.
17
<PAGE> 306
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $11,005 $ 9,908 $10,010
Net income (loss)........................................... 263 (18) 147
Per common share
Net income (loss)(1)...................................... 18.29 (1.26) 10.19
Dividends................................................. 2.00 3.00 1.00
Book value(2)............................................. 397.46 402.49 421.07
Total assets................................................ 8,825 8,636 8,783
Shareholders' equity........................................ 5,723 5,796 6,063
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $6,790 $6,983
Income (loss) from operations............................... (7) 167
</TABLE>
- ---------------
(1) Based on 14,400 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding as of January 31, 1995, February 3, 1996
and February 1, 1997.
(2) Based on 14,400 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 307
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
To the extent a discussion of the financial condition and results of
operations of the Company for any of the fiscal years ended January 31, 1995,
February 3, 1996 or February 1, 1997 or for either of the nine-month periods
ended November 2, 1996 or November 1, 1997 is necessary to identify certain
trends or conditions that differ from the combined Belk Companies and that are
material to Shareholders' understanding of the financial condition or results of
operations of the Company, such discussion is included below. The discussion
which follows is based upon and should be read in conjunction with the
historical financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus Supplement.
Comparable store sales decreased in fiscal year 1996 as a result of a
change in merchandise mix, markdown policies and increased inventories as part
of a plan to revise the store's overall merchandising strategy.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Albany Mall in
Albany, Georgia. The Company's retail store operates in a manner consistent with
the business of the Belk Companies described in the Proxy Statement/Prospectus.
The store is managed out of the Bergren group office in Gainesville, Florida.
The Company operates a clearance center in downtown Albany, Georgia; however,
the clearance center is under contract to be sold for $575,000. The Company also
owns approximately $720,000 in marketable securities.
Facilities. The Company owns the store property and building, which
contains approximately 84,000 square feet of floor area, together with an
adjacent parking area. The Company also owns the downtown building currently
operated as a clearance center. The Company believes the Albany Mall building is
adequate to meet its current needs.
Competition. Specific competitors in the Company's market include
Gayfer's, J.C. Penney and Mansour's.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 308
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer) (a)(b)(c)..... 9,660 67.1%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(c).................................................... 8,480 58.9%
H. W. McKay Belk (Director and Executive Officer) (b)(c).... 8,492 59.0%
John R. Belk (Director and Executive Officer) (b)(c)........ 8,492 59.0%
Henderson Belk (Director)................................... 0 *
Sarah Belk Gambrell (Director).............................. 1,318 9.2%
Karl G. Hudson, Jr. (Director).............................. 0 *
Katherine McKay Belk (b).................................... 1,204 8.4%
Katherine Belk Morris (b)................................... 1,092 7.6%
Leroy Robinson (b).......................................... 904 6.3%
Byron L. Bergren (Executive Officer)........................ 0 *
James Madden (Executive Officer)............................ 0 *
Montgomery Investment Company............................... 900 6.3%
Belk of Toccoa, Ga., Inc.................................... 1,484 10.3%
Belk of Waycross, Ga., Inc.................................. 5,378 37.3%
Thomas M. Belk, Trustee U/A dated September 15, 1993........ 904 6.3%
All Directors and Executive Officers as a group (8
persons).................................................. 11,548 80.2%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson, Katherine McKay Belk and Katherine Belk
Morris -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk
Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207; Karl G. Hudson,
Jr. -- 2416 White Oak Road, Raleigh, N.C. 27609; Byron L. Bergren and James
Madden -- 1312 N. Main Street, Gainesville, Florida 32601; Thomas M. Belk,
Trustee U/A dated September 15, 1993, Montgomery Investment Company, Belk of
Toccoa, Ga., Inc. and Belk of Waycross, Ga., Inc. -- 2801 West Tyvola Road,
Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 900 shares held by Montgomery Investment Company, of which John M.
Belk is the majority shareholder.
(b) Includes 904 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(c) Includes 268 shares held by Belk Enterprises, Inc., 24 shares held by
Hudson-Belk Company, 240 shares held by Belk of Thomaston, Ga., Inc., 1,484
shares held by Belk of Toccoa, Ga., Inc., and 5,378 shares held by Belk of
Waycross, Ga., Inc., which shares are voted by the members of the Executive
Committee of the Board of Directors of each such Corporation, under
authority given by the directors of each such Corporation at the annual
meeting of directors held in March, 1998. The Executive Committee of each
such Corporation consists of John M. Belk, Thomas M. Belk, Jr., H. W. McKay
Belk and John R. Belk.
20
<PAGE> 309
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 310
BELK'S DEPARTMENT STORE OF ALBANY, GEORGIA
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 40,170 $ 10,901
Accounts receivable, net.................................. 1,700,624 1,931,112
Merchandise inventory..................................... 2,208,643 2,190,867
Refundable income taxes................................... 29,445 --
Deferred income taxes..................................... 57,257 33,205
Other..................................................... 105,512 95,966
---------- ----------
Total current assets........................................ 4,141,651 4,262,051
Loans receivable from affiliates, net....................... 7,230 7,230
Investments................................................. 1,055,441 1,339,692
Property, plant and equipment, net.......................... 3,371,965 3,121,759
Other noncurrent assets..................................... 60,151 52,712
---------- ----------
$8,636,438 $8,783,444
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current installments of long-term debt.................... $ 375,000 $ 375,000
Accounts payable and accrued expenses..................... 450,227 479,214
Payables to affiliates, net............................... 536,728 630,070
Accrued income taxes...................................... -- 106,476
---------- ----------
Total current liabilities................................... 1,361,955 1,590,760
Deferred income taxes....................................... 341,920 339,354
Long-term debt, excluding current installments.............. 931,250 556,250
Other noncurrent liabilities................................ 205,460 233,712
---------- ----------
Total liabilities........................................... 2,840,585 2,720,076
Shareholders' equity:
Common stock.............................................. 1,440,000 1,440,000
Net unrealized gain (loss) on investments, net of income
taxes.................................................. 330,828 465,951
Retained earnings......................................... 4,025,025 4,157,417
---------- ----------
Total shareholders' equity.................................. 5,795,853 6,063,368
---------- ----------
$8,636,438 $8,783,444
========== ==========
</TABLE>
F-2
<PAGE> 311
BELK'S DEPARTMENT STORE OF ALBANY, GEORGIA
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Total store sales..................................... $11,365,760 $10,249,370 $10,355,774
Less: Leased Sales.................................... 360,408 341,365 346,207
----------- ----------- -----------
Net sales............................................. 11,005,352 9,908,005 10,009,567
Operating costs and expenses.......................... 10,458,062 9,840,701 9,753,356
----------- ----------- -----------
Income from operations................................ 547,290 67,304 256,211
----------- ----------- -----------
Other income (expense):
Interest, net....................................... (145,336) (155,308) (125,068)
Dividend income..................................... 9,504 10,656 11,880
Gain (loss) on disposal of property, plant and
equipment........................................ (6,459) 1,574 1,722
Miscellaneous, net.................................. (14,457) (19,874) 712
----------- ----------- -----------
Total other expense, net.............................. (156,748) (162,952) (110,754)
----------- ----------- -----------
Earnings from continuing operations before income
taxes, and equity in earnings of unconsolidated
entities............................................ 390,542 (95,648) 145,457
Income tax expense (benefit).......................... 127,096 (46,780) 44,596
----------- ----------- -----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities................. 263,446 (48,868) 100,861
Equity in earnings (loss) of unconsolidated entity,
net of tax.......................................... -- 30,761 45,931
----------- ----------- -----------
Net earnings.......................................... 263,446 (18,107) 146,792
Retained earnings at beginning of period.............. 3,820,774 4,055,420 4,025,025
Dividends paid........................................ (28,800) (43,200) (14,400)
Retained earnings adjustments......................... -- 30,912 --
----------- ----------- -----------
Retained earnings at end of period.................... $ 4,055,420 $ 4,025,025 $ 4,157,417
=========== =========== ===========
</TABLE>
F-3
<PAGE> 312
BELK'S DEPARTMENT STORE OF ALBANY, GEORGIA
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31. Fiscal years 1997, 1996, and 1995 ended on February 1, 1997,
February 3, 1996, and January 31, 1995 respectively.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
F-4
<PAGE> 313
BELK'S DEPARTMENT STORE OF ALBANY, GEORGIA
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. (BSS) in obtaining
merchandising, architectural, legal, accounting, internal audit, accounts
payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1995 and 1996 amounts have been reclassified in order to be
consistent with classifications adopted in 1997. These reclassifications have no
effect on the Company's total shareholders' equity or net earnings as previously
reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements
F-5
<PAGE> 314
BELK'S DEPARTMENT STORE OF ALBANY, GEORGIA
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
issued for all fiscal periods starting after December 15, 1995 and requires the
recognition of impairment losses on long-lived assets when book values exceed
expected future cash flows.
(12) RETAINED EARNINGS ADJUSTMENT
Adjustment to Retained Earnings of the Company at February 3, 1996, is due
to placing the Company's investment in Belk-Hagins Company of Americus, Ga.,
Inc. on the equity method of accounting.
F-6
<PAGE> 315
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 14, CHAPTER 2
BUSINESS CORPORATIONS
STATE OF GEORGIA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
A-1
<PAGE> 316
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's right.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
A-2
<PAGE> 317
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
A-3
<PAGE> 318
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing
A-4
<PAGE> 319
under subsection (a) of this Code section within 30 days after the corporation
offered payment for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
A-5
<PAGE> 320
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
A-6
<PAGE> 321
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................... $10,009,566 $146,792 $336,763 $646,880 $6,063,368
Adjustments to eliminate less than
wholly-owned subsidiaries................... -- -- -- -- --
----------- -------- -------- -------- ----------
Adjusted Shareholders' Statement.............. $10,009,566 146,792 336,763 646,880 6,063,368
=========== -------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............... (1,194) (1,722) (1,722)
Gain/loss on sale of securities............. -- -- --
Impairment loss............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries.............................. (45,931) (66,239) (66,239)
Gain/loss on discontinued operations........ -- -- --
Adjustment to tax expense................... -- -- -- --
-------- -------- --------
Total non-operating items..................... (47,125) (67,961) (67,961)
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities............................. -- -- --
Adjustment for ownership in other Belk
entities.................................. (619,692)
-------- -------- -------- ----------
Per Model..................................... $ 99,667 $268,802 $578,919 $5,443,676
======== ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................... $ (10,900)
Negative cash balances reclassified to
accounts payable........................ 16
Receivables from affiliates, net.......... 0
Loans receivable from affiliates, net..... (7,230)
Liabilities
Notes payable............................. --
Current installments of long-term debt.... 375,000
Current portion of obligations under
capital leases.......................... --
Payables to affiliates, net............... 630,070
Long-term debt, excluding current
installments............................ 556,250
Obligations under capital leases,
excluding current portion............... --
Loans payable to affiliates, net.......... --
-----------
Net debt (cash)............................... 1,543,206
Adjustments to eliminate less than
wholly-owned subsidiaries................... --
-----------
Per Model..................................... $ 1,543,206
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 322
SUPPLEMENT NO. 4
<PAGE> 323
BELK'S DEPARTMENT STORE OF ALBANY, GEORGIA
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 10:50 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
-------------------
-------------------------------
Signature
-------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 4
<PAGE> 324
BELK OF AMERICUS, GA., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk of Americus, Ga., Inc. (the "Company"), to
be held on April 15, 1998, at 5:20 p.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Georgia law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 13.2397 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 26,268 shares of New Belk Class A Common Stock which will
represent approximately 0.0438% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage paid envelope. If you plan to attend the Special Meeting, you may vote
in person if you wish, even if you have previously returned your proxy card.
Your prompt cooperation will be greatly appreciated.
(5)
<PAGE> 325
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 326
BELK OF AMERICUS, GA., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK OF AMERICUS, GA., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk of Americus, Ga., Inc. (the "Company") will be held on April
15, 1998, at 5:20 p.m., local time, at the offices of Belk Stores Services,
Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for the
following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Georgia law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 13.2397 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 327
BELK OF AMERICUS, GA., INC.
SUPPLEMENT NO. 5
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 5 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK OF AMERICUS,
GA., INC. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE DISCUSSION IN
THE PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED HEREIN ASSUMES
THAT ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION. IF ANY ONE OR
MORE BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE INFORMATION
CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 328
THE COMPANY
The Company was incorporated as a Georgia corporation in 1949 as
Belk-Hagins Company of Americus, Ga., Inc. The Company changed its name to Belk
of Americus, Ga., Inc. on June 23, 1997. The mailing address of the Company's
principal executive offices is 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, and its telephone number at that address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 5:20 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under Georgia law),
will be converted, without any action on the part of the Shareholder, into the
right to receive 13.2397 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk (the "New Belk Class A Common Stock"). All
of the shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 9,312 shares of Common Stock
outstanding held of record by 15 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 92.4% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock
2
<PAGE> 329
vote in favor of the Merger, the vote of such persons, corporations and trusts
in favor of the Merger would be sufficient to approve the Merger under the
governing documents of the Company and applicable state law.
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Georgia Business Corporation Code (the "GBCC"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 20,224 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A
3
<PAGE> 330
Common Stock are convertible into New Belk Class B Common Stock, in whole or in
part, at any time and from time to time at the option of the holder, on the
basis of one share of New Belk Class B Common Stock for each share of New Belk
Class A Common Stock converted. Shares of New Belk Class A Common Stock held by
a New Belk Stockholder who is a Class A Permitted Holder will also automatically
convert into New Belk Class B Common Stock in the event that such New Belk
Stockholder no longer meets the requirements of a Class A Permitted Holder. New
Belk Class B Common Stock has no conversion rights. The Company Articles provide
for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the GBCC, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as the
effect of such distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to
4
<PAGE> 331
be less than the sum of its total liabilities plus (unless the articles of
incorporation permit otherwise) the amount that would be needed if the
corporation dissolved at the time of the payment of the dividend to satisfy the
preferential rights upon dissolution of shareholders whose preferential rights
are superior to those receiving the distribution. The Company Bylaws provide
that the Board of Directors of the Company (the "Company Board") may from time
to time declare dividends on the Company's outstanding shares in the manner and
upon the terms and conditions provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The GBCC permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 25%, or such
greater or lesser percentages as may be provided in the articles of
incorporation or bylaws, of all votes entitled to be cast on the proposed
corporate action to call a special meeting. The Company Bylaws authorize the
Chairman, President, Secretary, the Company Board and any Shareholder pursuant
to the written request of the holders of not less than 10% of all the shares
entitled to vote at the meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the GBCC, unless the articles of incorporation, the bylaws or
the provisions regarding meetings in the GBCC specify a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the shareholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class, or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
5
<PAGE> 332
Under the GBCC, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the GBCC
requires an amendment to the articles of incorporation to be recommended by the
board of directors to the shareholders and approved by a majority (unless the
articles of incorporation or the board of directors requires a greater vote or a
vote by voting groups) of the votes entitled to be cast on the amendment by any
voting group. As under the DGCL, the holders of the outstanding shares of a
class or series are entitled to vote as a separate voting group (if shareholder
voting is otherwise required by the GBCC) on a proposed amendment if the
amendment would change certain fundamental rights and preferences of that class
or series. The Company Articles do not specify a greater vote or a vote by
voting groups to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the GBCC, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or the
GBCC reserves this power exclusively to the shareholders in whole or part or
(ii) the shareholders in amending or repealing a particular bylaw provided
expressly that the board of directors may not amend or repeal that bylaw. The
shareholders of the corporation may amend or repeal the bylaws of the
corporation even though such bylaws may be amended or repealed by the board of
directors of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board, or by the affirmative vote of a majority of the shares
outstanding and entitled to vote at any regular or special meeting of the
Shareholders. Further, the Company Bylaws provide that the Company Board has no
power to adopt a bylaw: (i) requiring more than a majority of the voting shares
for a quorum at a meeting of the Shareholders, except where higher percentages
are required by law; (ii) providing for the management of the Company otherwise
than by the Company Board or its executive committees; (iii) increasing or
decreasing the number of directors; or (iv) classifying and staggering the
election of directors. The Company Articles provide that the Company Board shall
have concurrent power, by vote of a majority of all of the directors, to make,
alter, amend and rescind the Company Bylaws. The bylaws enacted by the
Shareholders may be affected by action of the Company Board and vice versa;
provided, however, the Company Board may not re-enact a bylaw which the
Shareholders have repealed or altered, nor may it repeal a bylaw enacted by the
Shareholders which limits the powers of the Company Board or enhances or
protects the right of Shareholders, without the consent of the Shareholders.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the GBCC, any action that may be taken by an annual or special
meeting of shareholders may be taken without a meeting and without prior notice,
if all holders of outstanding shares entitled to vote on such action or, if so
provided in the articles of incorporation, by persons entitled to vote at a
meeting shares having voting power to cast not less than the minimum number (or
numbers, in the case of voting groups) of votes that would be necessary to
authorize or take the action at which all shareholders entitled to vote were
present and voted sign the written consent(s) describing such action. The
Company Bylaws permit any action which may be taken at a meeting of the
Shareholders to be taken without a meeting if a consent in writing,
6
<PAGE> 333
setting forth the action so taken, is signed by all of the persons who would be
entitled to vote upon such action at a meeting and filed with the Secretary of
the Company.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation or a bylaw
approved by the shareholders, the GBCC permits a vacancy in the board of
directors to be filled by the shareholders or by the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board and if
the vacancy is one that the directors are authorized to fill, then the directors
may fill the vacancy by the affirmative vote of a majority of all the directors
remaining in office.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors may be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The GBCC requires a corporation to have at least one director. The articles
of incorporation or the bylaws may authorize the shareholders or the board of
directors to change the number of directors. If the articles of incorporation or
the bylaws establish a variable range for the size of directors, the number of
directors may be changed, within the prescribed range, by the shareholders or,
if the articles of incorporation so provide, by the board of directors. The
Company Bylaws require the Company Board to consist of at least three, but no
more than 15, directors.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless
7
<PAGE> 334
otherwise provided in the certificate of incorporation or the bylaws. The New
Belk Bylaws and the New Belk Certificate do not provide for any qualifications
for directors of the New Belk Board.
Under the GBCC, a director must be a natural person and at least 18 years
of age, but does not have to be a resident of Georgia or a shareholder of the
corporation unless otherwise provided for in the articles of incorporation. The
Company Articles do not require directors of the Company to be residents of
Georgia or shareholders of the Company. The GBCC also allows the articles of
incorporation or the bylaws to provide for additional qualifications of
directors.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each class expiring at the
annual meeting in successive years beginning with the first class and
progressing to the third class, if any. Thereafter, directors are chosen for a
full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
Under the GBCC, the articles of incorporation may allow for staggering the
terms of directors by dividing the total number of directors into two or three
groups, with each group containing one-half or one-third of the total. The term
of each group expires in each successive year beginning with the first group and
progressing to the third group, if any. Thereafter, directors are chosen for a
term of two or three years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
According to the GBCC, unless the articles of incorporation or bylaws
provide that directors may be removed only for cause, the shareholders may
remove one or more directors with or without cause. If a director is elected by
a voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove him. If cumulative voting is not authorized, a
director may be removed only by a majority of votes entitled to be cast.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under both the DGCL and the GBCC, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
8
<PAGE> 335
Similar to the DGCL, the GBCC generally permits transactions involving a
Georgia corporation and an interested director of that corporation if: (i) the
transaction received the affirmative vote of a majority (but not less than two)
of those qualified directors on the board of directors or on a duly empowered
committee thereof who voted on the transaction after required disclosure to
them; (ii) if a majority of the votes entitled to be cast by the holders of all
qualified shares were cast in favor of the transaction after (a) notice to
shareholders describing the director's conflicting interest transaction, (b)
provision of the information with regard to any unqualified shares and (c)
required disclosure to the shareholders who voted on the transaction (to the
extent the information was not known by them); or (iii) the transaction, judged
in the circumstances at the time of commitment, is established to have been fair
to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the GBCC, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the GBCC (i) in connection with a
proceeding by or in the right of the corporation, except for reasonable expenses
incurred in connection with the proceeding if it is determined that the director
or officer has met the relevant standard of conduct under the GBCC or (ii) in
connection with any proceeding with respect to conduct for which he was adjudged
liable on the basis that personal benefit was improperly received by him,
whether or not involving action in his official capacity. A Georgia corporation
must indemnify a director or officer who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party because he
9
<PAGE> 336
was a director or officer of the corporation against reasonable expenses
incurred by the director or officer in connection with the proceeding.
The Company Bylaws authorize indemnification as provided in the GBCC. In
addition, the Company Bylaws provide that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify a director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the GBCC, a director
will not be personally liable to the Company or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The GBCC concerning the approval of mergers and share exchanges is similar
in all material respects to the DGCL, except action by the shareholders of the
surviving corporation is not required if the number and kind of shares
outstanding immediately after the merger or share exchange, plus the number and
kind of shares issuable as a result of the merger or share exchange and by the
conversion of securities issued pursuant to the merger or share exchange or the
exercise of rights and warrants issued pursuant to the merger or share exchange
does not exceed the total number and kind of shares of the surviving or
acquiring corporation authorized by its articles of incorporation immediately
before the merger or share exchange. The GBCC and DGCL provisions concerning the
approval of the sale of all or substantially all of the assets of a corporation
are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the GBCC include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined in the DGCL and the
GBCC, "business combinations" generally encompass (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder, (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested shareholder of a substantial percentage of assets of the corporation,
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested shareholder,
except in certain circumstances, (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested shareholder, except
in certain
10
<PAGE> 337
circumstances or (v) any receipt by the interested shareholder of the benefit of
any loans, advances, guarantees, pledges or other financial benefits (other than
those expressly permitted in (i) through (iv) above) provided by or through the
corporation.
The DGCL defines an "interested stockholder" as any person who (i) is the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation and within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation. Under the
GBCC, an "interested shareholder" is any person who owns 10% of the outstanding
voting shares or is an affiliate of the corporation owning 10% of the
outstanding voting shares within the prior two years, and a "continuing
director" is a director not associated or affiliated with any interested
shareholder.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
According to the GBCC, if at least three continuing directors serve on the
board of directors, then those directors must unanimously approve the business
combination. If three continuing directors do not serve on the board of
directors, then 66 2/3% of the continuing directors must recommend the business
combination and a majority of shareholders entitled to cast a vote must approve
the business combination. Also, except under certain circumstances, no mergers
may occur between a corporation and an interested shareholder within five years
of the date the shareholder became an interested shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the GBCC provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
11
<PAGE> 338
The GBCC concerning preemptive rights is equivalent to the DGCL. The
Company Articles do not contain any provision with respect to preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the GBCC, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) excerpts from minutes of any
meeting of the board of directors, records of any action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporations; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the GBCC ("Article 13") has
the right to receive in cash the fair value of such Shareholder's shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN
ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
To exercise appraisal rights under Article 13, a holder of Common Stock
must (i) deliver to the Company before the taking of the vote of Shareholders on
the Reorganization Agreement written notice of his intent to demand payment for
his shares if the Merger is effected and (ii) not vote his shares in favor of
the Reorganization Agreement. A Shareholder who does not satisfy these two
requirements is not entitled to payment for his shares under Article 13. In
addition, any Shareholder who returns a signed proxy but fails to provide
instructions as to the manner in which such shares are to be voted will be
deemed to have voted in favor of the Reorganization Agreement and will not be
entitled to assert dissenters' rights of appraisal.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial Shareholder and he notifies the Company
in writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of such a partial dissenter are determined as if
the shares as to which he dissents and his other shares are registered in the
names of different Shareholders.
If the Reorganization Agreement is approved at the Special Meeting, the
Company must deliver a written dissenters' notice (the "Dissenters' Notice") to
all Shareholders who satisfied the notice requirements of Article 13. The
Dissenters' Notice must be sent within 10 days after the Effective Time and must
(i) state where the demand for payment must be sent and where and when
certificates for shares must be deposited, (ii) inform holders of uncertificated
shares to what extent transfer of those shares will be restricted after the
demand for payment is received, (iii) set a date by which the Company must
receive the demand for payment (which date may not be fewer than 30 nor more
than 60 days after the Dissenters' Notice is delivered) and (iv) be accompanied
by a copy of Article 13.
12
<PAGE> 339
A record Shareholder who receives the Dissenters' Notice must demand
payment and deposit his certificates in accordance with the Dissenters' Notice.
Such Shareholder will retain all other rights of a Shareholder until those
rights are canceled or modified by the consummation of the Merger. A record
Shareholder who does not demand payment or deposit his share certificates where
required, each by the date set in the Dissenters' Notice, is not entitled to
payment for his shares under Article 13.
Within 10 days of the later of the Effective Time or receipt of a payment
demand, the Company must offer to pay each dissenting Shareholder who complied
with Article 13 the amount the Company estimates to be the fair value of his
shares, plus accrued interest from the Effective Time. Such offer of payment
must be accompanied by (i) certain recent Company financial statements, (ii) the
Company's estimate of the fair value of the shares and interest due, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Article 13 and (v) a copy of Article
13. If the Shareholder accepts the Company's offer by written notice to the
Company within 30 days after the Company's offer, the Company must make payment
within 60 days after the later of the making of the offer or the Effective Time.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing share certificates, the Company must return the
deposited certificates. If, after such return, the Merger is consummated, the
Company must send a new Dissenters' Notice and repeat the payment procedure
described above.
A dissenting Shareholder may notify the Company in writing of his own
estimate of the fair value of his shares and the interest due, and may demand
payment of his estimate, if (i) he believes that the amount offered by the
Company is less than the fair value of his shares or that the interest due has
been calculated incorrectly or (ii) the Company, having failed to consummate the
Merger, does not return the deposited certificates within 60 days after the date
set for demanding payment. A dissenting Shareholder waives his right to demand
payment unless he notifies the Company of his demand in writing within 30 days
after the Company makes or offers payment for his shares. If the Company does
not offer payment within 10 days of the later of the Effective Time or receipt
of a payment demand, then (i) the Shareholder may demand the financial
statements and other information of the Company, and the Company must provide
such information within 10 days after receipt of the written demand and (ii) the
Shareholder may notify the Company of his own estimate of the fair value of his
shares and the amount of interest due, and may demand payment of that estimate.
If a demand for payment by a Shareholder remains unsettled, the Company
must commence a nonjury equity valuation proceeding in the appropriate court, as
specified in Article 13, within 60 days after receiving the payment demand and
must petition the court to determine the fair value of the shares and accrued
interest. If the Company does not commence a valuation proceeding within 60
days, the Company is required to pay each dissenting Shareholder whose demand
remains unsettled, the amount demanded. The Company is required to make all
dissenting Shareholders whose demands remain unsettled parties to the proceeding
and to serve a copy of the petition upon each dissenting Shareholder. The court
may appoint appraisers to receive evidence and to recommend a decision on fair
value. Each dissenting Shareholder made a party to the proceeding is entitled to
judgment for the fair value of his shares plus interest to the date of judgment.
In an appraisal proceeding commenced under Article 13, the court must
determine the costs of the proceeding, excluding fees and expenses of attorneys
and experts for the respective parties, and must assess those costs against the
Company, except that the court may assess the costs against all or some of the
dissenting Shareholders to the extent the court finds they acted arbitrarily,
vexatiously or not in good faith in demanding payment under Article 13. The
court also may assess the fees and expenses of attorneys and experts for the
respective parties against the Company if the court finds the Company did not
substantially comply with the requirements of Article 13, or against either the
Company or a dissenting Shareholder if the court finds that such party acted
arbitrarily, vexatiously or not in good faith with respect to the rights
provided by Article 13.
If the court finds that the services of the attorneys for any dissenting
Shareholder were of substantial benefit to other dissenting Shareholders
similarly situated, and that the fees for those services should not be assessed
against the Company, the court may award those attorneys reasonable fees out of
the amounts
13
<PAGE> 340
awarded the dissenting Shareholders who were benefited. No action by any
dissenting Shareholder to enforce dissenters' rights may be brought more than
three years after the Effective Time, regardless of whether notice of the Merger
and of the right to dissent was given by the Company in compliance with the
provisions of Article 13.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales..................... $3,851,382 $3,851,382 0.6 $(65,024) $2,375,853
EBITDA........................ 278,900 281,006 7 (65,024) 2,032,066
EBIT.......................... 201,366 203,472 10 (65,024) 2,099,744
Net Income.................... 132,830 118,785 15 -- 1,781,775
Book Equity................... 1,660,457 1,660,193 1 -- 1,660,193
</TABLE>
14
<PAGE> 341
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
N/A N/A% X $ N/A = $ N/A
----------
Total $ N/A
==========
Relative Operating Value of Company $2,375,853
Relative Operating Value of Other Companies Owned by Company + --
----------
Total Relative Value of Company = $2,375,853
==========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk's Department
Store of Albany,
Georgia 34.579% X $ 2,375,853 = $ 821,546
Belk of Dawson, Ga.,
Inc., 34.3643 X 2,375,853 = 816,445
Belk of Toccoa, Ga.,
Inc. 9.4072 X 2,375,853 = 223,501
Belk of Dalton, Ga.,
Inc. .3436 X 2,375,853 = 8,163
----------
Total $1,869,655
==========
Total Relative Value of Company $2,375,853
Total Relative Value of Company Owned by Other Belk Companies - 1,869,655
----------
Net Relative Value of Company = $ 506,198
==========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$506,198 / $1,156,226,577 = .0438%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON APPLICABLE EXCHANGE
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) RATIO
<S> <C> <C> <C> <C> <C> <C>
(.0438% X 59,998,834) / 1,984 = 13.2397
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
15
<PAGE> 342
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 14.26
Dividends(2).............................................. 0.00
Book value per share(3)................................... 178.31
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 12.71
Dividends(2).............................................. 3.44
Book value per share...................................... 165.76
</TABLE>
- ---------------
(1) Based on 9,312 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 9,312 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
16
<PAGE> 343
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 3,820 $ 3,801 $ 3,851
Net income.................................................. 177 89 133
Per common share
Net income (loss)(1)...................................... 22.96 9.55 14.26
Dividends................................................. -- -- --
Book value(2)............................................. 154.50 164.05 178.31
Total assets................................................ 1,954 1,864 2,024
Shareholders' equity........................................ 1,439 1,528 1,660
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $2,718 $2,584
Income from operations...................................... 119 94
</TABLE>
- ---------------
(1) Based on 9,312 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 9,312 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
17
<PAGE> 344
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates one retail department store in Perlis Plaza
in Americus, Georgia. The Company's store operates in a manner consistent with
the business of the Belk Companies described in the Proxy Statement/Prospectus.
The store is managed out of the Matthews group office in Macon, Georgia.
Facilities. The Company leases its store building, which contains
approximately 43,000 square feet of floor area. The current term of the lease
expires in 2003. The Company believes its store building is adequate to meet its
current needs.
Competition. The Company's principal competitor in the market is Wal-Mart.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
18
<PAGE> 345
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer) (a)(b)(c)..... 8,304 89.2%
Thomas M. Belk, Jr. (Director and Executive Officer)
(a)(c).................................................... 7,936 85.2%
H. W. McKay Belk (Director and Executive Officer) (a)(c).... 7,936 85.2%
John R. Belk (Director and Executive Officer) (a)(c)........ 7,936 85.2%
Henderson Belk (Director) (b)............................... 160 1.7%
Sarah Belk Gambrell (Director) (b).......................... 464 5.0%
Leroy Robinson (Director) (a)............................... 608 6.5%
Katherine McKay Belk (a).................................... 608 6.5%
Katherine Belk Morris (a)................................... 608 6.5%
William M. Matthews, V (Executive Officer).................. 0 *
Belk of Dawson, Ga., Inc.................................... 3,200 34.4%
Belk's Department Store of Albany, Ga., Inc................. 3,220 34.6%
Belk's of Toccoa, Ga., Inc.................................. 876 9.4%
Thomas M. Belk, Trustee U/A dated September 15, 1993........ 608 6.5%
All Directors and Executive Officers as a group (8
persons).................................................. 8,608 92.4%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson, Katherine McKay Belk, and Katherine Belk
Morris -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk
Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207; William M. Matthews,
V -- 3661 Eisenhower Parkway, Macon, Ga. 31206; Belk of Dawson, Ga., Inc.,
Belk's Department Store of Albany, Ga., Inc. Belk of Toccoa, Ga., Inc. and
Thomas M. Belk, Trustee U/A dated September 15, 1993 -- 2801 West Tyvola Road,
Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 608 shares held by Thomas M. Belk, Trustee, U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(b) Includes 160 shares held in several Trusts established by the Will of W. H.
Belk for the benefit of his children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W.H. Belk, Jr. Voting and investment power
of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson Belk is
shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H. Belk, Jr.
and Irwin Belk.
(c) Includes 3,220 shares held by Belk's Department Store of Albany, Georgia, 32
shares held by Belk of Dalton, Ga., Inc., 3,200 shares held by Belk of
Dawson, Ga., Inc. and 876 shares held by Belk of Toccoa, Ga., Inc., which
shares are voted by the members of the Executive Committee of the Board of
Directors of each such Corporation, under authority given by the directors
of each such Corporation at the annual meeting of directors held in March,
1997. The Executive Committee of each such Corporation consists of John M.
Belk, Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
19
<PAGE> 346
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 347
BELK OF AMERICUS, GA., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 50,261 $ 150,499
Accounts receivable, net.................................. 515,017 568,810
Merchandise inventory..................................... 728,021 808,354
Deferred income taxes..................................... -- 20,854
Other..................................................... 45,901 41,780
---------- ----------
Total current assets........................................ 1,339,200 1,590,297
Investments................................................. 264 264
Property, plant and equipment, net.......................... 292,604 221,687
Deferred income taxes....................................... 219,669 201,887
Other noncurrent assets..................................... 11,900 9,829
---------- ----------
$1,863,637 $2,023,964
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 157,292 $ 211,800
Payables to affiliates, net............................... 110,442 85,475
Deferred income taxes..................................... 9,043 --
Accrued income taxes...................................... 30,742 34,398
---------- ----------
Total current liabilities................................... 307,519 331,673
Other noncurrent liabilities................................ 28,491 31,834
---------- ----------
Total liabilities........................................... 336,010 363,507
Shareholders' equity:
Common stock.............................................. 931,200 931,200
Additional paid in capital................................ 115,808 115,808
Retained earnings......................................... 480,619 613,449
---------- ----------
Total shareholders' equity.................................. 1,527,627 1,660,457
---------- ----------
$1,863,637 $2,023,964
========== ==========
</TABLE>
F-2
<PAGE> 348
BELK OF AMERICUS, GA., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $3,819,822 $3,800,658 $3,851,382
Operating costs and expenses............................... 3,659,579 3,649,783 3,652,478
---------- ---------- ----------
Income from operations..................................... 160,243 150,875 198,904
---------- ---------- ----------
Other income (expense):
Interest, net............................................ (45,560) (32,406) (26,121)
Gain (loss) on disposal of property, plant and
equipment............................................. -- -- (2,106)
Miscellaneous, net....................................... (236) 3,266 4,569
---------- ---------- ----------
Total other expense, net................................... (45,796) (29,140) (23,658)
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 114,447 121,735 175,246
Income tax expense (benefit)............................... (62,627) 32,776 42,416
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 177,074 88,959 132,830
---------- ---------- ----------
Net earnings............................................... 177,074 88,959 132,830
Retained earnings at beginning of period................... 214,586 391,660 480,619
---------- ---------- ----------
Retained earnings at end of period......................... $ 391,660 $ 480,619 $ 613,449
========== ========== ==========
</TABLE>
F-3
<PAGE> 349
BELK OF AMERICUS, GA., INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31. Fiscal years 1997, 1996 and 1995 ended on February 1, 1997, February
3, 1996 and January 31, 1995, respectively.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
F-4
<PAGE> 350
BELK OF AMERICUS, GA., INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements
F-5
<PAGE> 351
BELK OF AMERICUS, GA., INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
issued for all fiscal periods starting after December 15, 1995 and requires the
recognition of impairment losses on long-lived assets when book values exceed
expected future cash flows.
F-6
<PAGE> 352
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 14, CHAPTER 2
BUSINESS CORPORATIONS
STATE OF GEORGIA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
A-1
<PAGE> 353
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's right.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
A-2
<PAGE> 354
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
A-3
<PAGE> 355
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing
A-4
<PAGE> 356
under subsection (a) of this Code section within 30 days after the corporation
offered payment for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
A-5
<PAGE> 357
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
A-6
<PAGE> 358
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
---------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement.................... $3,851,382 $132,830 $201,366 $278,900 $1,660,457
Adjustments to eliminate less than wholly-owned
subsidiaries................................. -- -- -- -- --
---------- -------- -------- -------- ----------
Adjusted Shareholders' Statement............... $3,851,382 132,830 201,366 278,900 1,660,457
========== -------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E................ 1,411 2,106 2,106
Gain/loss on sale of securities.............. -- -- --
Impairment loss.............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries............................... -- -- --
Gain/loss on discontinued operations......... -- -- --
Adjustment to tax expense.................... (15,456) -- -- --
-------- -------- --------
Total non-operating items...................... (14,045) 2,106 2,106
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities.............................. -- -- --
Adjustment for ownership in other Belk
entities................................... (264)
-------- -------- -------- ----------
Per Model...................................... $118,785 $203,472 $281,006 $1,660,193
======== ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER SHAREHOLDERS'
STATEMENT
Assets
Cash & cash equivalents.................... $ (150,499)
Negative cash balances reclassified to
accounts payable......................... --
Receivables from affiliates, net........... --
Loans receivable from affiliates, net...... --
Liabilities
Notes payable.............................. --
Current installments of long-term debt..... --
Current portion of obligations under
capital leases........................... --
Payables to affiliates, net................ 85,475
Long-term debt, excluding current
installments............................. --
Obligations under capital leases, excluding
current portion.......................... --
Loans payable to affiliates, net........... --
----------
Net debt (cash)................................ (65,024)
Adjustments to eliminate less than wholly-owned
subsidiaries................................. --
----------
Per Model...................................... $ (65,024)
==========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 359
SUPPLEMENT NO. 5
<PAGE> 360
BELK OF AMERICUS, GA., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 5:20 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: ,1998
-------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 5
<PAGE> 361
BELK OF ATHENS, GA., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk of Athens, Ga., Inc. (the "Company"), to
be held on April 15, 1998, at 3:30 p.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Georgia law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 57.4570 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 292,858 shares of New Belk Class A Common Stock which will
represent approximately 0.4881% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage paid
(6)
<PAGE> 362
envelope. If you plan to attend the Special Meeting, you may vote in person if
you wish, even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 363
BELK OF ATHENS, GA., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK OF ATHENS, GA., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk of Athens, Ga., Inc. (the "Company") will be held on April 15,
1998, at 3:30 p.m., local time, at the offices of Belk Stores Services, Inc.,
2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for the following
purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization (the "Reorganization Agreement"), dated as of
November 25, 1997, by and among the Company, the other Belk Companies named
therein, Belk Acquisition Co., a South Carolina corporation, and Belk,
Inc., a Delaware corporation ("New Belk"), pursuant to which the Company
would be merged with and into New Belk (the "Merger") and (b) the Merger.
The Merger will be part of a transaction pursuant to which 112 separate
Belk companies will be merged into a single operating entity. If the Merger
is consummated, each outstanding share of common stock, par value $100 per
share, of the Company ("Company Common Stock") (other than shares entitled
to dissenters' rights of appraisal under Georgia law and other than shares
of Company Common Stock owned by other Belk Companies, which will be
canceled) will be converted into the right to receive 57.4570 shares of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk
Class A Common Stock"). All of the shares of New Belk Class A Common Stock
to be received by each shareholder in the Reorganization will be aggregated
and the total will be rounded to the nearest whole share. No fractional
shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 364
BELK OF ATHENS, GA., INC.
SUPPLEMENT NO. 6
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 6 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK OF ATHENS, GA.,
INC. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE DISCUSSION IN THE
PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED HEREIN ASSUMES THAT
ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION. IF ANY ONE OR MORE
BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE INFORMATION
CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 365
THE COMPANY
The Company was incorporated as a Georgia corporation in 1930 as
Gallant-Belk Company, Athens, Georgia. The Company changed its name to Belk of
Athens, Ga., Inc. on July 23, 1997. The mailing address of the Company's
principal executive offices is 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, and its telephone number at that address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 3:30 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under Georgia law),
will be converted, without any action on the part of the Shareholder, into the
right to receive 57.4570 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk (the "New Belk Class A Common Stock"). All
of the shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 12,906 shares of Common Stock
outstanding held of record by 62 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 78.4% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock
2
<PAGE> 366
vote in favor of the Merger, the vote of such persons, corporations and trusts
in favor of the Merger would be sufficient to approve the Merger under the
governing documents of the Company and applicable state law.
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Georgia Business Corporation Code (the "GBCC"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 12,952 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A
3
<PAGE> 367
Common Stock are convertible into New Belk Class B Common Stock, in whole or in
part, at any time and from time to time at the option of the holder, on the
basis of one share of New Belk Class B Common Stock for each share of New Belk
Class A Common Stock converted. Shares of New Belk Class A Common Stock held by
a New Belk Stockholder who is a Class A Permitted Holder will also automatically
convert into New Belk Class B Common Stock in the event that such New Belk
Stockholder no longer meets the requirements of a Class A Permitted Holder. New
Belk Class B Common Stock has no conversion rights. The Company Articles provide
for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the GBCC, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as the
effect of such distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to
4
<PAGE> 368
be less than the sum of its total liabilities plus (unless the articles of
incorporation permit otherwise) the amount that would be needed if the
corporation dissolved at the time of the payment of the dividend to satisfy the
preferential rights upon dissolution of shareholders whose preferential rights
are superior to those receiving the distribution. The Company Bylaws provide
that the Board of Directors of the Company (the "Company Board") may from time
to time declare dividends on the Company's outstanding shares in the manner and
upon the terms and conditions provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The GBCC permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 25%, or such
greater or lesser percentages as may be provided in the articles of
incorporation or bylaws, of all votes entitled to be cast on the proposed
corporate action to call a special meeting. The Company Bylaws authorize the
Chairman, President, Secretary, the Company Board and any Shareholder pursuant
to the written request of the holders of not less than 10% of all the shares
entitled to vote at the meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the GBCC, unless the articles of incorporation, the bylaws or
the provisions regarding meetings in the GBCC specify a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the shareholders. The Company Articles specify that to liquidate and
discontinue the business of the Company at any time requires a vote of
two-thirds of its shares outstanding at the time.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the
5
<PAGE> 369
shares of the series so affected by the amendment will be considered a separate
class for purposes of voting by classes. The New Belk Certificate is consistent
with the foregoing provisions of the DGCL.
Under the GBCC, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the GBCC
requires an amendment to the articles of incorporation to be recommended by the
board of directors to the shareholders and approved by a majority (unless the
articles of incorporation or the board of directors requires a greater vote or a
vote by voting groups) of the votes entitled to be cast on the amendment by any
voting group. As under the DGCL, the holders of the outstanding shares of a
class or series are entitled to vote as a separate voting group (if shareholder
voting is otherwise required by the GBCC) on a proposed amendment if the
amendment would change certain fundamental rights and preferences of that class
or series. The Company Articles specify that an amendment of the Company
Articles in either substance or form requires a vote of the majority of its
shares outstanding at the time.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the GBCC, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or the
GBCC reserves this power exclusively to the shareholders in whole or part or
(ii) the shareholders in amending or repealing a particular bylaw provided
expressly that the board of directors may not amend or repeal that bylaw. The
shareholders of the corporation may amend or repeal the bylaws of the
corporation even though such bylaws may be amended or repealed by the board of
directors of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board, or by the affirmative vote of a majority of the shares
outstanding and entitled to vote at any regular or special meeting of the
Shareholders. Further, the Company Bylaws provide that the Company Board has no
power to adopt a bylaw: (i) requiring more than a majority of the voting shares
for a quorum at a meeting of the Shareholders, except where higher percentages
are required by law; (ii) providing for the management of the Company otherwise
than by the Company Board or its executive committees; (iii) increasing or
decreasing the number of directors; or (iv) classifying and staggering the
election of directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the GBCC, any action that may be taken by an annual or special
meeting of shareholders may be taken without a meeting and without prior notice,
if all holders of outstanding shares entitled to vote on such action or, if so
provided in the articles of incorporation, by persons entitled to vote at a
meeting shares having voting power to cast not less than the minimum number (or
numbers, in the case of voting groups) of votes that would be necessary to
authorize or take the action at which all shareholders entitled to vote were
present and voted sign the written consent(s) describing such action. The
Company Bylaws permit any action which may be taken at a meeting of the
Shareholders to be taken without a meeting if a consent in writing, setting
forth the action so taken, is signed by all of the persons who would be entitled
to vote upon such action at a meeting and filed with the Secretary of the
Company.
6
<PAGE> 370
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation or a bylaw
approved by the shareholders, the GBCC permits a vacancy in the board of
directors to be filled by the shareholders or by the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board and if
the vacancy is one that the directors are authorized to fill, then the directors
may fill the vacancy by the affirmative vote of a majority of all the directors
remaining in office.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors may be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The GBCC requires a corporation to have at least one director. The articles
of incorporation or the bylaws may authorize the shareholders or the board of
directors to change the number of directors. If the articles of incorporation or
the bylaws establish a variable range for the size of directors, the number of
directors may be changed, within the prescribed range, by the shareholders or,
if the articles of incorporation so provide, by the board of directors. The
Company Bylaws require the Company Board to consist of at least three, but no
more than 15, directors.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
7
<PAGE> 371
Under the GBCC, a director must be a natural person and at least 18 years
of age, but does not have to be a resident of Georgia or a shareholder of the
corporation unless otherwise provided for in the articles of incorporation. The
Company Articles do not require directors of the Company to be residents of
Georgia or shareholders of the Company. The GBCC also allows the articles of
incorporation or the bylaws to provide for additional qualifications of
directors.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each class expiring at the
annual meeting in successive years beginning with the first class and
progressing to the third class, if any. Thereafter, directors are chosen for a
full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
Under the GBCC, the articles of incorporation may allow for staggering the
terms of directors by dividing the total number of directors into two or three
groups, with each group containing one-half or one-third of the total. The term
of each group expires in each successive year beginning with the first group and
progressing to the third group, if any. Thereafter, directors are chosen for a
term of two or three years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
According to the GBCC, unless the articles of incorporation or bylaws
provide that directors may be removed only for cause, the shareholders may
remove one or more directors with or without cause. If a director is elected by
a voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove him. If cumulative voting is not authorized, a
director may be removed only by a majority of votes entitled to be cast.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under both the DGCL and the GBCC, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the GBCC generally permits transactions involving a
Georgia corporation and an interested director of that corporation if: (i) the
transaction received the affirmative vote of a majority (but not less than two)
of those qualified directors on the board of directors or on a duly empowered
committee
8
<PAGE> 372
thereof who voted on the transaction after required disclosure to them; (ii) if
a majority of the votes entitled to be cast by the holders of all qualified
shares were cast in favor of the transaction after (a) notice to shareholders
describing the director's conflicting interest transaction, (b) provision of the
information with regard to any unqualified shares and (c) required disclosure to
the shareholders who voted on the transaction (to the extent the information was
not known by them); or (iii) the transaction, judged in the circumstances at the
time of commitment, is established to have been fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the GBCC, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the GBCC (i) in connection with a
proceeding by or in the right of the corporation, except for reasonable expenses
incurred in connection with the proceeding if it is determined that the director
or officer has met the relevant standard of conduct under the GBCC or (ii) in
connection with any proceeding with respect to conduct for which he was adjudged
liable on the basis that personal benefit was improperly received by him,
whether or not involving action in his official capacity. A Georgia corporation
must indemnify a director or officer who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party because he
was a director or officer of the corporation against reasonable expenses
incurred by the director or officer in connection with the proceeding.
9
<PAGE> 373
The Company Bylaws authorize indemnification as provided in the GBCC. In
addition, the Company Bylaws provide that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify a director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the GBCC, a director
will not be personally liable to the Company or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The GBCC concerning the approval of mergers and share exchanges is similar
in all material respects to the DGCL, except action by the shareholders of the
surviving corporation is not required if the number and kind of shares
outstanding immediately after the merger or share exchange, plus the number and
kind of shares issuable as a result of the merger or share exchange and by the
conversion of securities issued pursuant to the merger or share exchange or the
exercise of rights and warrants issued pursuant to the merger or share exchange
does not exceed the total number and kind of shares of the surviving or
acquiring corporation authorized by its articles of incorporation immediately
before the merger or share exchange. The GBCC and DGCL provisions concerning the
approval of the sale of all or substantially all of the assets of a corporation
are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the GBCC include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined in the DGCL and the
GBCC, "business combinations" generally encompass (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder, (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested shareholder of a substantial percentage of assets of the corporation,
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested shareholder,
except in certain circumstances, (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested shareholder, except
in certain circumstances or (v) any receipt by the interested shareholder of the
benefit of any loans, advances,
10
<PAGE> 374
guarantees, pledges or other financial benefits (other than those expressly
permitted in (i) through (iv) above) provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who (i) is the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation and within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation. Under the
GBCC, an "interested shareholder" is any person who owns 10% of the outstanding
voting shares or is an affiliate of the corporation owning 10% of the
outstanding voting shares within the prior two years, and a "continuing
director" is a director not associated or affiliated with any interested
shareholder.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
According to the GBCC, if at least three continuing directors serve on the
board of directors, then those directors must unanimously approve the business
combination. If three continuing directors do not serve on the board of
directors, then 66 2/3% of the continuing directors must recommend the business
combination and a majority of shareholders entitled to cast a vote must approve
the business combination. Also, except under certain circumstances, no mergers
may occur between a corporation and an interested shareholder within five years
of the date the shareholder became an interested shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the GBCC provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
11
<PAGE> 375
The GBCC concerning preemptive rights is equivalent to the DGCL. The
Company Articles do not contain any provision with respect to preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the GBCC, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) excerpts from minutes of any
meeting of the board of directors, records of any action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporations; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the GBCC ("Article 13") has
the right to receive in cash the fair value of such Shareholder's shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN
ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
To exercise appraisal rights under Article 13, a holder of Common Stock
must (i) deliver to the Company before the taking of the vote of Shareholders on
the Reorganization Agreement written notice of his intent to demand payment for
his shares if the Merger is effected and (ii) not vote his shares in favor of
the Reorganization Agreement. A Shareholder who does not satisfy these two
requirements is not entitled to payment for his shares under Article 13. In
addition, any Shareholder who returns a signed proxy but fails to provide
instructions as to the manner in which such shares are to be voted will be
deemed to have voted in favor of the Reorganization Agreement and will not be
entitled to assert dissenters' rights of appraisal.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial Shareholder and he notifies the Company
in writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of such a partial dissenter are determined as if
the shares as to which he dissents and his other shares are registered in the
names of different Shareholders.
If the Reorganization Agreement is approved at the Special Meeting, the
Company must deliver a written dissenters' notice (the "Dissenters' Notice") to
all Shareholders who satisfied the notice requirements of Article 13. The
Dissenters' Notice must be sent within 10 days after the Effective Time and must
(i) state where the demand for payment must be sent and where and when
certificates for shares must be deposited, (ii) inform holders of uncertificated
shares to what extent transfer of those shares will be restricted after the
demand for payment is received, (iii) set a date by which the Company must
receive the demand for payment (which date may not be fewer than 30 nor more
than 60 days after the Dissenters' Notice is delivered) and (iv) be accompanied
by a copy of Article 13.
12
<PAGE> 376
A record Shareholder who receives the Dissenters' Notice must demand
payment and deposit his certificates in accordance with the Dissenters' Notice.
Such Shareholder will retain all other rights of a Shareholder until those
rights are canceled or modified by the consummation of the Merger. A record
Shareholder who does not demand payment or deposit his share certificates where
required, each by the date set in the Dissenters' Notice, is not entitled to
payment for his shares under Article 13.
Within 10 days of the later of the Effective Time or receipt of a payment
demand, the Company must offer to pay each dissenting Shareholder who complied
with Article 13 the amount the Company estimates to be the fair value of his
shares, plus accrued interest from the Effective Time. Such offer of payment
must be accompanied by (i) certain recent Company financial statements, (ii) the
Company's estimate of the fair value of the shares and interest due, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Article 13 and (v) a copy of Article
13. If the Shareholder accepts the Company's offer by written notice to the
Company within 30 days after the Company's offer, the Company must make payment
within 60 days after the later of the making of the offer or the Effective Time.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing share certificates, the Company must return the
deposited certificates. If, after such return, the Merger is consummated, the
Company must send a new Dissenters' Notice and repeat the payment procedure
described above.
A dissenting Shareholder may notify the Company in writing of his own
estimate of the fair value of his shares and the interest due, and may demand
payment of his estimate, if (i) he believes that the amount offered by the
Company is less than the fair value of his shares or that the interest due has
been calculated incorrectly or (ii) the Company, having failed to consummate the
Merger, does not return the deposited certificates within 60 days after the date
set for demanding payment. A dissenting Shareholder waives his right to demand
payment unless he notifies the Company of his demand in writing within 30 days
after the Company makes or offers payment for his shares. If the Company does
not offer payment within 10 days of the later of the Effective Time or receipt
of a payment demand, then (i) the Shareholder may demand the financial
statements and other information of the Company, and the Company must provide
such information within 10 days after receipt of the written demand and (ii) the
Shareholder may notify the Company of his own estimate of the fair value of his
shares and the amount of interest due, and may demand payment of that estimate.
If a demand for payment by a Shareholder remains unsettled, the Company
must commence a nonjury equity valuation proceeding in the appropriate court, as
specified in Article 13, within 60 days after receiving the payment demand and
must petition the court to determine the fair value of the shares and accrued
interest. If the Company does not commence a valuation proceeding within 60
days, the Company is required to pay each dissenting Shareholder whose demand
remains unsettled, the amount demanded. The Company is required to make all
dissenting Shareholders whose demands remain unsettled parties to the proceeding
and to serve a copy of the petition upon each dissenting Shareholder. The court
may appoint appraisers to receive evidence and to recommend a decision on fair
value. Each dissenting Shareholder made a party to the proceeding is entitled to
judgment for the fair value of his shares plus interest to the date of judgment.
In an appraisal proceeding commenced under Article 13, the court must
determine the costs of the proceeding, excluding fees and expenses of attorneys
and experts for the respective parties, and must assess those costs against the
Company, except that the court may assess the costs against all or some of the
dissenting Shareholders to the extent the court finds they acted arbitrarily,
vexatiously or not in good faith in demanding payment under Article 13. The
court also may assess the fees and expenses of attorneys and experts for the
respective parties against the Company if the court finds the Company did not
substantially comply with the requirements of Article 13, or against either the
Company or a dissenting Shareholder if the court finds that such party acted
arbitrarily, vexatiously or not in good faith with respect to the rights
provided by Article 13.
If the court finds that the services of the attorneys for any dissenting
Shareholder were of substantial benefit to other dissenting Shareholders
similarly situated, and that the fees for those services should not be assessed
against the Company, the court may award those attorneys reasonable fees out of
the amounts
13
<PAGE> 377
awarded the dissenting Shareholders who were benefited. No action by any
dissenting Shareholder to enforce dissenters' rights may be brought more than
three years after the Effective Time, regardless of whether notice of the Merger
and of the right to dissent was given by the Company in compliance with the
provisions of Article 13.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ----------- ----------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales........................... $15,328,996 $15,328,996 0.6 $(18,702) $9,216,100
EBITDA.............................. 1,193,872 1,190,519 7 (18,702) 8,352,335
EBIT................................ 726,392 723,039 10 (18,702) 7,249,092
Net Income.......................... 442,157 440,030 15 -- 6,600,450
Book Equity......................... 8,821,331 5,995,445 1 -- 5,995,445
</TABLE>
14
<PAGE> 378
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk of Canton, Ga.,
Inc. 1.3458% X $ 2,207,655 = $ 29,711
Belk of Dalton, Ga.,
Inc. .6292% X 8,605,064 = 54,143
Belk of LaGrange,
Ga., Inc. 6.3399% X 25,267,594 = 1,601,940
Belk of
Lawrenceville, Ga.,
Inc. .5766% X 6,024,824 = 34,739
Belk of Monroe, Ga.,
Inc. .1326% X 1,961,637 = 2,601
Belk of Thomaston,
Ga., Inc. 11.0555% X 30,309,289 = 3,350,843
-----------
Total $ 5,073,978
===========
Relative Operating Value of Company $ 9,216,100
Relative Operating Value of Other Companies Owned by Company + 5,073,978
-----------
Total Relative Value of Company = $14,290,078
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Gallant-Belk Company
of Anderson, SC 48.0552% X $14,290,078 = $ 6,867,125
Belk Enterprise, Inc. .9918% X 14,290,078 = 141,729
Belk of Dalton, Ga.,
Inc. .2944% X 14,290,078 = 42,070
Belk of LaGrange,
Ga., Inc. 9.1895 X 14,290,078 = 1,313,187
Belk of Thomaston,
Ga., Inc. .2402% X 14,290,078 = 34,325
Belk of Toccoa, Ga.,
Inc. 1.7356 X 14,290,078 = 248,019
-----------
Total $ 8,646,454
===========
Total Relative Value of Company $14,290,078
Total Relative Value of Company Owned by Other Belk Companies - 8,646,454
-----------
Net Relative Value of Company = $ 5,643,623
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 5,643,623 / $1,156,226,577 = .4881%
</TABLE>
15
<PAGE> 379
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.4881% X 59,998,834) / 5,097 = 57.4570
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 380
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 34.26
Dividends(2).............................................. 12.50
Book value per share(3)................................... 683.51
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 55.16
Dividends(2).............................................. 14.94
Book value per share...................................... 719.36
</TABLE>
- ---------------
(1) Based on 12,906 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 12,906 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
17
<PAGE> 381
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $14,886 $14,393 $15,329
Net income.................................................. 517 476 442
Per common share
Net income (loss)(1)...................................... 40.04 36.86 34.26
Dividends................................................. 10.00 12.50 12.50
Book value(2)............................................. 637.39 661.75 683.51
Total assets................................................ 9.803 9.982 10,892
Shareholders' equity........................................ 8,226 8,540 8,821
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $10,304 $10,689
Income from operations...................................... 310 446
</TABLE>
- ---------------
(1) Based on 12,906 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding for the years ended January 31, 1995,
February 3, 1996 and February 1, 1997.
(2) Based on 12,906 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 382
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
To the extent a discussion of the financial condition and results of
operations of the Company for any of the fiscal years ended January 31, 1995,
February 3, 1996 or February 1, 1997 or for either of the nine month periods
ended November 2, 1996 or November 1, 1997 is necessary to identify certain
trends or conditions that differ from the combined Belk Companies and that are
material to Shareholders' understanding of the financial condition or results of
operations of the Company, such discussion is included below. The discussion
which follows is based upon and should be read in conjunction with the
historical financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus Supplement.
Other expense, net increased in fiscal year 1997 as a result of increased
interest expense incurred on additional borrowings used to fund the purchase of
stock in other Belk companies.
BUSINESS OF THE COMPANY
General. The Company operates one retail department store in Georgia
Square Mall in Athens, Georgia. The Company's store operates in a manner
consistent with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is managed out of the Kerr group office in
Norcross, Georgia.
Facilities. The Company leases its store building, which contains
approximately 119,000 square feet of floor area. The current term of the lease
expires in 2007. The Company believes its store building is adequate to meet its
current needs.
Competition. Specific competitors in the Company's market include Macy's,
Penney and Sears.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 383
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)(f)........................................ 9,665 74.9%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(c)(f)(g).............................................. 8,421 65.2%
H. W. McKay Belk (Director and Executive Officer)
(b)(c)(f)(h).............................................. 8,442 65.4%
John R. Belk (Director and Executive Officer)
(b)(c)(f)(i).............................................. 8,449 65.5%
Henderson Belk (Director) (d)(e)............................ 424 3.3%
Sarah Belk Gambrell (d)(e).................................. 1,328 10.3%
Leroy Robinson (Director) (b)(c)............................ 480 3.7%
Robert K. Kerr, Jr. (Director and Executive Officer)........ 8 *
Sarah Gambrell Knight....................................... 872 6.8%
Gallant-Belk Company........................................ 6,202 48.1%
Belk of LaGrange, Ga., Inc. ................................ 1,186 9.2%
All Directors and Executive Officers as a group (7
persons).................................................. 10,118 78.4%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business addresses for the beneficial owners, directors and/or officers
are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk and Leroy Robinson -- 2801 West Tyvola Road, Charlotte, N.C.
28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207;
Sarah Gambrell Knight -- 810 Colville Road, Charlotte, N.C. 28207; Robert K.
Kerr, Jr. -- 1890-D Beaver Ridge Circle, Norcross, Ga. 30071; Gallant-Belk
Company and Belk of LaGrange, Ga., Inc. -- 2801 West Tyvola Road, Charlotte,
N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Represented by 28 shares held by Claudia W. Belk, Tr. U/A f/b/o Mary
Claudia Belk. Claudia W. Belk, the Trustee, is John M. Belk's wife.
(b) Includes 176 shares held by Brothers Investment Company, which corporation
is equally owned by John M. Belk and the Estate of Thomas M. Belk. Voting
and investment power is shared by John M. Belk, Katherine McKay Belk,
Katherine Belk Morris, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk
and Leroy Robinson.
(c) Includes 304 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(d) Includes 400 shares held in several Trusts established by the Will of W. H.
Belk for the benefit of his children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, and W.
H. Belk, Jr. and Irwin Belk.
20
<PAGE> 384
(e) Includes 24 shares held in several Trusts established by the Will of Mary
I. Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(f) Includes 128 shares held by Belk Enterprises, Inc., 6,202 shares held by
Gallant-Belk Company, 38 shares held by Belk of Dalton, Ga., Inc., 1,186
shares held by Belk of LaGrange, Ga., Inc., 31 shares held by Belk of
Thomaston, Ga., Inc., and 224 shares held by Belk of Toccoa, Ga., Inc.,
which shares are voted by the members of the Executive Committee of the
Board of Directors of each such Corporation, under authority given by the
directors of each such Corporation at the annual meeting of directors held
in March 1997. The Executive Committee of each such Corporation consists of
John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(g) Includes 20 shares held by Thomas M. Belk, Jr. as custodian for his minor
children.
(h) Includes 5 shares held by H. W. McKay Belk as custodian for his minor
children.
(i) Includes 15 shares held by John R. Belk as custodian for his minor
children.
21
<PAGE> 385
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 386
BELK OF ATHENS, GA., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 166,904 $ 200,587
Accounts receivable, net.................................. 2,094,224 2,561,228
Merchandise inventory..................................... 2,891,753 3,134,922
Receivable from affiliates, net........................... 870,067 618,114
Refundable income taxes................................... 15,799 10,695
Deferred income taxes..................................... 33,566 --
Other..................................................... 147,514 113,770
---------- -----------
Total current assets........................................ 6,219,827 6,639,316
Loans receivable from affiliates, net....................... 1,800,000 --
Investments................................................. 192,424 2,825,886
Property, plant and equipment, net.......................... 1,650,459 1,271,881
Deferred income taxes....................................... -- 35,872
Other noncurrent assets..................................... 119,517 118,583
---------- -----------
$9,982,227 $10,891,538
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 942,280 $ 809,871
Deferred income taxes..................................... -- 1,699
Accrued income taxes...................................... 77,126 40,329
---------- -----------
Total current liabilities................................... 1,019,406 851,899
Deferred income taxes....................................... 26,579 --
Loans payable to affiliates, net............................ -- 800,000
Other noncurrent liabilities................................ 395,743 418,308
---------- -----------
Total liabilities........................................... 1,441,728 2,070,207
Shareholders' equity:
Common stock.............................................. 1,290,600 1,290,600
Additional paid in capital................................ 4,302 4,302
Retained earnings......................................... 7,245,597 7,526,429
---------- -----------
Total shareholders' equity.................................. 8,540,499 8,821,331
---------- -----------
$9,982,227 $10,891,538
========== ===========
</TABLE>
F-2
<PAGE> 387
BELK OF ATHENS, GA., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Total store sales....................................... $15,078,600 $14,620,971 $15,541,900
Less: Leased Sales...................................... 192,112 227,905 212,904
----------- ----------- -----------
Net sales............................................... 14,886,488 14,393,066 15,328,996
Operating costs and expenses............................ 14,029,429 13,742,731 14,601,494
----------- ----------- -----------
Income from operations.................................. 857,059 650,335 727,502
----------- ----------- -----------
Other income (expense):
Interest, net......................................... 53,578 111,655 (29,350)
Dividend income....................................... 1,584 2,089 3,146
Gain (loss) on disposal of property, plant and
equipment.......................................... (402) (630) 207
Miscellaneous, net.................................... (35,981) (1,855) (4,463)
----------- ----------- -----------
Total other expense, net................................ 18,779 111,259 (30,460)
----------- ----------- -----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities..... 875,838 761,594 697,042
Income tax expense (benefit)............................ 359,103 285,904 254,885
----------- ----------- -----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities................... 516,735 475,690 442,157
----------- ----------- -----------
Net earnings............................................ 516,735 475,690 442,157
Retained earnings at beginning of period................ 6,543,557 6,931,232 7,245,597
Dividends paid.......................................... (129,060) (161,325) (161,325)
----------- ----------- -----------
Retained earnings at end of period...................... $ 6,931,232 $ 7,245,597 $ 7,526,429
=========== =========== ===========
</TABLE>
F-3
<PAGE> 388
BELK OF ATHENS, GA., INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31. Fiscal years 1997, 1996 and 1995 ended on February 1, 1997, February
3, 1996 and January 31, 1995, respectively.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
F-4
<PAGE> 389
BELK OF ATHENS, GA., INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements
F-5
<PAGE> 390
BELK OF ATHENS, GA., INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
issued for all fiscal periods starting after December 15, 1995 and requires the
recognition of impairment losses on long-lived assets when book values exceed
expected future cash flows.
F-6
<PAGE> 391
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 14, CHAPTER 2
BUSINESS CORPORATIONS
STATE OF GEORGIA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
A-1
<PAGE> 392
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's right.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
A-2
<PAGE> 393
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
A-3
<PAGE> 394
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing
A-4
<PAGE> 395
under subsection (a) of this Code section within 30 days after the corporation
offered payment for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
A-5
<PAGE> 396
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
A-6
<PAGE> 397
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................... $15,328,996 $442,157 $726,392 $1,193,872 $8,821,331
Adjustments to eliminate less than
wholly-owned subsidiaries................... -- -- -- -- --
----------- -------- -------- ---------- ----------
Adjusted Shareholders' Statement.............. $15,328,996 442,157 726,392 1,193,872 8,821,331
=========== -------- -------- ---------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............... (131) (207) (207)
Gain/loss on sale of securities............. -- -- --
Impairment loss............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries.............................. -- -- --
Gain/loss on discontinued operations........ -- -- --
Adjustment to tax expense................... -- -- -- --
-------- -------- ----------
Total non-operating items..................... (131) (207) (207)
-------- -------- ----------
Other Adjustments:
Adjustment for dividends received from other
Belk entities............................. (1,996) (3,146) (3,146)
Adjustment for ownership in other Belk
entities.................................. (2,825,886)
-------- -------- ---------- ----------
Per Model..................................... $440,030 $723,039 $1,190,519 $5,995,445
======== ======== ========== ==========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................... $ (200,588)
Negative cash balances reclassified to
accounts payable........................ --
Receivables from affiliates, net.......... (618,114)
Loans receivable from affiliates, net..... --
Liabilities
Notes payable............................. --
Current installments of long-term debt.... --
Current portion of obligations under
capital leases.......................... --
Payables to affiliates, net............... --
Long-term debt, excluding current
installments............................ --
Obligations under capital leases,
excluding current portion............... --
Loans payable to affiliates, net.......... 800,000
-----------
Net debt (cash)............................... (18,702)
Adjustments to eliminate less than
wholly-owned subsidiaries................... --
-----------
Per Model..................................... $ (18,702)
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 398
SUPPLEMENT NO. 6
<PAGE> 399
BELK OF ATHENS, GA., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 3:30 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 6
<PAGE> 400
BELK-SIMPSON CO. OF BAINBRIDGE, GA., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk-Simpson Co. of Bainbridge, Ga., Inc. (the
"Company"), to be held on April 16, 1998, at 4:10 p.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Georgia law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 51.9882 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 126,435 shares of New Belk Class A Common Stock which will
represent approximately 0.2107% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(7)
<PAGE> 401
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 402
BELK-SIMPSON CO. OF BAINBRIDGE, GA., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK-SIMPSON CO. OF BAINBRIDGE, GA., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk-Simpson Co. of Bainbridge, Ga., Inc. (the "Company") will be
held on April 16, 1998, at 4:10 p.m., local time, at the offices of Belk Stores
Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for
the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Georgia law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 51.9882 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 403
BELK-SIMPSON CO., OF BAINBRIDGE, GA., INC.
SUPPLEMENT NO. 7
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 7 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK-SIMPSON CO., OF
BAINBRIDGE, GA., INC. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE
DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED
HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION.
IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE
INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 16
SELECTED HISTORICAL FINANCIAL INFORMATION................... 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 18
BUSINESS OF THE COMPANY..................................... 18
SECURITY OWNERSHIP OF THE COMPANY........................... 19
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION.................................. B-1
</TABLE>
<PAGE> 404
THE COMPANY
The Company was incorporated as a Georgia corporation in 1950. The mailing
address of the Company's principal executive offices is 2801 West Tyvola Road,
Charlotte, North Carolina 28217-4500, and its telephone number at that address
is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 4:10 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization dated as of November 25, 1997 (the "Reorganization Agreement"),
by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk Acquisition
Co., a South Carolina corporation, and the 112 Belk companies named therein (the
"Belk Companies"), including the Company, pursuant to which the Company will be
merged with and into New Belk (the "Merger") and (ii) the Merger. A copy of the
Reorganization Agreement is attached as Annex A to the Proxy
Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under Georgia law),
will be converted, without any action on the part of the Shareholder, into the
right to receive 51.9882 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk (the "New Belk Class A Common Stock"). All
of the shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 7,200 shares of Common Stock
outstanding held of record by 27 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 74.7% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 405
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
New Belk has entered into an agreement dated February 27, 1998 (the
"Hanahan Agreement") with Mary E.S. Hanahan ("Mrs. Hanahan") who is the owner of
210 shares of Common Stock of the Company (the "Hanahan Shares"). In the Hanahan
Agreement, Mrs. Hanahan granted to certain employees of BSS her irrevocable
proxy to vote the Hanahan Shares in favor of the Merger, agreed to withdraw her
appeal in certain litigation instituted by Belk of Spartanburg, S.C., Inc.
against Mrs. Hanahan and another party and released New Belk and the Belk
Companies from any and all claims which Mrs. Hanahan has or may have against New
Belk and the Belk Companies. New Belk agreed, among other things, to purchase
from Mrs. Hanahan, at her election at any time prior to December 31, 1999, all
of the shares of New Belk Common Stock received by Mrs. Hanahan in exchange for
the Hanahan Shares and shares in other Belk Companies in the Reorganization for
an aggregate purchase price of $3.85 million.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Georgia Business Corporation Code (the "GBCC"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 7,200 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer
3
<PAGE> 406
restrictions in respect of New Belk Class A Common Stock. The holders of New
Belk Class A Common Stock are entitled to 10 votes per share. The holders of New
Belk Class B Common Stock are entitled to one vote per share. Shares of New Belk
Class A Common Stock may be owned only by Class A Permitted Holders. If a share
of New Belk Class A Common Stock is transferred to any person other than a Class
A Permitted Holder, whether by sale, assignment, gift, bequest, appointment or
otherwise, such share will be converted automatically into a share of New Belk
Class B Common Stock. Shares of New Belk Class A Common Stock are convertible
into New Belk Class B Common Stock, in whole or in part, at any time and from
time to time at the option of the holder, on the basis of one share of New Belk
Class B Common Stock for each share of New Belk Class A Common Stock converted.
Shares of New Belk Class A Common Stock held by a New Belk Stockholder who is a
Class A Permitted Holder will also automatically convert into New Belk Class B
Common Stock in the event that such New Belk Stockholder no longer meets the
requirements of a Class A Permitted Holder. New Belk Class B Common Stock has no
conversion rights. The Company Articles provide for only one class of common
stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same
4
<PAGE> 407
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock.
Pursuant to the GBCC, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as the
effect of such distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to be less than the sum of its total liabilities plus
(unless the articles of incorporation permit otherwise) the amount that would be
needed if the corporation dissolved at the time of the payment of the dividend
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The GBCC permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 25%, or such
greater or lesser percentages as may be provided in the articles of
incorporation or bylaws, of all votes entitled to be cast on the proposed
corporate action to call a special meeting. The Company Bylaws authorize the
Chairman, President, Secretary, the Company Board and any Shareholder pursuant
to the written request of the holders of not less than 10% of all the shares
entitled to vote at the meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the GBCC, unless the articles of incorporation, the bylaws or
the provisions regarding meetings in the GBCC specify a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the shareholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or
5
<PAGE> 408
alter or change the powers, preferences or special rights of the shares of such
class so as to affect them adversely. If any proposed amendment would alter or
change the powers, preferences or special rights of one or more series of any
class so as to affect them adversely, but would not so affect the entire class,
then only the shares of the series so affected by the amendment will be
considered a separate class for purposes of voting by classes. The New Belk
Certificate is consistent with the foregoing provisions of the DGCL.
Under the GBCC, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the GBCC
requires an amendment to the articles of incorporation to be recommended by the
board of directors to the shareholders and approved by a majority (unless the
articles of incorporation or the board of directors requires a greater vote or a
vote by voting groups) of the votes entitled to be cast on the amendment by any
voting group. As under the DGCL, the holders of the outstanding shares of a
class or series are entitled to vote as a separate voting group (if shareholder
voting is otherwise required by the GBCC) on a proposed amendment if the
amendment would change certain fundamental rights and preferences of that class
or series. The Company Articles do not specify a greater vote or a vote by
voting groups to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the GBCC, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or the
GBCC reserves this power exclusively to the shareholders in whole or part or
(ii) the shareholders in amending or repealing a particular bylaw provided
expressly that the board of directors may not amend or repeal that bylaw. The
shareholders of the corporation may amend or repeal the bylaws of the
corporation even though such bylaws may be amended or repealed by the board of
directors of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board, or by the affirmative vote of a majority of the shares
outstanding and entitled to vote at any regular or special meeting of the
Shareholders. Further, the Company Bylaws provide that the Company Board has no
power to adopt a bylaw: (i) requiring more than a majority of the voting shares
for a quorum at a meeting of the Shareholders, except where higher percentages
are required by law; (ii) providing for the management of the Company otherwise
than by the Company Board or its executive committees; (iii) increasing or
decreasing the number of directors; or (iv) classifying and staggering the
election of directors. The Company Articles provide that the Company Board shall
have concurrent power, by vote of a majority of all of the directors, to make,
alter, amend and rescind the Company Bylaws. The bylaws enacted by the
Shareholders may be affected by action of the Company Board and vice versa;
provided, however, the Company Board may not re-enact a bylaw which the
Shareholders have repealed or altered, nor may it repeal a bylaw enacted by the
Shareholders which limits the powers of the Company Board or enhances or
protects the right of Shareholders, without the consent of the Shareholders.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the GBCC, any action that may be taken by an annual or special
meeting of shareholders may be taken without a meeting and without prior notice,
if all holders of outstanding shares entitled to vote
6
<PAGE> 409
on such action or, if so provided in the articles of incorporation, by persons
entitled to vote at a meeting shares having voting power to cast not less than
the minimum number (or numbers, in the case of voting groups) of votes that
would be necessary to authorize or take the action at which all shareholders
entitled to vote were present and voted sign the written consent(s) describing
such action. The Company Bylaws permit any action which may be taken at a
meeting of the Shareholders to be taken without a meeting if a consent in
writing, setting forth the action so taken, is signed by all of the persons who
would be entitled to vote upon such action at a meeting and filed with the
Secretary of the Company.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation or a bylaw
approved by the shareholders, the GBCC permits a vacancy in the board of
directors to be filled by the shareholders or by the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board and if
the vacancy is one that the directors are authorized to fill, then the directors
may fill the vacancy by the affirmative vote of a majority of all the directors
remaining in office.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors may be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The GBCC requires a corporation to have at least one director. The articles
of incorporation or the bylaws may authorize the shareholders or the board of
directors to change the number of directors. If the articles of incorporation or
the bylaws establish a variable range for the size of directors, the number of
directors may be changed, within the prescribed range, by the shareholders or,
if the articles of incorporation so provide, by the
7
<PAGE> 410
board of directors. The Company Bylaws require the Company Board to consist of
at least three, but no more than 15, directors.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
Under the GBCC, a director must be a natural person and at least 18 years
of age, but does not have to be a resident of Georgia or a shareholder of the
corporation unless otherwise provided for in the articles of incorporation. The
Company Articles do not require directors of the Company to be residents of
Georgia or shareholders of the Company. The GBCC also allows the articles of
incorporation or the bylaws to provide for additional qualifications of
directors.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each class expiring at the
annual meeting in successive years beginning with the first class and
progressing to the third class, if any. Thereafter, directors are chosen for a
full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
Under the GBCC, the articles of incorporation may allow for staggering the
terms of directors by dividing the total number of directors into two or three
groups, with each group containing one-half or one-third of the total. The term
of each group expires in each successive year beginning with the first group and
progressing to the third group, if any. Thereafter, directors are chosen for a
term of two or three years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
According to the GBCC, unless the articles of incorporation or bylaws
provide that directors may be removed only for cause, the shareholders may
remove one or more directors with or without cause. If a director is elected by
a voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove him. If cumulative voting is not authorized, a
director may be removed only by a majority of votes entitled to be cast.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under both the DGCL and the GBCC, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a
8
<PAGE> 411
majority of disinterested directors consents; (ii) the material facts are
disclosed and a majority of shares entitled to vote thereon consents; or (iii)
the transaction is fair to the corporation at the time it is authorized by the
board of directors, a committee of the board or the stockholders.
Similar to the DGCL, the GBCC generally permits transactions involving a
Georgia corporation and an interested director of that corporation if: (i) the
transaction received the affirmative vote of a majority (but not less than two)
of those qualified directors on the board of directors or on a duly empowered
committee thereof who voted on the transaction after required disclosure to
them; (ii) if a majority of the votes entitled to be cast by the holders of all
qualified shares were cast in favor of the transaction after (a) notice to
shareholders describing the director's conflicting interest transaction, (b)
provision of the information with regard to any unqualified shares and (c)
required disclosure to the shareholders who voted on the transaction (to the
extent the information was not known by them); or (iii) the transaction, judged
in the circumstances at the time of commitment, is established to have been fair
to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the GBCC, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the GBCC (i) in connection with a
proceeding by or in the right of the corporation, except for reasonable expenses
incurred in connection with the proceeding if it is determined that the director
or officer has met the relevant standard of conduct under the GBCC or (ii) in
connection with any proceeding with respect to conduct for which he was
9
<PAGE> 412
adjudged liable on the basis that personal benefit was improperly received by
him, whether or not involving action in his official capacity. A Georgia
corporation must indemnify a director or officer who was wholly successful, on
the merits or otherwise, in the defense of any proceeding to which he was a
party because he was a director or officer of the corporation against reasonable
expenses incurred by the director or officer in connection with the proceeding.
The Company Bylaws authorize indemnification as provided in the GBCC. In
addition, the Company Bylaws provide that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify a director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the GBCC, a director
will not be personally liable to the Company or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The GBCC concerning the approval of mergers and share exchanges is similar
in all material respects to the DGCL, except action by the shareholders of the
surviving corporation is not required if the number and kind of shares
outstanding immediately after the merger or share exchange, plus the number and
kind of shares issuable as a result of the merger or share exchange and by the
conversion of securities issued pursuant to the merger or share exchange or the
exercise of rights and warrants issued pursuant to the merger or share exchange
does not exceed the total number and kind of shares of the surviving or
acquiring corporation authorized by its articles of incorporation immediately
before the merger or share exchange. The GBCC and DGCL provisions concerning the
approval of the sale of all or substantially all of the assets of a corporation
are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the GBCC include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined in the DGCL and the
GBCC, "business combinations" generally encompass (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder, (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested shareholder of a substantial percentage of assets of the corporation,
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested
10
<PAGE> 413
shareholder, except in certain circumstances, (iv) any transaction involving the
corporation which has the effect of increasing the proportionate share of the
stock of any class or series, or securities convertible into the stock of any
class or series, of the corporation which is owned by the interested
shareholder, except in certain circumstances or (v) any receipt by the
interested shareholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits (other than those expressly permitted in (i)
through (iv) above) provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who (i) is the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation and within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation. Under the
GBCC, an "interested shareholder" is any person who owns 10% of the outstanding
voting shares or is an affiliate of the corporation owning 10% of the
outstanding voting shares within the prior two years, and a "continuing
director" is a director not associated or affiliated with any interested
shareholder.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
According to the GBCC, if at least three continuing directors serve on the
board of directors, then those directors must unanimously approve the business
combination. If three continuing directors do not serve on the board of
directors, then 66 2/3% of the continuing directors must recommend the business
combination and a majority of shareholders entitled to cast a vote must approve
the business combination. Also, except under certain circumstances, no mergers
may occur between a corporation and an interested shareholder within five years
of the date the shareholder became an interested shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the GBCC provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a
11
<PAGE> 414
preemptive right to purchase, subscribe for or otherwise acquire stock of any
class or series of New Belk or any security convertible into or exchangeable
for, or any warrant, option or right to purchase, subscribe for or otherwise
acquire, stock of any class or series of New Belk, whether now or hereafter
authorized.
The GBCC concerning preemptive rights is equivalent to the DGCL. The
Company Articles do not contain any provision with respect to preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the GBCC, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose; and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) excerpts from minutes of any
meeting of the board of directors, records of any action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporations; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the GBCC ("Article 13") has
the right to receive in cash the fair value of such Shareholder's shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN
ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
To exercise appraisal rights under Article 13, a holder of Common Stock
must (i) deliver to the Company before the taking of the vote of Shareholders on
the Reorganization Agreement written notice of his intent to demand payment for
his shares if the Merger is effected and (ii) not vote his shares in favor of
the Reorganization Agreement. A Shareholder who does not satisfy these two
requirements is not entitled to payment for his shares under Article 13. In
addition, any Shareholder who returns a signed proxy but fails to provide
instructions as to the manner in which such shares are to be voted will be
deemed to have voted in favor of the Reorganization Agreement and will not be
entitled to assert dissenters' rights of appraisal.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial Shareholder and he notifies the Company
in writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of such a partial dissenter are determined as if
the shares as to which he dissents and his other shares are registered in the
names of different Shareholders.
If the Reorganization Agreement is approved at the Special Meeting, the
Company must deliver a written dissenters' notice (the "Dissenters' Notice") to
all Shareholders who satisfied the notice requirements of Article 13. The
Dissenters' Notice must be sent within 10 days after the Effective Time and must
(i) state where the demand for payment must be sent and where and when
certificates for shares must be deposited, (ii) inform holders of uncertificated
shares to what extent transfer of those shares will be restricted after the
12
<PAGE> 415
demand for payment is received, (iii) set a date by which the Company must
receive the demand for payment (which date may not be fewer than 30 nor more
than 60 days after the Dissenters' Notice is delivered) and (iv) be accompanied
by a copy of Article 13.
A record Shareholder who receives the Dissenters' Notice must demand
payment and deposit his certificates in accordance with the Dissenters' Notice.
Such Shareholder will retain all other rights of a Shareholder until those
rights are canceled or modified by the consummation of the Merger. A record
Shareholder who does not demand payment or deposit his share certificates where
required, each by the date set in the Dissenters' Notice, is not entitled to
payment for his shares under Article 13.
Within 10 days of the later of the Effective Time or receipt of a payment
demand, the Company must offer to pay each dissenting Shareholder who complied
with Article 13 the amount the Company estimates to be the fair value of his
shares, plus accrued interest from the Effective Time. Such offer of payment
must be accompanied by (i) certain recent Company financial statements, (ii) the
Company's estimate of the fair value of the shares and interest due, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Article 13 and (v) a copy of Article
13. If the Shareholder accepts the Company's offer by written notice to the
Company within 30 days after the Company's offer, the Company must make payment
within 60 days after the later of the making of the offer or the Effective Time.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing share certificates, the Company must return the
deposited certificates. If, after such return, the Merger is consummated, the
Company must send a new Dissenters' Notice and repeat the payment procedure
described above.
A dissenting Shareholder may notify the Company in writing of his own
estimate of the fair value of his shares and the interest due, and may demand
payment of his estimate, if (i) he believes that the amount offered by the
Company is less than the fair value of his shares or that the interest due has
been calculated incorrectly or (ii) the Company, having failed to consummate the
Merger, does not return the deposited certificates within 60 days after the date
set for demanding payment. A dissenting Shareholder waives his right to demand
payment unless he notifies the Company of his demand in writing within 30 days
after the Company makes or offers payment for his shares. If the Company does
not offer payment within 10 days of the later of the Effective Time or receipt
of a payment demand, then (i) the Shareholder may demand the financial
statements and other information of the Company, and the Company must provide
such information within 10 days after receipt of the written demand and (ii) the
Shareholder may notify the Company of his own estimate of the fair value of his
shares and the amount of interest due, and may demand payment of that estimate.
If a demand for payment by a Shareholder remains unsettled, the Company
must commence a nonjury equity valuation proceeding in the appropriate court, as
specified in Article 13, within 60 days after receiving the payment demand and
must petition the court to determine the fair value of the shares and accrued
interest. If the Company does not commence a valuation proceeding within 60
days, the Company is required to pay each dissenting Shareholder whose demand
remains unsettled, the amount demanded. The Company is required to make all
dissenting Shareholders whose demands remain unsettled parties to the proceeding
and to serve a copy of the petition upon each dissenting Shareholder. The court
may appoint appraisers to receive evidence and to recommend a decision on fair
value. Each dissenting Shareholder made a party to the proceeding is entitled to
judgment for the fair value of his shares plus interest to the date of judgment.
In an appraisal proceeding commenced under Article 13, the court must
determine the costs of the proceeding, excluding fees and expenses of attorneys
and experts for the respective parties, and must assess those costs against the
Company, except that the court may assess the costs against all or some of the
dissenting Shareholders to the extent the court finds they acted arbitrarily,
vexatiously or not in good faith in demanding payment under Article 13. The
court also may assess the fees and expenses of attorneys and experts for the
respective parties against the Company if the court finds the Company did not
substantially comply with the requirements of Article 13, or against either the
Company or a dissenting Shareholder if the court finds that such party acted
arbitrarily, vexatiously or not in good faith with respect to the rights
provided by Article 13.
13
<PAGE> 416
If the court finds that the services of the attorneys for any dissenting
Shareholder were of substantial benefit to other dissenting Shareholders
similarly situated, and that the fees for those services should not be assessed
against the Company, the court may award those attorneys reasonable fees out of
the amounts awarded the dissenting Shareholders who were benefited. No action by
any dissenting Shareholder to enforce dissenters' rights may be brought more
than three years after the Effective Time, regardless of whether notice of the
Merger and of the right to dissent was given by the Company in compliance with
the provisions of Article 13.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales.................... $3,638,258 $3,638,258 0.6 $(482,116) $2,665,071
EBITDA....................... 343,141 342,743 7 (482,116) 2,881,317
EBIT......................... 312,855 312,456 10 (482,116) 3,606,676
Net Income................... 196,727 196,480 15 -- 2,947,200
Book Equity.................. 1,744,365 1,744,092 1 -- 1,744,092
</TABLE>
14
<PAGE> 417
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
N/A N/A% X $ N/A = $ N/A
-----------
Total $ N/A
===========
Relative Operating Value of Company $ 3,606,676
Relative Operating Value of Other Companies Owned by Company + --
-----------
Total Relative Value of Company = $ 3,606,676
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Enterprises,
Inc. 16.0% X $ 3,606,676 = $ 577,068
Belk of Toccoa, Ga.,
Inc. 5.3333 X 3,606,676 = 192,355
Belk of Waycross,
Ga., Inc. 11.1111 X 3,606,676 = 400,741
-----------
Total $ 1,170,164
===========
Total Relative Value of Company $ 3,606,676
Total Relative Value of Company Owned by Other Belk Companies - 1,170,164
-----------
Net Relative Value of Company = $ 2,436,512
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 2,436,512 / $1,156,226,577 = .2107%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.2107% X 59,998,834) / 2,432 = 51.9882
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
15
<PAGE> 418
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 54.65
Dividends(2).............................................. 15.00
Book value per share(3)................................... 484.55
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 49.91
Dividends(2).............................................. 13.52
Book value per share...................................... 650.89
</TABLE>
- ---------------
(1) Based on 3,600 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 3,600 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
16
<PAGE> 419
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 3,558 $ 3,612 $ 3,638
Net income.................................................. 125 127 197
Per common share
Net income (loss)(1)...................................... 34.83 35.15 54.65
Dividends................................................. 15.00 15.00 15.00
Book value(2)............................................. 424.75 444.90 484.55
Total assets................................................ 1,826 1,876 2,108
Shareholders' equity........................................ 1,529 1,602 1,744
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $2,440 $2,752
Income from operations...................................... 182 258
</TABLE>
- ---------------
(1) Based on 3,600 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 3,600 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
17
<PAGE> 420
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
To the extent a discussion of the financial condition and results of
operations of the Company for any of the fiscal years ended January 31, 1995,
February 3, 1996 or February 1, 1997 or for either of the nine-month periods
ended November 2, 1996 or November 1, 1997 is necessary to identify certain
trends or conditions that differ from the combined Belk Companies and that are
material to Shareholders' understanding of the financial condition or results of
operations of the Company, such discussion is included below. The information
which follows is based upon and should be read in conjunction with the
historical financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus Supplement.
Comparable store sales increased for the nine months ended November 1, 1997
due to changes in the merchandise mix, including adding new higher volume lines
and improving ladies ready-to-wear.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Bainbridge Mall
in Bainbridge, Georgia. The Company's store operates in a manner consistent with
the business of the Belk Companies described in the Proxy Statement/Prospectus.
The store is managed out of the Bergren group office in Gainesville, Florida.
Facilities. The Company leases its store building, which contains
approximately 45,000 square feet of floor area. The current term of the lease
expires in 2003. The Company believes the building is adequate to meet its
current needs.
Competition. Specific competitors in the Company's market include K-Mart,
Wal-Mart and Goody's.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
18
<PAGE> 421
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d).............................................. 1,556 43.2%
Thomas M. Belk, Jr. (Director and Executive Officer)
(a)(d).................................................... 1,312 36.4%
H. W. McKay Belk (Director and Executive Officer) (a)(d).... 1,312 36.4%
John R. Belk (Director and Executive Officer) (a)(d)........ 1,312 36.4%
Henderson Belk (Director) (b)(c)............................ 80 2.2%
Sarah Belk Gambrell (Director) (b)(c)....................... 464 12.9%
John A. Kuhne (Director) (e)................................ 570 15.8%
Lucy Simpson Kuhne (f)...................................... 930 25.8%
Mary E. S. Hanahan.......................................... 210 5.8%
Kate Simpson (f)............................................ 420 11.7%
Claire E. Russo (f)......................................... 360 10.0%
Byron L. Bergren (Executive Officer)........................ 0 *
James Madden (Executive Officer)............................ 0 *
Belk Enterprises, Inc....................................... 576 16.0%
Belk of Toccoa, Ga., Inc.................................... 192 5.3%
Belk of Waycross, Ga., Inc.................................. 400 11.1%
Kate McArver Simpson, Lucy Caroline Bowden Simpson Kuhne,
and Hazel Claire M. Efird as Personal Representative of
The Estate of William Henry Belk Simpson, Deceased........ 360 10.0%
All Directors and Executive Officers as a group (9
persons).................................................. 2,690 74.7%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk
and Henderson Belk -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; Sarah
Belk Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207; John A. Kuhne, Lucy
Simpson Kuhne, and Claire E. Russo -- 14 South Main Street, Greenville, S.C.
29601; Kate Simpson and Lucy Caroline Bowden Simpson Kuhne, and Hazel Claire M.
Efird as Personal Representative of the Estate of William Henry Belk Simpson,
Deceased -- P.O. Box 17433, Greenville, S.C. 29601; Mary E. S. Hanahan -- P.O.
Box 1294, Charleston, S.C. 29402; Byron L. Bergren and James Madden -- 1312 N.
Main Street, Gainesville, Fla. 32601; Belk Enterprises, Inc., Belk of Toccoa,
Ga., Inc. and Belk of Waycross, Ga., Inc. -- 2801 West Tyvola Road, Charlotte,
N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 84 shares held by Thomas M. Belk, Trustee u/a dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
19
<PAGE> 422
(b) Includes 60 shares held in several Trusts established by the Will of W. H.
Belk for the benefit of his children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(c) Includes 20 shares held in several Trusts established by the Will of Mary I.
Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(d) Includes 576 shares held by Belk Enterprises, Inc., 192 shares held by Belk
of Toccoa, Ga., Inc. and 400 shares held by Belk of Waycross, Ga., Inc.,
which shares are voted by the members of the Executive Committee of the
Board of Directors of each such Corporation, under authority given by the
directors of each such Corporation at the annual meeting of directors held
in March, 1997. The Executive Committee of each such Corporation consists of
John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(e) Includes 570 shares held by John A. Kuhne's wife, Lucy Simpson Kuhne.
(f) Includes 360 shares held by the Estate of William Henry Belk Simpson. Voting
and investment power is shared by the Personal Representatives, who are Kate
Simpson, Lucy Kuhne and Claire Russo.
20
<PAGE> 423
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 424
BELK-SIMPSON CO., OF BAINBRIDGE, GA., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 40,596 $ 42,010
Accounts receivable, net.................................. 572,646 693,915
Merchandise inventory..................................... 622,148 745,512
Receivable from affiliates, net........................... 403,897 440,106
Refundable income taxes................................... 18,949 --
Deferred income taxes..................................... 7,223 2,781
Other..................................................... 33,309 26,230
---------- ----------
Total current assets........................................ 1,698,768 1,950,554
Investments................................................. 273 273
Property, plant and equipment, net.......................... 159,224 137,987
Other noncurrent assets..................................... 17,929 19,143
---------- ----------
$1,876,194 $2,107,957
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 227,259 $ 258,880
Accrued income taxes...................................... -- 62,621
---------- ----------
Total current liabilities................................... 227,259 321,501
Deferred income taxes....................................... 19,617 14,672
Other noncurrent liabilities................................ 27,680 27,419
---------- ----------
Total liabilities........................................... 274,556 363,592
Shareholders' equity:
Common stock.............................................. 360,000 360,000
Retained earnings......................................... 1,241,638 1,384,365
---------- ----------
Total shareholders' equity.................................. 1,601,638 1,744,365
---------- ----------
$1,876,194 $2,107,957
========== ==========
</TABLE>
F-2
<PAGE> 425
BELK-SIMPSON CO., OF BAINBRIDGE, GA., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Total store sales.......................................... 3,558,458 3,611,604 3,649,518
Less: Leased Sales......................................... -- -- 11,260
---------- ---------- ----------
Net sales.................................................. 3,558,458 3,611,604 3,638,258
Operating costs and expenses............................... 3,358,423 3,433,400 3,329,188
---------- ---------- ----------
Income from operations..................................... 200,035 178,204 309,070
---------- ---------- ----------
Other income (expense):
Interest, net............................................ 5,855 15,231 3,710
Gain (loss) on disposal of property, plant and
equipment............................................. (1,245) 450 398
Miscellaneous, net....................................... (5,695) (2,463) 3,387
---------- ---------- ----------
Total other expense, net................................... (1,085) 13,218 7,495
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 198,950 191,422 316,565
Income tax expense (benefit)............................... 73,561 64,877 119,838
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 125,389 126,545 196,727
---------- ---------- ----------
Net earnings............................................... 125,389 126,545 196,727
Retained earnings at beginning of period................... 1,097,704 1,169,093 1,241,638
Dividends paid............................................. (54,000) (54,000) (54,000)
---------- ---------- ----------
Retained earnings at end of period......................... $1,169,093 $1,241,638 $1,384,365
========== ========== ==========
</TABLE>
F-3
<PAGE> 426
BELK-SIMPSON CO., OF BAINBRIDGE, GA., INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31. Fiscal years 1997, 1996 and 1995, ended on February 1, 1997,
February 3, 1996 and January 31, 1995, respectively.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
F-4
<PAGE> 427
BELK-SIMPSON CO., OF BAINBRIDGE, GA., INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements
F-5
<PAGE> 428
BELK-SIMPSON CO., OF BAINBRIDGE, GA., INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
issued for all fiscal periods starting after December 15, 1995 and requires the
recognition of impairment losses on long-lived assets when book values exceed
expected future cash flows.
F-6
<PAGE> 429
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 14, CHAPTER 2
BUSINESS CORPORATIONS
STATE OF GEORGIA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
A-1
<PAGE> 430
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's right.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
A-2
<PAGE> 431
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
A-3
<PAGE> 432
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing
A-4
<PAGE> 433
under subsection (a) of this Code section within 30 days after the corporation
offered payment for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
A-5
<PAGE> 434
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
A-6
<PAGE> 435
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
---------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement.................... $3,638,258 $196,727 $312,854 $343,141 $1,744,365
Adjustments to eliminate less than wholly-owned
subsidiaries................................. -- -- -- -- --
---------- -------- -------- -------- ----------
Adjusted Shareholders' Statement............... $3,638,258 196,727 312,854 343,141 1,744,365
========== -------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E................ (247) (398) (398)
Gain/loss on sale of securities.............. -- -- --
Impairment loss.............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries............................... -- -- --
Gain/loss on discontinued operations......... -- -- --
Adjustment to tax expense.................... -- -- --
-------- -------- --------
Total non-operating items...................... (247) (398) (398)
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities.............................. -- -- --
Adjustment for ownership in other Belk
entities................................... (273)
-------- -------- -------- ----------
Per Model...................................... $196,480 $312,456 $342,743 $1,744,092
======== ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER SHAREHOLDERS'
STATEMENT
Assets
Cash & cash equivalents.................... $ (42,010)
Negative cash balances reclassified to
accounts payable......................... --
Receivables from affiliates, net........... (440,106)
Loans receivable from affiliates, net...... --
Liabilities
Notes payable.............................. --
Current installments of long-term debt..... --
Current portion of obligations under
capital leases........................... --
Payables to affiliates, net................ --
Long-term debt, excluding current
installments............................. --
Obligations under capital leases, excluding
current portion.......................... --
Loans payable to affiliates, net........... --
----------
Net debt (cash)................................ (482,116)
Adjustments to eliminate less than wholly-owned
subsidiaries................................. --
----------
Per Model...................................... $ (482,116)
==========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 436
SUPPLEMENT NO. 7
<PAGE> 437
BELK-SIMPSON CO., OF BAINBRIDGE, GA., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 4:10 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 7
<PAGE> 438
BELK OF CANTON, GA., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk of Canton, Ga., Inc. (the "Company"), to
be held on April 15, 1998, at 9:00 a.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Georgia law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 29.6482 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 56,628 shares of New Belk Class A Common Stock which will
represent approximately 0.0944% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage paid
(8)
<PAGE> 439
envelope. If you plan to attend the Special Meeting, you may vote in person if
you wish, even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 440
BELK OF CANTON, GA., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK OF CANTON, GA., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk of Canton, Ga., Inc. (the "Company") will be held on April 15,
1998, at 9:00 a.m., local time, at the offices of Belk Stores Services, Inc.,
2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for the following
purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Georgia law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 29.6482 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 441
BELK OF CANTON, GA., INC.
SUPPLEMENT NO. 8
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 8 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK OF CANTON, GA.,
INC. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE DISCUSSION IN THE
PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED HEREIN ASSUMES THAT
ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION. IF ANY ONE OR MORE
BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE INFORMATION
CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 16
SELECTED HISTORICAL FINANCIAL INFORMATION................... 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 18
BUSINESS OF THE COMPANY..................................... 18
SECURITY OWNERSHIP OF THE COMPANY........................... 19
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 442
THE COMPANY
The Company was incorporated as a Georgia corporation in 1934. The Company
changed its name from Gallant-Belk Co. of Winder, Ga., Inc. to Belk of Canton,
Ga., Inc. on July 23, 1997. The mailing address of the Company's principal
executive offices is 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, and its telephone number at that address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 9:00 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under Georgia law),
will be converted, without any action on the part of the Shareholder, into the
right to receive 29.6482 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk (the "New Belk Class A Common Stock"). All
of the shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 3,864 shares of Common Stock
outstanding held of record by 24 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 75.4% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock
2
<PAGE> 443
vote in favor of the Merger, the vote of such persons, corporations and trusts
in favor of the Merger would be sufficient to approve the Merger under the
governing documents of the Company and applicable state law.
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. In addition, the Reorganization is expected to have
certain other benefits for the Company and the Shareholders, including the
ability to share the risks associated with the Company's relocation of its
former store in Winder to Canton, Georgia, where Belk has no history of store
operations. There is no assurance that the new Canton store will meet its
financial projections. If the new Canton store does not meet these projections,
the financial condition and results of operations of the Company may be
adversely affected. The Merger would enable the Company to share with New Belk
the risk of relocating the Winder store to Canton.
There can be no assurance, however, that any of these benefits will be
achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Georgia Business Corporation Code (the "GBCC"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 4,048 shares of
Common Stock.
3
<PAGE> 444
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock held by a New Belk Stockholder who is a Class A Permitted
Holder will also automatically convert into New Belk Class B Common Stock in the
event that such New Belk Stockholder no longer meets the requirements of a Class
A Permitted Holder. New Belk Class B Common Stock has no conversion rights. The
Company Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the
4
<PAGE> 445
holders of New Belk Class B Common Stock upon the same terms and conditions
applicable to the conversion of New Belk Class A Common Stock into New Belk
Class B Common Stock and must have the same restrictions on transfer and
ownership applicable to the transfer and ownership of the New Belk Class A
Common Stock.
Pursuant to the GBCC, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as the
effect of such distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to be less than the sum of its total liabilities plus
(unless the articles of incorporation permit otherwise) the amount that would be
needed if the corporation dissolved at the time of the payment of the dividend
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The GBCC permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 25%, or such
greater or lesser percentages as may be provided in the articles of
incorporation or bylaws, of all votes entitled to be cast on the proposed
corporate action to call a special meeting. The Company Bylaws authorize the
Chairman, President, Secretary, the Company Board and any Shareholder pursuant
to the written request of the holders of not less than 10% of all the shares
entitled to vote at the meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the GBCC, unless the articles of incorporation, the bylaws or
the provisions regarding meetings in the GBCC specify a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the shareholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are
5
<PAGE> 446
entitled to vote as a separate class on a proposed amendment that would increase
or decrease the aggregate number of authorized shares of such class, increase or
decrease the par value of the shares of such class or alter or change the
powers, preferences or special rights of the shares of such class so as to
affect them adversely. If any proposed amendment would alter or change the
powers, preferences or special rights of one or more series of any class so as
to affect them adversely, but would not so affect the entire class, then only
the shares of the series so affected by the amendment will be considered a
separate class for purposes of voting by classes. The New Belk Certificate is
consistent with the foregoing provisions of the DGCL.
Under the GBCC, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the GBCC
requires an amendment to the articles of incorporation to be recommended by the
board of directors to the shareholders and approved by a majority (unless the
articles of incorporation or the board of directors requires a greater vote or a
vote by voting groups) of the votes entitled to be cast on the amendment by any
voting group. As under the DGCL, the holders of the outstanding shares of a
class or one or more series are entitled to vote as a separate voting group (if
shareholder voting is otherwise required by the GBCC) on a proposed amendment if
the amendment would change certain fundamental rights and preferences of that
class or series. The Company Articles do not specify a greater vote or a vote by
voting groups to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the GBCC, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or the
GBCC reserves this power exclusively to the shareholders in whole or part or
(ii) the shareholders in amending or repealing a particular bylaw provided
expressly that the board of directors may not amend or repeal that bylaw. The
shareholders of the corporation may amend or repeal the bylaws of the
corporation even though such bylaws may be amended or repealed by the board of
directors of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board, or by the affirmative vote of a majority of the shares
outstanding and entitled to vote at any regular or special meeting of the
Shareholders. Further, the Company Bylaws provide that the Company Board has no
power to adopt a bylaw: (i) requiring more than a majority of the voting shares
for a quorum at a meeting of the Shareholders, except where higher percentages
are required by law; (ii) providing for the management of the Company otherwise
than by the Company Board or its executive committees; (iii) increasing or
decreasing the number of directors; or (iv) classifying and staggering the
election of directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the GBCC, any action that may be taken by an annual or special
meeting of shareholders may be taken without a meeting and without prior notice,
if all holders of outstanding shares entitled to vote on such action or, if so
provided in the articles of incorporation, by persons entitled to vote at a
meeting shares having voting power to cast not less than the minimum number (or
numbers, in the case of voting groups) of
6
<PAGE> 447
votes that would be necessary to authorize or take the action at which all
shareholders entitled to vote were present and voted sign the written consent(s)
describing such action. The Company Bylaws permit any action which may be taken
at a meeting of the Shareholders to be taken without a meeting if a consent in
writing, setting forth the action so taken, is signed by all of the persons who
would be entitled to vote upon such action at a meeting and filed with the
Secretary of the Company.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation or a bylaw
approved by the shareholders, the GBCC permits a vacancy in the board of
directors to be filled by the shareholders or by the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board and if
the vacancy is one that the directors are authorized to fill, then the directors
may fill the vacancy by the affirmative vote of a majority of all the directors
remaining in office.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors may be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The GBCC requires a corporation to have at least one director. The articles
of incorporation or the bylaws may authorize the shareholders or the board of
directors to change the number of directors. If the articles of incorporation or
the bylaws establish a variable range for the size of directors, the number of
directors may be changed, within the prescribed range, by the shareholders or,
if the articles of incorporation so provide, by the board of directors. The
Company Bylaws require the Company Board to consist of at least three, but no
more than 15, directors.
7
<PAGE> 448
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
Under the GBCC, director must be a natural person and at least 18 years of
age, but does not have to be a resident of Georgia or a shareholder of the
corporation unless otherwise provided for in the articles of incorporation. The
Company Articles do not require directors of the Company to be residents of
Georgia or shareholders of the Company. The GBCC also allows the articles of
incorporation or the bylaws to provide for additional qualifications of
directors.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each class expiring at the
annual meeting in successive years beginning with the first class and
progressing to the third class, if any. Thereafter, directors are chosen for a
full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
Under the GBCC, the articles of incorporation may allow for staggering the
terms of directors by dividing the total number of directors into two or three
groups, with each group containing one-half or one-third of the total. The term
of each group expires in each successive year beginning with the first group and
progressing to the third group, if any. Thereafter, directors are chosen for a
term of two or three years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
According to the GBCC, unless the articles of incorporation or bylaws
provide that directors may be removed only for cause, the shareholders may
remove one or more directors with or without cause. If a director is elected by
a voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove him. If cumulative voting is not authorized, a
director may be removed only be a majority of votes entitled to be cast.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under both the DGCL and the GBCC, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares
8
<PAGE> 449
entitled to vote thereon consents; or (iii) the transaction is fair to the
corporation at the time it is authorized by the board of directors, a committee
of the board or the stockholders.
Similar to the DGCL, the GBCC generally permits transactions involving a
Georgia corporation and an interested director of that corporation if: (i) the
transaction received the affirmative vote of a majority (but not less than two)
of those qualified directors on the board of directors or on a duly empowered
committee thereof who voted on the transaction after required disclosure to
them; (ii) if a majority of the votes entitled to be cast by the holders of all
qualified shares were cast in favor of the transaction after (a) notice to
shareholders describing the director's conflicting interest transaction, (b)
provision of the information with regard to any unqualified shares and (c)
required disclosure to the shareholders who voted on the transaction (to the
extent the information was not known by them); or (iii) the transaction, judged
in the circumstances at the time of commitment, is established to have been fair
to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the GBCC, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the GBCC (i) in connection with a
proceeding by or in the right of the corporation, except for reasonable expenses
incurred in connection with the proceeding if it is determined that the director
or officer has met the relevant standard of conduct under the GBCC or (ii) in
connection with any proceeding with respect to conduct for which he was adjudged
liable on the basis that personal benefit was improperly received by him,
whether or not involving
9
<PAGE> 450
action in his official capacity. A Georgia corporation must indemnify a director
or officer who was wholly successful, on the merits or otherwise, in the defense
of any proceeding to which he was a party because he was a director or officer
of the corporation against reasonable expenses incurred by the director or
officer in connection with the proceeding.
The Company Bylaws authorize indemnification as provided in the GBCC. In
addition, the Company Bylaws provide that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify a director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the GBCC, a director
will not be personally liable to the Company or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The GBCC concerning the approval of mergers and share exchanges is similar
in all material respects to the DGCL, except action by the shareholders of the
surviving corporation is not required if the number and kind of shares
outstanding immediately after the merger or share exchange, plus the number and
kind of shares issuable as a result of the merger or share exchange and by the
conversion of securities issued pursuant to the merger or share exchange or the
exercise of rights and warrants issued pursuant to the merger or share exchange
does not exceed the total number and kind of shares of the surviving or
acquiring corporation authorized by its articles of incorporation immediately
before the merger or share exchange. The GBCC and DGCL provisions concerning the
approval of the sale of all or substantially all of the assets of a corporation
are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the GBCC include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined in the DGCL and the
GBCC, "business combinations" generally encompass (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder, (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested shareholder of a substantial percentage of assets of the corporation,
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested shareholder,
except in certain circumstances, (iv) any transaction involving the corporation
which has the
10
<PAGE> 451
effect of increasing the proportionate share of the stock of any class or
series, or securities convertible into the stock of any class or series, of the
corporation which is owned by the interested shareholder, except in certain
circumstances or (v) any receipt by the interested shareholder of the benefit of
any loans, advances, guarantees, pledges or other financial benefits (other than
those expressly permitted in (i) through (iv) above) provided by or through the
corporation.
The DGCL defines an "interested stockholder" as any person who (i) is the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation and within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation. Under the
GBCC, an "interested shareholder" is any person who owns 10% of the outstanding
voting shares or is an affiliate of the corporation owning 10% of the
outstanding voting shares within the prior two years, and a "continuing
director" is a director not associated or affiliated with any interested
shareholder.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the date
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
According to the GBCC, if at least three continuing directors serve on the
board of directors, then those directors must unanimously approve the business
combination. If three continuing directors do not serve on the board of
directors, then 66 2/3% of the continuing directors must recommend the business
combination and a majority of shareholders entitled to cast a vote must approve
the business combination. Also, except under certain circumstances, no mergers
may occur between a corporation and an interested shareholder within five years
of the date the shareholder became an interested shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the GBCC provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any
11
<PAGE> 452
security convertible into or exchangeable for, or any warrant, option or right
to purchase, subscribe for or otherwise acquire, stock of any class or series of
New Belk, whether now or hereafter authorized.
The GBCC concerning preemptive rights is equivalent to the DGCL. The
Company Articles do not contain any provision with respect to preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the GBCC, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) excerpts from minutes of any
meeting of the board of directors, records of any action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporations; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the GBCC ("Article 13") has
the right to receive in cash the fair value of such Shareholder's shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN
ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
To exercise appraisal rights under Article 13, a holder of Common Stock
must (i) deliver to the Company before the taking of the vote of Shareholders on
the Reorganization Agreement written notice of his intent to demand payment for
his shares if the Merger is effected and (ii) not vote his shares in favor of
the Reorganization Agreement. A Shareholder who does not satisfy these two
requirements is not entitled to payment for his shares under Article 13. In
addition, any Shareholder who returns a signed proxy but fails to provide
instructions as to the manner in which such shares are to be voted will be
deemed to have voted in favor of the Reorganization Agreement and will not be
entitled to assert dissenters' rights of appraisal.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial Shareholder and he notifies the Company
in writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of such a partial dissenter are determined as if
the shares as to which he dissents and his other shares are registered in the
names of different Shareholders.
If the Reorganization Agreement is approved at the Special Meeting, the
Company must deliver a written dissenters' notice (the "Dissenters' Notice") to
all Shareholders who satisfied the notice requirements of Article 13. The
Dissenters' Notice must be sent within 10 days after the Effective Time and must
(i) state where the demand for payment must be sent and where and when
certificates for shares must be deposited, (ii) inform holders of uncertificated
shares to what extent transfer of those shares will be restricted after the
demand for payment is received, (iii) set a date by which the Company must
receive the demand for payment
12
<PAGE> 453
(which date may not be fewer than 30 nor more than 60 days after the Dissenters'
Notice is delivered) and (iv) be accompanied by a copy of Article 13.
A record Shareholder who receives the Dissenters' Notice must demand
payment and deposit his certificates in accordance with the Dissenters' Notice.
Such Shareholder will retain all other rights of a Shareholder until those
rights are canceled or modified by the consummation of the Merger. A record
Shareholder who does not demand payment or deposit his share certificates where
required, each by the date set in the Dissenters' Notice, is not entitled to
payment for his shares under Article 13.
Within 10 days of the later of the Effective Time or receipt of a payment
demand, the Company must offer to pay each dissenting Shareholder who complied
with Article 13 the amount the Company estimates to be the fair value of his
shares, plus accrued interest from the Effective Time. Such offer of payment
must be accompanied by (i) certain recent Company financial statements, (ii) the
Company's estimate of the fair value of the shares and interest due, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Article 13 and (v) a copy of Article
13. If the Shareholder accepts the Company's offer by written notice to the
Company within 30 days after the Company's offer, the Company must make payment
within 60 days after the later of the making of the offer or the Effective Time.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing share certificates, the Company must return the
deposited certificates. If, after such return, the Merger is consummated, the
Company must send a new Dissenters' Notice and repeat the payment procedure
described above.
A dissenting Shareholder may notify the Company in writing of his own
estimate of the fair value of his shares and the interest due, and may demand
payment of his estimate, if (i) he believes that the amount offered by the
Company is less than the fair value of his shares or that the interest due has
been calculated incorrectly or (ii) the Company, having failed to consummate the
Merger, does not return the deposited certificates within 60 days after the date
set for demanding payment. A dissenting Shareholder waives his right to demand
payment unless he notifies the Company of his demand in writing within 30 days
after the Company makes or offers payment for his shares. If the Company does
not offer payment within 10 days of the later of the Effective Time or receipt
of a payment demand, then (i) the Shareholder may demand the financial
statements and other information of the Company, and the Company must provide
such information within 10 days after receipt of the written demand and (ii) the
Shareholder may notify the Company of his own estimate of the fair value of his
shares and the amount of interest due, and may demand payment of that estimate.
If a demand for payment by a Shareholder remains unsettled, the Company
must commence a nonjury equity valuation proceeding in the appropriate court, as
specified in Article 13, within 60 days after receiving the payment demand and
must petition the court to determine the fair value of the shares and accrued
interest. If the Company does not commence a valuation proceeding within 60
days, the Company is required to pay each dissenting Shareholder whose demand
remains unsettled, the amount demanded. The Company is required to make all
dissenting Shareholders whose demands remain unsettled parties to the proceeding
and to serve a copy of the petition upon each dissenting Shareholder. The court
may appoint appraisers to receive evidence and to recommend a decision on fair
value. Each dissenting Shareholder made a party to the proceeding is entitled to
judgment for the fair value of his shares plus interest to the date of judgment.
In an appraisal proceeding commenced under Article 13, the court must
determine the costs of the proceeding, excluding fees and expenses of attorneys
and experts for the respective parties, and must assess those costs against the
Company, except that the court may assess the costs against all or some of the
dissenting Shareholders to the extent the court finds they acted arbitrarily,
vexatiously or not in good faith in demanding payment under Article 13. The
court also may assess the fees and expenses of attorneys and experts for the
respective parties against the Company if the court finds the Company did not
substantially comply with the requirements of Article 13, or against either the
Company or a dissenting Shareholder if the court finds that such party acted
arbitrarily, vexatiously or not in good faith with respect to the rights
provided by Article 13.
13
<PAGE> 454
If the court finds that the services of the attorneys for any dissenting
Shareholder were of substantial benefit to other dissenting Shareholders
similarly situated, and that the fees for those services should not be assessed
against the Company, the court may award those attorneys reasonable fees out of
the amounts awarded the dissenting Shareholders who were benefited. No action by
any dissenting Shareholder to enforce dissenters' rights may be brought more
than three years after the Effective Time, regardless of whether notice of the
Merger and of the right to dissent was given by the Company in compliance with
the provisions of Article 13.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ------ -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales................... $1,843,637 $1,843,637 0.6 $(1,101,473) $2,207,655
EBITDA...................... 74,753 74,753 7 (1,101,473) 1,624,744
EBIT........................ 64,350 64,350 10 (1,101,473) 1,744,973
Net Income.................. 84,035 84,035 15 -- 1,260,525
Book Equity................. 1,726,756 1,726,336 1 -- 1,726,336
</TABLE>
14
<PAGE> 455
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
N/A N/A% X $ N/A = $ N/A
-----------
Total $ N/A
===========
Relative Operating Value of Company $ 2,207,655
Relative Operating Value of Other Companies Owned by Company + --
-----------
Total Relative Value of Company = $ 2,207,655
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Gallant-Belk
Company --
Anderson, S.C. 6.9011% X $ 2,207,655 = $ 152,353
Belk of Athens, Ga.,
Inc. 1.3458% X 2,207,655 = 29,711
Belk Brothers Company 14.2340% X 2,207,655 = 314,238
Belk Enterprises,
Inc. 24.6718% X 2,207,655 = 544,668
Belk of Dalton, Ga.,
Inc. 2.1739% X 2,207,655 = 47,992
Belk of Thomaston,
Ga., Inc. 1.2422% X 2,207,655 = 27,423
-----------
Total $ 1,116,385
===========
Total Relative Value of Company $ 2,207,655
Total Relative Value of Company Owned by Other Belk Companies - 1,116,385
-----------
Net Relative Value of Company = $ 1,091,270
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 1,091,270 / $1,156,226,577 = .0944%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.0944% X 59,998,834) / 1,910 = 29.6482
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
15
<PAGE> 456
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 21.75
Dividends(2).............................................. 15.00
Book value per share(3)................................... 446.88
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 28.46
Dividends(2).............................................. 7.71
Book value per share...................................... 371.20
</TABLE>
- ---------------
(1) Based on 3,864 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 3,864 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
16
<PAGE> 457
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 1,994 $ 1,902 $ 1,844
Net income.................................................. 92 69 84
Per common share
Net income (loss)(1)...................................... 23.72 17.77 21.75
Dividends................................................. 15.00 15.00 15.00
Book value(2)............................................. 437.37 440.14 446.88
Total assets................................................ 1,897 1,869 1,898
Shareholders' equity........................................ 1,690 1,701 1,727
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $1,245 $1,058
Income (loss) from operations............................... (1) 44
</TABLE>
- ---------------
(1) Based on 3,864 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 3,864 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
17
<PAGE> 458
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Riverstone
Plaza in Canton, Georgia. The Company's store operates in a manner consistent
with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The Company recently closed its store in Winder, Georgia
to open the new store in Canton, Georgia. The Company closed the Winder store in
December 1997 because the facility was outmoded and the Company determined that
the prospects for long-term growth of the store's business were poor. The
Company determined that opening a store in Canton would provide more opportunity
for the long-term growth of the Company's business. The Company did not incur
any obligations in connection with closing the Winder store. The Canton store is
a full-line retail department store that carries nearly twice the merchandise
inventory that was available in the much smaller former store in Winder. The
store is managed out of the Kerr group office in Norcross, Georgia.
Facilities. The Company leases the Canton store building, which contains
approximately 60,000 square feet of floor area. The current term of the lease
expires in 2018. The Company believes the building is adequate to meet its
current needs.
Competition. Specific competitors in the Company's markets include Penney
and Goody's.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
18
<PAGE> 459
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)........................................... 2,774 71.8%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(d)(e)................................................. 2,326 60.2%
H. W. McKay Belk (Director and Executive Officer)
(b)(d)(e)................................................. 2,326 60.2%
John R. Belk (Director and Executive Officer) (b)(d)(e)..... 2,286 59.2%
Henderson Belk (Director) (c)............................... 4 *
Sarah Belk Gambrell (c)..................................... 566 14.6%
Leroy Robinson (Director) (b)............................... 312 8.1%
Katherine McKay Belk (b).................................... 312 8.1%
Katherine Belk Morris (b)................................... 372 9.6%
Robert K. Kerr, Jr. (Director and Executive Officer)........ 0 *
Gallant-Belk Company........................................ 266.67 6.9%
Belk Enterprises, Inc. ..................................... 953.33 24.7%
J.V. Properties............................................. 550.00 14.2%
Montgomery Investment Company............................... 236.00 6.1%
Thomas M. Belk, Trustee U/A dated September 15, 1993........ 312 8.1%
All Directors and Executive Officers as a group (7
persons).................................................. 2,914 75.4%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson, Katherine McKay Belk and Katherine Belk
Morris -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk
Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207; Robert K. Kerr,
Jr. -- 1890-D Beaver Ridge Circle, Norcross, Ga. 30071; Gallant-Belk Company,
Belk Enterprises, Inc., J.V. Properties, Montgomery Investment Company and
Thomas M. Belk, Trustee U/A dated September 15, 1993 -- 2801 West Tyvola Road,
Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 236 shares held by Montgomery Investment Company, of which John M.
Belk is the majority shareholder.
(b) Includes 312 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(c) Includes 4 shares held in several Trusts established by the Will of Mary I.
Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
19
<PAGE> 460
(d) Includes 266.67 shares held by Gallant-Belk Company, 52.00 shares held by
Belk of Athens, Ga., Inc., 84.00 shares held by Belk of Dalton, Ga., Inc.,
953.33 shares held by Belk Enterprises, Inc., and 48.00 shares held by Belk
of Thomaston, Ga., Inc. which shares are voted by the members of the
Executive Committee of the Board of Directors of each such Corporation,
under authority given by the directors of each such Corporation at the
annual meeting of directors held in March, 1997. The Executive Committee of
each such Corporation consists of John M. Belk, Thomas M. Belk, Jr., H. W.
McKay Belk and John R. Belk.
(e) Includes 550 shares held by J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
20
<PAGE> 461
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 462
BELK OF CANTON, GA., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 25,512 $ 25,059
Accounts receivable, net.................................. 236,685 283,443
Merchandise inventory..................................... 471,906 446,814
Receivable from affiliates, net........................... 117,482 126,416
Refundable income taxes................................... 1,618 --
Deferred income taxes..................................... 3,573 --
Other..................................................... 18,985 18,685
---------- ----------
Total current assets........................................ 875,761 900,417
Loans receivable from affiliates, net....................... 950,000 950,000
Investments................................................. 421 421
Property, plant and equipment, net.......................... 27,237 32,328
Deferred income taxes....................................... -- 638
Other noncurrent assets..................................... 15,208 14,323
---------- ----------
$1,868,627 $1,898,127
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 129,187 $ 119,664
Deferred income taxes..................................... -- 2,850
Accrued income taxes...................................... 5,135 16,906
---------- ----------
Total current liabilities................................... 134,322 139,420
Deferred income taxes....................................... 1,198 --
Other noncurrent liabilities................................ 32,425 31,950
---------- ----------
Total liabilities........................................... 167,945 171,370
Shareholders' equity:
Common stock.............................................. 386,400 386,400
Additional paid in capital................................ 1,236 1,236
Retained earnings......................................... 1,313,046 1,339,121
---------- ----------
Total shareholders' equity.................................. 1,700,682 1,726,757
---------- ----------
$1,868,627 $1,898,127
========== ==========
</TABLE>
F-2
<PAGE> 463
BELK OF CANTON, GA., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $1,993,948 $1,902,138 $1,843,637
Operating costs and expenses............................... 1,905,398 1,861,142 1,779,628
---------- ---------- ----------
Income from operations..................................... 88,550 40,996 64,009
---------- ---------- ----------
Other income (expense):
Interest, net............................................ 44,929 56,357 49,242
Miscellaneous, net....................................... (2,300) 663 341
---------- ---------- ----------
Total other expense, net................................... 42,629 57,020 49,583
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 131,179 98,016 113,592
Income tax expense (benefit)............................... 39,521 29,369 29,557
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 91,658 68,647 84,035
---------- ---------- ----------
Net earnings............................................... 91,658 68,647 84,035
Retained earnings at beginning of period................... 1,268,661 1,302,359 1,313,046
Dividends paid............................................. (57,960) (57,960) (57,960)
---------- ---------- ----------
Retained earnings at end of period......................... $1,302,359 $1,313,046 $1,339,121
========== ========== ==========
</TABLE>
F-3
<PAGE> 464
BELK OF CANTON, GA., INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31. Fiscal years 1997, 1996 and 1995 ended on February 1, 1997, February
3, 1996 and January 31, 1995, respectively.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
F-4
<PAGE> 465
BELK OF CANTON, GA., INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements
F-5
<PAGE> 466
BELK OF CANTON, GA., INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
issued for all fiscal periods starting after December 15, 1995 and requires the
recognition of impairment losses on long-lived assets when book values exceed
expected future cash flows.
F-6
<PAGE> 467
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 14, CHAPTER 2
BUSINESS CORPORATIONS
STATE OF GEORGIA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not
A-1
<PAGE> 468
including a sale pursuant to court order or a sale for cash pursuant to a
plan by which all or substantially all of the net proceeds of the sale will
be distributed to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's right.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
A-2
<PAGE> 469
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
A-3
<PAGE> 470
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing
A-4
<PAGE> 471
under subsection (a) of this Code section within 30 days after the corporation
offered payment for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
A-5
<PAGE> 472
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
A-6
<PAGE> 473
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- ------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................... $ 1,843,637 $84,035 $64,350 $74,753 $1,726,756
Adjustments to eliminate less than
wholly-owned subsidiaries................... -- -- -- -- --
----------- ------- ------- ------- ----------
Adjusted Shareholders' Statement.............. $ 1,843,637 84,035 64,350 74,753 1,726,756
=========== ------- ------- ------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............... -- -- --
Gain/loss on sale of securities............. -- -- --
Impairment loss............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries.............................. -- -- --
Gain/loss on discontinued operations........ -- -- --
Adjustment to tax expense................... -- -- -- --
------- ------- -------
Total non-operating items..................... -- -- --
------- ------- -------
Other Adjustments:
Adjustment for dividends received from other
Belk entities............................. -- -- --
Adjustment for ownership in other Belk
entities.................................. (421)
------- ------- ------- ----------
Per Model..................................... $84,035 $64,350 $74,753 $1,726,335
======= ======= ======= ==========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................... $ (25,057)
Negative cash balances reclassified to
accounts payable........................ --
Receivables from affiliates, net.......... (126,416)
Loans receivable from affiliates, net..... (950,000)
Liabilities
Notes payable............................. --
Current installments of long-term debt.... --
Current portion of obligations under
capital leases.......................... --
Payables to affiliates, net............... --
Long-term debt, excluding current
installments............................ --
Obligations under capital leases,
excluding current portion............... --
Loans payable to affiliates, net.......... --
-----------
Net debt (cash)............................... (1,101,473)
Adjustments to eliminate less than
wholly-owned subsidiaries................... --
-----------
Per Model..................................... $(1,101,473)
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 474
SUPPLEMENT NO. 8
<PAGE> 475
BELK OF CANTON, GA., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 9:00 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
-------------------
-------------------------------
Signature
-------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 8
<PAGE> 476
BELK-RHODES COMPANY, OF CARROLLTON, GA.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk-Rhodes Company of Carrollton, Ga. (the
"Company"), to be held on April 15, 1998, at 10:30 a.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Georgia law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 31.6405 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 397,911 shares of New Belk Class A Common Stock which will
represent approximately 0.6632% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage paid
(9)
<PAGE> 477
envelope. If you plan to attend the Special Meeting, you may vote in person if
you wish, even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 478
BELK-RHODES COMPANY, OF CARROLLTON, GA.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK-RHODES COMPANY, OF CARROLLTON, GA.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk-Rhodes Company, of Carrollton, Ga. (the "Company") will be
held on April 15, 1998, at 10:30 a.m., local time, at the offices of Belk Stores
Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for
the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Georgia law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 31.6405 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 479
BELK-RHODES COMPANY, OF CARROLLTON, GA.
SUPPLEMENT NO. 9
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 9 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK-RHODES COMPANY,
OF CARROLLTON, GA. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE
DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED
HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION.
IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE
INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 13
COMPARATIVE PER SHARE DATA.................................. 16
SELECTED HISTORICAL FINANCIAL INFORMATION................... 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 18
BUSINESS OF THE COMPANY..................................... 18
SECURITY OWNERSHIP OF THE COMPANY........................... 19
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 480
THE COMPANY
The Company was incorporated as a Georgia corporation in 1946. The mailing
address of the Company's principal executive offices is 2801 West Tyvola Road,
Charlotte, North Carolina 28217-4500, and its telephone number at that address
is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 10:30 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under Georgia law),
will be converted, without any action on the part of the Shareholder, into the
right to receive 31.6405 shares (the "Exchange Ratio") of Class A common stock,
par value $.01 per share, of New Belk (the "New Belk Class A Common Stock"). All
of the shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 17,280 shares of Common Stock
outstanding held of record by 33 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 63.6% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 481
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Georgia Business Corporation Code (the "GBCC"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 34,560 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock held by a New Belk Stockholder who is a Class A Permitted
Holder will also automatically convert into New
3
<PAGE> 482
Belk Class B Common Stock in the event that such New Belk Stockholder no longer
meets the requirements of a Class A Permitted Holder. New Belk Class B Common
Stock has no conversion rights. The Company Articles provide for only one class
of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the GBCC, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as the
effect of such distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to be less than the sum of its total liabilities plus
(unless the articles of incorporation permit otherwise) the amount that would be
needed if the corporation dissolved at the time of the payment of the dividend
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
4
<PAGE> 483
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The GBCC permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 25%, or such
greater or lesser percentages as may be provided in the articles of
incorporation or bylaws, of all votes entitled to be cast on the proposed
corporate action to call a special meeting. The Company Bylaws authorize the
Chairman, President, Secretary, the Company Board and any Shareholder pursuant
to the written request of the holders of not less than 10% of all the shares
entitled to vote at the meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the GBCC, unless the articles of incorporation, the bylaws or
the provisions regarding meetings in the GBCC specify a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the shareholders. The Company Articles specify that to liquidate and
discontinue the business of the Company requires a two-thirds vote.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
Under the GBCC, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the GBCC
requires an amendment to the articles of incorporation to be recommended by the
board of directors to the
5
<PAGE> 484
shareholders and approved by a majority (unless the articles of incorporation or
the board of directors requires a greater vote or a vote by voting groups) of
the votes entitled to be cast on the amendment by any voting group. As under the
DGCL, the holders of the outstanding shares of a class or series are entitled to
vote as a separate voting group (if shareholder voting is otherwise required by
the GBCC) on a proposed amendment if the amendment would change certain
fundamental rights and preferences of that class or series. The Company Articles
do not specify a greater vote or a vote by voting groups to amend the Company
Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the GBCC, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or the
GBCC reserves this power exclusively to the shareholders in whole or part or
(ii) the shareholders in amending or repealing a particular bylaw provided
expressly that the board of directors may not amend or repeal that bylaw. The
shareholders of the corporation may amend or repeal the bylaws of the
corporation even though such bylaws may be amended or repealed by the board of
directors of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board, or by the affirmative vote of a majority of the shares
outstanding and entitled to vote at any regular or special meeting of the
Shareholders. Further, the Company Bylaws provide that the Company Board has no
power to adopt a bylaw: (i) requiring more than a majority of the voting shares
for a quorum at a meeting of the Shareholders, except where higher percentages
are required by law; (ii) providing for the management of the Company otherwise
than by the Company Board or its executive committees; (iii) increasing or
decreasing the number of directors; or (iv) classifying and staggering the
election of directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the GBCC, any action that may be taken by an annual or special
meeting of shareholders may be taken without a meeting and without prior notice,
if all holders of outstanding shares entitled to vote on such action or, if so
provided in the articles of incorporation, by persons entitled to vote at a
meeting shares having voting power to cast not less than the minimum number (or
numbers, in the case of voting groups) of votes that would be necessary to
authorize or take the action at which all shareholders entitled to vote were
present and voted sign the written consent(s) describing such action. The
Company Bylaws permit any action which may be taken at a meeting of the
Shareholders to be taken without a meeting if a consent in writing, setting
forth the action so taken, is signed by all of the persons who would be entitled
to vote upon such action at a meeting and filed with the Secretary of the
Company.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding
6
<PAGE> 485
having the right to vote for such directors, order an election to be held to
fill any such vacancies or newly created directorships or to replace the
directors chosen by the directors then in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation or a bylaw
approved by the shareholders, the GBCC permits a vacancy in the board of
directors to be filled by the shareholders or by the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board and if
the vacancy is one that the directors are authorized to fill, then the directors
may fill the vacancy by the affirmative vote of a majority of all the directors
remaining in office.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors may be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The GBCC requires a corporation to have at least one director. The articles
of incorporation or the bylaws may authorize the shareholders or the board of
directors to change the number of directors. If the articles of incorporation or
the bylaws establish a variable range for the size of directors, the number of
directors may be changed, within the prescribed range, by the shareholders or,
if the articles of incorporation so provide, by the board of directors. The
Company Bylaws require the Company Board to consist of at least three, but no
more than 15, directors.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
Under the GBCC a director must be a natural person and at least 18 years of
age, but does not have to be a resident of Georgia or a shareholder of the
corporation unless otherwise provided for in the articles of incorporation. The
Company Articles do not require directors of the Company to be residents of
Georgia or shareholders of the Company. The GBCC also allows the articles of
incorporation or the bylaws to provide for additional qualifications of
directors.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each
7
<PAGE> 486
class expiring at the annual meeting in successive years beginning with the
first class and progressing to the third class, if any. Thereafter, directors
are chosen for a full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
Under the GBCC, the articles of incorporation may allow for staggering the
terms of directors by dividing the total number of directors into two or three
groups, with each group containing one-half or one-third of the total. The term
of each group expires in each successive year beginning with the first group and
progressing to the third group, if any. Thereafter, directors are chosen for a
term of two or three years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
According to the GBCC, unless the articles of incorporation or bylaws
provide that directors may be removed only for cause, the shareholders may
remove one or more directors with or without cause. If a director is elected by
a voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove him. If cumulative voting is not authorized, a
director may be removed only by a majority of votes entitled to be cast.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under both the DGCL and the GBCC, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the GBCC generally permits transactions involving a
Georgia corporation and an interested director of that corporation if: (i) the
transaction received the affirmative vote of a majority (but not less than two)
of those qualified directors on the board of directors or on a duly empowered
committee thereof who voted on the transaction after required disclosure to
them; (ii) if a majority of the votes entitled to be cast by the holders of all
qualified shares were cast in favor of the transaction after (a) notice to
shareholders describing the director's conflicting interest transaction, (b)
provision of the information with regard to any unqualified shares and (c)
required disclosure to the shareholders who voted on the transaction (to the
extent the information was not known by them); or (iii) the transaction, judged
in the circumstances at the time of commitment, is established to have been fair
to the corporation.
8
<PAGE> 487
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the GBCC, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the GBCC (i) in connection with a
proceeding by or in the right of the corporation, except for reasonable expenses
incurred in connection with the proceeding if it is determined that the director
or officer has met the relevant standard of conduct under the GBCC or (ii) in
connection with any proceeding with respect to conduct for which he was adjudged
liable on the basis that personal benefit was improperly received by him,
whether or not involving action in his official capacity. A Georgia corporation
must indemnify a director or officer who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party because he
was a director or officer of the corporation against reasonable expenses
incurred by the director or officer in connection with the proceeding.
The Company Bylaws authorize indemnification as provided in the GBCC. In
addition, the Company Bylaws provide that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture,
9
<PAGE> 488
trust or other enterprise, as a partner of a partnership or as a trustee or
administrator under an employee benefit plan. The Company will also indemnify a
director or officer for reasonable costs, expenses and attorneys' fees in
connection with the enforcement of rights to indemnification granted therein, if
it is so determined in accordance with the Company Articles that the director or
officer is entitled to indemnification thereunder. The Company Articles provide
that to the fullest extent permitted by the GBCC, a director will not be
personally liable to the Company or any of its Shareholders or otherwise for
monetary damages for breach of duty of care or other duty as a director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The GBCC concerning the approval of mergers and share exchanges is similar
in all material respects to the DGCL, except action by the shareholders of the
surviving corporation is not required if the number and kind of shares
outstanding immediately after the merger or share exchange, plus the number and
kind of shares issuable as a result of the merger or share exchange and by the
conversion of securities issued pursuant to the merger or share exchange or the
exercise of rights and warrants issued pursuant to the merger or share exchange
does not exceed the total number and kind of shares of the surviving or
acquiring corporation authorized by its articles of incorporation immediately
before the merger or share exchange. The GBCC and DGCL provisions concerning the
approval of the sale of all or substantially all of the assets of a corporation
are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the GBCC include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined in the DGCL and the
GBCC, "business combinations" generally encompass (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder, (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested shareholder of a substantial percentage of assets of the corporation,
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested shareholder,
except in certain circumstances, (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested shareholder, except
in certain circumstances or (v) any receipt by the interested shareholder of the
benefit of any loans, advances, guarantees, pledges or other financial benefits
(other than those expressly permitted in (i) through (iv) above) provided by or
through the corporation.
The DGCL defines an "interested stockholder" as any person who (i) is the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation and within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation. Under the
GBCC, an "interested shareholder" is any person who owns 10% of the outstanding
voting shares or is an affiliate of the corporation owning 10% of the
outstanding voting shares within the prior two years, and a "continuing
director" is a director not associated or affiliated with any interested
shareholder.
10
<PAGE> 489
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
According to the GBCC, if at least three continuing directors serve on the
board of directors, then those directors must unanimously approve the business
combination. If three continuing directors do not serve on the board of
directors, then 66 2/3% of the continuing directors must recommend the business
combination and a majority of shareholders entitled to cast a vote must approve
the business combination. Also, except under certain circumstances, no mergers
may occur between a corporation and an interested shareholder within five years
of the date the shareholder became an interested shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the GBCC provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The GBCC concerning preemptive rights is equivalent to the DGCL. The
Company Articles do not contain any provision with respect to preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the GBCC, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the
11
<PAGE> 490
purpose and the records the shareholder desires to inspect, (iii) the records
are directly connected with the purpose and (iv) the shareholder gives the
corporation written notice of the demand at least five business days before the
date on which the shareholder wishes to inspect and copy such records. Such
documents include: (i) excerpts from minutes of any meeting of the board of
directors, records of any action of a committee of the board of directors while
acting in place of the board of directors on behalf of the corporation, minutes
of any meeting of the shareholders and records of action taken by the
shareholders or board of directors without a meeting; (ii) accounting records of
the corporations; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the GBCC ("Article 13") has
the right to receive in cash the fair value of such Shareholder's shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN
ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
To exercise appraisal rights under Article 13, a holder of Common Stock
must (i) deliver to the Company before the taking of the vote of Shareholders on
the Reorganization Agreement written notice of his intent to demand payment for
his shares if the Merger is effected and (ii) not vote his shares in favor of
the Reorganization Agreement. A Shareholder who does not satisfy these two
requirements is not entitled to payment for his shares under Article 13. In
addition, any Shareholder who returns a signed proxy but fails to provide
instructions as to the manner in which such shares are to be voted will be
deemed to have voted in favor of the Reorganization Agreement and will not be
entitled to assert dissenters' rights of appraisal.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial Shareholder and he notifies the Company
in writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of such a partial dissenter are determined as if
the shares as to which he dissents and his other shares are registered in the
names of different Shareholders.
If the Reorganization Agreement is approved at the Special Meeting, the
Company must deliver a written dissenters' notice (the "Dissenters' Notice") to
all Shareholders who satisfied the notice requirements of Article 13. The
Dissenters' Notice must be sent within 10 days after the Effective Time and must
(i) state where the demand for payment must be sent and where and when
certificates for shares must be deposited, (ii) inform holders of uncertificated
shares to what extent transfer of those shares will be restricted after the
demand for payment is received, (iii) set a date by which the Company must
receive the demand for payment (which date may not be fewer than 30 nor more
than 60 days after the Dissenters' Notice is delivered) and (iv) be accompanied
by a copy of Article 13.
A record Shareholder who receives the Dissenters' Notice must demand
payment and deposit his certificates in accordance with the Dissenters' Notice.
Such Shareholder will retain all other rights of a Shareholder until those
rights are canceled or modified by the consummation of the Merger. A record
Shareholder who does not demand payment or deposit his share certificates where
required, each by the date set in the Dissenters' Notice, is not entitled to
payment for his shares under Article 13.
Within 10 days of the later of the Effective Time or receipt of a payment
demand, the Company must offer to pay each dissenting Shareholder who complied
with Article 13 the amount the Company estimates to be the fair value of his
shares, plus accrued interest from the Effective Time. Such offer of payment
must be accompanied by (i) certain recent Company financial statements, (ii) the
Company's estimate of the fair value of the shares and interest due, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Article 13 and (v) a copy of Article
13. If the Shareholder
12
<PAGE> 491
accepts the Company's offer by written notice to the Company within 30 days
after the Company's offer, the Company must make payment within 60 days after
the later of the making of the offer or the Effective Time.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing share certificates, the Company must return the
deposited certificates. If, after such return, the Merger is consummated, the
Company must send a new Dissenters' Notice and repeat the payment procedure
described above.
A dissenting Shareholder may notify the Company in writing of his own
estimate of the fair value of his shares and the interest due, and may demand
payment of his estimate, if (i) he believes that the amount offered by the
Company is less than the fair value of his shares or that the interest due has
been calculated incorrectly or (ii) the Company, having failed to consummate the
Merger, does not return the deposited certificates within 60 days after the date
set for demanding payment. A dissenting Shareholder waives his right to demand
payment unless he notifies the Company of his demand in writing within 30 days
after the Company makes or offers payment for his shares. If the Company does
not offer payment within 10 days of the later of the Effective Time or receipt
of a payment demand, then (i) the Shareholder may demand the financial
statements and other information of the Company, and the Company must provide
such information within 10 days after receipt of the written demand and (ii) the
Shareholder may notify the Company of his own estimate of the fair value of his
shares and the amount of interest due, and may demand payment of that estimate.
If a demand for payment by a Shareholder remains unsettled, the Company
must commence a nonjury equity valuation proceeding in the appropriate court, as
specified in Article 13, within 60 days after receiving the payment demand and
must petition the court to determine the fair value of the shares and accrued
interest. If the Company does not commence a valuation proceeding within 60
days, the Company is required to pay each dissenting Shareholder whose demand
remains unsettled, the amount demanded. The Company is required to make all
dissenting Shareholders whose demands remain unsettled parties to the proceeding
and to serve a copy of the petition upon each dissenting Shareholder. The court
may appoint appraisers to receive evidence and to recommend a decision on fair
value. Each dissenting Shareholder made a party to the proceeding is entitled to
judgment for the fair value of his shares plus interest to the date of judgment.
In an appraisal proceeding commenced under Article 13, the court must
determine the costs of the proceeding, excluding fees and expenses of attorneys
and experts for the respective parties, and must assess those costs against the
Company, except that the court may assess the costs against all or some of the
dissenting Shareholders to the extent the court finds they acted arbitrarily,
vexatiously or not in good faith in demanding payment under Article 13. The
court also may assess the fees and expenses of attorneys and experts for the
respective parties against the Company if the court finds the Company did not
substantially comply with the requirements of Article 13, or against either the
Company or a dissenting Shareholder if the court finds that such party acted
arbitrarily, vexatiously or not in good faith with respect to the rights
provided by Article 13.
If the court finds that the services of the attorneys for any dissenting
Shareholder were of substantial benefit to other dissenting Shareholders
similarly situated, and that the fees for those services should not be assessed
against the Company, the court may award those attorneys reasonable fees out of
the amounts awarded the dissenting Shareholders who were benefited. No action by
any dissenting Shareholder to enforce dissenters' rights may be brought more
than three years after the Effective Time, regardless of whether notice of the
Merger and of the right to dissent was given by the Company in compliance with
the provisions of Article 13.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated
13
<PAGE> 492
multiples and taking the highest of: (i) the Company's adjusted sales during the
period from February 4, 1996 to February 1, 1997 (the "Measurement Period")
multiplied by six-tenths, less Net Debt (calculated in accordance with Annex B
of this Prospectus Supplement under "Components of Net Debt (Cash) per
Shareholders' Statement") at the end of the Measurement Period; (ii) the
Company's adjusted earnings before interest, taxes, depreciation and
amortization ("EBITDA") during the Measurement Period multiplied by seven, less
Net Debt at the end of the Measurement Period; (iii) the Company's adjusted
earnings before interest and taxes ("EBIT") during the Measurement Period
multiplied by 10, less Net Debt at the end of the Measurement Period; (iv) the
Company's adjusted net income during the Measurement Period multiplied by 15;
and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ------ -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............... $8,826,624 $8,826,624 0.6 $(928,220) $ 6,224,194
EBITDA.................. 1,012,243 1,013,690 7 (928,220) 8,024,050
EBIT.................... 959,357 960,804 10 (928,220) 10,536,260
Net Income.............. 677,506 678,415 15 -- 10,176,225
Book Equity............. 5,294,027 5,293,769 1 -- 5,293,769
</TABLE>
14
<PAGE> 493
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
N/A N/A% X $ N/A = $ N/A
-----------
Total $ N/A
===========
Relative Operating Value of Company $10,536,260
Relative Operating Value of Other Companies Owned by Company + --
-----------
Total Relative Value of Company = $10,536,260
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk's Department
Store of Batesburg,
S.C., Inc. .2315% X $10,536,260 = $ 24,391
Belk of Dalton, Ga.,
Inc. 15.787% X 10,536,260 = 1,663,359
Belk Rhodes Company
(Rome, Georgia) 11.2037% X 10,536,260 = 1,180,451
-----------
Total $ 2,868,202
===========
Total Relative Value of Company $10,536,260
Total Relative Value of Company Owned by Other Belk Companies - 2,868,202
-----------
Net Relative Value of Company = $ 7,668,058
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 7,668,058 / $1,156,226,577 = .6632%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.6632% X 59,998,834) / 12,576 = 31.6405
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
15
<PAGE> 494
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 39.21
Dividends(2).............................................. 12.50
Book value per share(3)................................... 306.37
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 30.37
Dividends(2).............................................. 8.23
Book value per share...................................... 396.14
</TABLE>
- ---------------
(1) Based on 17,280 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 17,280 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
16
<PAGE> 495
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $8,269 $8,260 $8,827
Net income.................................................. 601 612 678
Per common share
Net income (loss)(1)...................................... 34.76 35.42 39.21
Dividends................................................. 10.00 12.50 12.50
Book value(2)............................................. 256.74 279.66 306.37
Total assets................................................ 5,419 5,562 6,127
Shareholders' equity........................................ 4,436 4,833 5,294
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $6,015 $6,500
Income from operations...................................... 532 248
</TABLE>
- ---------------
(1) Based on 17,280 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding for the years ended January 31, 1995,
February 3, 1996 and February 1, 1997.
(2) Based on 17,280 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
17
<PAGE> 496
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in McIntosh Plaza
in Carrollton, Georgia. The Company's store operates in a manner consistent with
the business of the Belk Companies described in the Proxy Statement/Prospectus.
The store is managed out of the Kerr group office in Norcross, Georgia.
The Company closed its store at First Tuesday Mall in Carrollton in 1997
and opened its store at McIntosh Plaza. The Company has continuing monthly lease
obligations of $10,816 until October 1998 on the First Tuesday Mall lease.
Facilities. The Company leases the land upon which it built its store
building, which contains approximately 70,000 square feet of floor area. The
current term of the lease expires in 2017. The Company believes the building is
adequate to meet its current needs.
Competition. Specific competitors in the Company's market include Target,
Penney and Goody's.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
18
<PAGE> 497
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(f).............................................. 3,794 22.0%
Thomas M. Belk, Jr. (Director and Executive Officer)
(a)(c)(d)................................................. 5,446 31.5%
H. W. McKay Belk (Executive Officer) (a)(c)................. 3,510 20.3%
John R. Belk (Executive Officer) (a)(c)..................... 3,510 20.3%
Henderson Belk (Director) (b)............................... 144 *
Sarah Belk Gambrell (Director) (b).......................... 2,696 15.6%
Cecil David Rhodes, Jr. (Director).......................... 1,440 8.3%
C. D. Rhodes, III (Director)................................ 0 *
Robert Earl Rhodes (Director) (e)........................... 928 5.4%
Thelma E. Rhodes............................................ 960 5.6%
Cecil D. Rhodes Trust....................................... 1,440 8.3%
Ralph A. Pitts (Director)................................... 0 *
Robert K. Kerr, Jr. (Executive Officer)..................... 0 *
Belk of Dalton, Ga., Inc. .................................. 2,728 15.8%
Belk-Rhodes Company, (Rome, Georgia) ....................... 1,936 11.2%
All Directors and Executive Officers as a group (9
persons).................................................. 10,998 63.6%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson and Ralph A. Pitts -- 2801 West Tyvola Road,
Charlotte, N.C. 28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road, Charlotte,
N.C. 28207; Robert K. Kerr, Jr. -- 1890-D Beaver Ridge Circle, Norcross, Ga.
30071; Cecil David Rhodes, Jr. -- 209 Brentwood Drive, Wilson, N.C. 27893; C. D.
Rhodes, III -- Darlington School, 1014 Cave Spring Road, Rome, Ga. 30161; Robert
Earl Rhodes -- 245 Jackson Street, Denver, Co. 80206-5524; Thelma E.
Rhodes -- 804 Highlands Avenue, Rome, Ga. 30161; Cecil D. Rhodes Trust -- Ernest
J. Rudert & Company, Box 1744, Rome, Ga. 30161; Belk of Dalton, Ga., Inc. and
Belk-Rhodes Company, (Rome, Georgia) -- 2801 West Tyvola Road, Charlotte, N.C.
28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below
(a) Includes 394 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(b) Includes 144 shares held in several Trusts established by the Will of Mary
I. Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
19
<PAGE> 498
(c) Includes 2,728 shares held by Belk of Dalton, Ga., Inc. and 40 shares held
by Belk's Department Store of Batesburg, S.C., Inc., which shares are voted
by the members of the Executive Committee of the Board of Directors of each
such Corporation, under authority given by the directors of each such
Corporation at the annual meeting of directors held in March, 1997. The
Executive Committee of each such Corporation consists of John M. Belk,
Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(d) Includes 1,936 shares held by Belk-Rhodes Company, (Rome, Georgia), which
shares are voted by the President of this Corporation, under authority
given by the directors of the Corporation at the annual meeting of
directors held in March, 1997.
(e) Includes 704 shares held by Robert Earl Rhodes' wife, Sandra Jeanne Rhodes.
(f) Includes 78 shares held by Claudia W. Belk, Trustee U/A f/b/o Mary Claudia
Belk. Claudia W. Belk is John M. Belk's wife.
20
<PAGE> 499
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 500
BELK-RHODES COMPANY, OF CARROLLTON, GA.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 69,418 $ 102,998
Accounts receivable, net.................................. 974,744 1,194,177
Merchandise inventory..................................... 1,522,436 1,591,370
Receivable from affiliates, net........................... 393,068 225,222
Deferred income taxes..................................... 12,366 --
Other..................................................... 76,030 104,044
---------- ----------
Total current assets........................................ 3,048,062 3,217,811
Loans receivable from affiliates, net....................... 2,200,000 600,000
Investments................................................. 258 258
Property, plant and equipment, net.......................... 241,377 2,229,102
Deferred income taxes....................................... 23,539 36,127
Other noncurrent assets..................................... 48,616 43,883
---------- ----------
$5,561,852 $6,127,181
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 540,423 $ 564,621
Deferred income taxes..................................... -- 5,505
Accrued income taxes...................................... 19,713 76,752
---------- ----------
Total current liabilities................................... 560,136 646,878
Other noncurrent liabilities................................ 169,195 186,276
---------- ----------
Total liabilities........................................... 729,331 833,154
Shareholders' equity:
Common stock.............................................. 1,728,000 1,728,000
Retained earnings......................................... 3,104,521 3,566,027
---------- ----------
Total Shareholders' equity.................................. 4,832,521 5,294,027
---------- ----------
$5,561,852 $6,127,181
========== ==========
</TABLE>
F-2
<PAGE> 501
BELK-RHODES COMPANY, OF CARROLLTON, GA.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $8,269,295 $8,259,577 $8,826,624
Operating costs and expenses............................... 7,406,432 7,434,053 7,864,600
---------- ---------- ----------
Income from operations..................................... 862,863 825,524 962,024
---------- ---------- ----------
Other income (expense):
Interest, net............................................ 107,153 152,969 119,459
Gain (loss) on disposal of property, plant and
equipment............................................. -- -- (1,447)
Miscellaneous, net....................................... (10,141) (400) (1,220)
---------- ---------- ----------
Total other expense, net................................... 97,012 152,569 116,792
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 959,875 978,093 1,078,816
Income tax expense (benefit)............................... 359,244 366,045 401,310
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 600,631 612,048 677,506
---------- ---------- ----------
Net earnings............................................... 600,631 612,048 677,506
Retained earnings at beginning of period................... 3,144,642 2,708,473 3,104,521
Dividends paid............................................. (172,800) (216,000) (216,000)
Retained earnings adjustments.............................. (864,000) -- --
---------- ---------- ----------
Retained earnings at end of period......................... $2,708,473 $3,104,521 $3,566,027
========== ========== ==========
</TABLE>
F-3
<PAGE> 502
BELK-RHODES COMPANY, OF CARROLLTON, GA.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31. Fiscal years 1997, 1996 and 1995 ended on February 1, 1997, February
3, 1996 and January 31, 1995, respectively.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current Shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
F-4
<PAGE> 503
BELK-RHODES COMPANY, OF CARROLLTON, GA.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
Shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total Shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements
F-5
<PAGE> 504
BELK-RHODES COMPANY, OF CARROLLTON, GA.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
issued for all fiscal periods starting after December 15, 1995 and requires the
recognition of impairment losses on long-lived assets when book values exceed
expected future cash flows.
F-6
<PAGE> 505
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 14, CHAPTER 2
BUSINESS CORPORATIONS
STATE OF GEORGIA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
A-1
<PAGE> 506
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's right.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
A-2
<PAGE> 507
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
A-3
<PAGE> 508
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing
A-4
<PAGE> 509
under subsection (a) of this Code section within 30 days after the corporation
offered payment for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
A-5
<PAGE> 510
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
A-6
<PAGE> 511
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
---------- ---------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement.................... $8,826,624 $677,506 $959,358 $1,012,243 $5,294,027
Adjustments to eliminate less than wholly-owned
subsidiaries................................. -- -- -- -- --
---------- -------- -------- ---------- ----------
Adjusted Shareholders' Statement............... $8,826,624 677,506 959,358 1,012,243 5,294,027
========== -------- -------- ---------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E................ (909) (1,447) (1,447)
Gain/loss on sale of securities.............. -- -- --
Impairment loss.............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries............................... -- -- --
Gain/loss on discontinued operations......... -- -- --
Adjustment to tax expense.................... -- -- -- --
-------- -------- ----------
Total non-operating items...................... (909) (1,447) (1,447)
-------- -------- ----------
Other Adjustments:
Adjustment for dividends received from other
Belk entities.............................. -- -- --
Adjustment for ownership in other Belk
entities................................... (258)
-------- -------- ---------- ----------
Per Model...................................... $678,415 $960,805 $1,013,690 $5,293,769
======== ======== ========== ==========
COMPONENTS OF NET DEBT (CASH) PER SHAREHOLDERS'
STATEMENT
Assets
Cash & cash equivalents.................... $ (102,998)
Negative cash balances reclassified to
accounts payable......................... --
Receivables from affiliates, net........... (225,222)
Loans receivable from affiliates, net...... (600,000)
Liabilities
Notes payable.............................. --
Current installments of long-term debt..... --
Current portion of obligations under
capital leases........................... --
Payables to affiliates, net................ --
Long-term debt, excluding current
installments............................. --
Obligations under capital leases, excluding
current portion.......................... --
Loans payable to affiliates, net........... --
----------
Net debt (cash)................................ (928,220)
Adjustments to eliminate less than wholly-owned
subsidiaries................................. --
----------
Per Model...................................... $ (928,220)
==========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 512
SUPPLEMENT NO. 9
<PAGE> 513
BELK-RHODES COMPANY, OF CARROLLTON, GA.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 10:30 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
-------------------
-------------------------------
Signature
-------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 9
<PAGE> 514
BELK'S DEPARTMENT STORE OF CARTERSVILLE, GEORGIA, INCORPORATED
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk's Department Store of Cartersville,
Georgia, Incorporated (the "Company"), to be held on April 15, 1998, at 9:10
a.m., local time, at the offices of Belk Stores Services, Inc., 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Georgia law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 31.3247 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 129,026 shares of New Belk Class A Common Stock which will
represent approximately 0.2150% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(10)
<PAGE> 515
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 516
BELK'S DEPARTMENT STORE OF CARTERSVILLE, GEORGIA, INCORPORATED
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK'S DEPARTMENT STORE OF CARTERSVILLE, GEORGIA,
INCORPORATED:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk's Department Store of Cartersville, Georgia, Incorporated (the
"Company") will be held on April 15, 1998, at 9:10 a.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Georgia law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 31.3247 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 517
BELK'S DEPARTMENT STORE OF
CARTERSVILLE, GEORGIA, INCORPORATED
SUPPLEMENT NO. 10
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 10 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK'S DEPARTMENT
STORE OF CARTERSVILLE, GEORGIA, INCORPORATED (THE "COMPANY"), THE DISCUSSION
HEREIN SUPERSEDES THE DISCUSSION IN THE PROXY STATEMENT/ PROSPECTUS. ALL OF THE
INFORMATION CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE
IN THE REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN
THE REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY
AND THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT
BE ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL
CAPITALIZED TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE
MEANINGS SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 518
THE COMPANY
The Company was incorporated as a Georgia corporation in 1975. The mailing
address of the Company's principal executive offices is 2801 West Tyvola Road,
Charlotte, North Carolina 28217-4500, and its telephone number at that address
is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 9:10 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization dated as of November 25, 1997 (the "Reorganization Agreement"),
by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk Acquisition
Co., a South Carolina corporation, and the 112 Belk companies named therein (the
"Belk Companies"), including the Company, pursuant to which the Company will be
merged with and into New Belk (the "Merger") and (ii) the Merger. A copy of the
Reorganization Agreement is attached as Annex A to the Proxy
Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common's Stock owned by other Belk companies and shares of Common Stock owned by
a Shareholder who perfects his dissenters' rights of appraisal under Georgia
law), will be converted, without any action on the part of the Shareholder, into
the right to receive 31.3247 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk (the "New Belk Class A Common
Stock"). All of the shares of New Belk Class A Common Stock received by each
Existing Belk Shareholder in the Reorganization will be aggregated and the total
will be rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 6,312 shares of Common Stock
outstanding held of record by 22 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 74.3% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 519
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Georgia Business Corporation Code (the "GBCC"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 6,312 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock held by a New Belk Stockholder who is a Class A Permitted
Holder will also automatically convert into New
3
<PAGE> 520
Belk Class B Common Stock in the event that such New Belk Stockholder no longer
meets the requirements of a Class A Permitted Holder. New Belk Class B Common
Stock has no conversion rights. The Company Articles provide for only one class
of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the GBCC, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as the
effect of such distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to be less than the sum of its total liabilities plus
(unless the articles of incorporation permit otherwise) the amount that would be
needed if the corporation dissolved at the time of the payment of the dividend
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
4
<PAGE> 521
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The GBCC permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 25%, or such
greater or lesser percentages as may be provided in the articles of
incorporation or bylaws, of all votes entitled to be cast on the proposed
corporate action to call a special meeting. The Company Bylaws authorize the
Chairman, President, Secretary, the Company Board and any Shareholder pursuant
to the written request of the holders of not less than 10% of all the shares
entitled to vote at the meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the GBCC, unless the articles of incorporation, the bylaws or
the provisions regarding meetings in the GBCC specify a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the shareholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
Under the GBCC, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the GBCC
requires an amendment to the articles of incorporation to be recommended by the
board of directors to the
5
<PAGE> 522
shareholders and approved by a majority (unless the articles of incorporation or
the board of directors requires a greater vote or a vote by voting groups) of
the votes entitled to be cast on the amendment by any voting group. As under the
DGCL, the holders of the outstanding shares of a class or series are entitled to
vote as a separate voting group (if shareholder voting is otherwise required by
the GBCC) on a proposed amendment if the amendment would change certain
fundamental rights and preferences of that class or series. The Company Articles
do not specify a greater vote or a vote by voting groups to amend the Company
Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the GBCC, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or the
GBCC reserves this power exclusively to the shareholders in whole or part or
(ii) the shareholders in amending or repealing a particular bylaw provided
expressly that the board of directors may not amend or repeal that bylaw. The
shareholders of the corporation may amend or repeal the bylaws of the
corporation even though such bylaws may be amended or repealed by the board of
directors of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board, or by the affirmative vote of a majority of the shares
outstanding and entitled to vote at any regular or special meeting of the
Shareholders. Further, the Company Bylaws provide that the Company Board has no
power to adopt a bylaw: (i) requiring more than a majority of the voting shares
for a quorum at a meeting of the Shareholders, except where higher percentages
are required by law; (ii) providing for the management of the Company otherwise
than by the Company Board or its executive committees; (iii) increasing or
decreasing the number of directors; or (iv) classifying and staggering the
election of directors. The Company Articles provide that the Company Board shall
have concurrent power, by vote of a majority of all of the directors, to make,
alter, amend and rescind the Company Bylaws. The bylaws enacted by the
Shareholders may be affected by action of the Company Board and vice versa;
provided, however, the Company Board may not re-enact a bylaw which the
Shareholders have repealed or altered, nor may it repeal a bylaw enacted by the
Shareholders which limits the powers of the Company Board or enhances or
protects the right of Shareholders, without the consent of the Shareholders.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the GBCC, any action that may be taken by an annual or special
meeting of shareholders may be taken without a meeting and without prior notice,
if all holders of outstanding shares entitled to vote on such action or, if so
provided in the articles of incorporation, by persons entitled to vote at a
meeting shares having voting power to cast not less than the minimum number (or
numbers, in the case of voting groups) of votes that would be necessary to
authorize or take the action at which all shareholders entitled to vote were
present and voted sign the written consent(s) describing such action. The
Company Bylaws permit any action which may be taken at a meeting of the
Shareholders to be taken without a meeting if a consent in writing, setting
forth the action so taken, is signed by all of the persons who would be entitled
to vote upon such action at a meeting and filed with the Secretary of the
Company.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be
6
<PAGE> 523
filled by a majority of the directors then in office, although less than a
quorum, or by a sole remaining director. If at the time of filling any vacancy
or newly created directorship, the directors then in office constitute less than
a majority of the whole board as constituted immediately prior to such increase,
the Delaware Court of Chancery may, upon application of stockholders holding at
least 10% of the total number of shares outstanding having the right to vote for
such directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation or a bylaw
approved by the shareholders, the GBCC permits a vacancy in the board of
directors to be filled by the shareholders or by the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board and if
the vacancy is one that the directors are authorized to fill, then the directors
may fill the vacancy by the affirmative vote of a majority of all the directors
remaining in office.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors may be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The GBCC requires a corporation to have at least one director. The articles
of incorporation or the bylaws may authorize the shareholders or the board of
directors to change the number of directors. If the articles of incorporation or
the bylaws establish a variable range for the size of directors, the number of
directors may be changed, within the prescribed range, by the shareholders or,
if the articles of incorporation so provide, by the board of directors. The
Company Bylaws require the Company Board to consist of at least three, but no
more than 15, directors.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
Under the GBCC, a director must be a natural person and at least 18 years
of age, but does not have to be a resident of Georgia or a shareholder of the
corporation unless otherwise provided for in the articles of incorporation. The
Company Articles do not require directors of the Company to be residents of
Georgia or
7
<PAGE> 524
shareholders of the Company. The GBCC also allows the articles of incorporation
or the bylaws to provide for additional qualifications of directors.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each class expiring at the
annual meeting in successive years beginning with the first class and
progressing to the third class, if any. Thereafter, directors are chosen for a
full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
Under the GBCC, the articles of incorporation may allow for staggering the
terms of directors by dividing the total number of directors into two or three
groups, with each group containing one-half or one-third of the total. The term
of each group expires in each successive year beginning with the first group and
progressing to the third group, if any. Thereafter, directors are chosen for a
term of two or three years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
According to the GBCC, unless the articles of incorporation or bylaws
provide that directors may be removed only for cause, the shareholders may
remove one or more directors with or without cause. If a director is elected by
a voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove him. If cumulative voting is not authorized, a
director may be removed only by a majority of votes entitled to be cast.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under both the DGCL and the GBCC, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the GBCC generally permits transactions involving a
Georgia corporation and an interested director of that corporation if: (i) the
transaction received the affirmative vote of a majority (but not less than two)
of those qualified directors on the board of directors or on a duly empowered
committee thereof who voted on the transaction after required disclosure to
them; (ii) if a majority of the votes entitled to be cast by the holders of all
qualified shares were cast in favor of the transaction after (a) notice to
shareholders describing the director's conflicting interest transaction, (b)
provision of the information with
8
<PAGE> 525
regard to any unqualified shares and (c) required disclosure to the shareholders
who voted on the transaction (to the extent the information was not known by
them); or (iii) the transaction, judged in the circumstances at the time of
commitment, is established to have been fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the GBCC, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the GBCC (i) in connection with a
proceeding by or in the right of the corporation, except for reasonable expenses
incurred in connection with the proceeding if it is determined that the director
or officer has met the relevant standard of conduct under the GBCC or (ii) in
connection with any proceeding with respect to conduct for which he was adjudged
liable on the basis that personal benefit was improperly received by him,
whether or not involving action in his official capacity. A Georgia corporation
must indemnify a director or officer who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party because he
was a director or officer of the corporation against reasonable expenses
incurred by the director or officer in connection with the proceeding.
The Company Bylaws authorize indemnification as provided in the GBCC. In
addition, the Company Bylaws provide that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not
9
<PAGE> 526
indemnify a director or officer against liability or litigation expense that he
may incur on account of his activities which were, at the time taken, known or
believed by him to be clearly in conflict with the best interest of the Company.
The Company will likewise and to the same extent indemnify any person who, at
the request of the Company, is or was serving as a director or as an officer of
another corporation, joint venture, trust or other enterprise, as a partner of a
partnership or as a trustee or administrator under an employee benefit plan. The
Company will also indemnify a director or officer for reasonable costs, expenses
and attorneys' fees in connection with the enforcement of rights to
indemnification granted therein, if it is so determined in accordance with the
Company Articles that the director or officer is entitled to indemnification
thereunder. The Company Articles provide that to the fullest extent permitted by
the GBCC, a director will not be personally liable to the Company or any of its
Shareholders or otherwise for monetary damages for breach of duty of care or
other duty as a director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The GBCC concerning the approval of mergers and share exchanges is similar
in all material respects to the DGCL, except action by the shareholders of the
surviving corporation is not required if the number and kind of shares
outstanding immediately after the merger or share exchange, plus the number and
kind of shares issuable as a result of the merger or share exchange and by the
conversion of securities issued pursuant to the merger or share exchange or the
exercise of rights and warrants issued pursuant to the merger or share exchange
does not exceed the total number and kind of shares of the surviving or
acquiring corporation authorized by its articles of incorporation immediately
before the merger or share exchange. The GBCC and DGCL provisions concerning the
approval of the sale of all or substantially all of the assets of a corporation
are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the GBCC include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined in the DGCL and the
GBCC, "business combinations" generally encompass (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder, (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested shareholder of a substantial percentage of assets of the corporation,
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested shareholder,
except in certain circumstances, (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested shareholder, except
in certain circumstances or (v) any receipt by the interested Shareholder of the
benefit of any loans, advances, guarantees, pledges or other financial benefits
(other than those expressly permitted in (i) through (iv) above) provided by or
through the corporation.
The DGCL defines an "interested stockholder" as any person who (i) is the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation and within three years of the date in
question was the direct
10
<PAGE> 527
or indirect owner of at least 15% of the voting power of any class or series of
the then outstanding stock of the corporation. Under the GBCC, an "interested
shareholder" is any person who owns 10% of the outstanding voting shares or is
an affiliate of the corporation owning 10% of the outstanding voting shares
within the prior two years, and a "continuing director" is a director not
associated or affiliated with any interested shareholder.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
According to the GBCC, if at least three continuing directors serve on the
board of directors, then those directors must unanimously approve the business
combination. If three continuing directors do not serve on the board of
directors, then 66 2/3% of the continuing directors must recommend the business
combination and a majority of shareholders entitled to cast a vote must approve
the business combination. Also, except under certain circumstances, no mergers
may occur between a corporation and an interested shareholder within five years
of the date the shareholder became an interested shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the GBCC provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The GBCC concerning preemptive rights is equivalent to the DGCL. The
Company Articles do not contain any provision with respect to preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other
11
<PAGE> 528
books and records and to make copies or extracts therefrom. A proper purpose
means a purpose reasonably related to such person's interest as a stockholder.
Pursuant to the GBCC, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) excerpts from minutes of any
meeting of the board of directors, records of any action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporations; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the GBCC ("Article 13") has
the right to receive in cash the fair value of such Shareholder's shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN
ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
To exercise appraisal rights under Article 13, a holder of Common Stock
must (i) deliver to the Company before the taking of the vote of Shareholders on
the Reorganization Agreement written notice of his intent to demand payment for
his shares if the Merger is effected and (ii) not vote his shares in favor of
the Reorganization Agreement. A Shareholder who does not satisfy these two
requirements is not entitled to payment for his shares under Article 13. In
addition, any Shareholder who returns a signed proxy but fails to provide
instructions as to the manner in which such shares are to be voted will be
deemed to have voted in favor of the Reorganization Agreement and will not be
entitled to assert dissenters' rights of appraisal.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial Shareholder and he notifies the Company
in writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of such a partial dissenter are determined as if
the shares as to which he dissents and his other shares are registered in the
names of different Shareholders.
If the Reorganization Agreement is approved at the Special Meeting, the
Company must deliver a written dissenters' notice (the "Dissenters' Notice") to
all Shareholders who satisfied the notice requirements of Article 13. The
Dissenters' Notice must be sent within 10 days after the Effective Time and must
(i) state where the demand for payment must be sent and where and when
certificates for shares must be deposited, (ii) inform holders of uncertificated
shares to what extent transfer of those shares will be restricted after the
demand for payment is received, (iii) set a date by which the Company must
receive the demand for payment (which date may not be fewer than 30 nor more
than 60 days after the Dissenters' Notice is delivered) and (iv) be accompanied
by a copy of Article 13.
A record Shareholder who receives the Dissenters' Notice must demand
payment and deposit his certificates in accordance with the Dissenters' Notice.
Such Shareholder will retain all other rights of a Shareholder until those
rights are canceled or modified by the consummation of the Merger. A record
Shareholder who does not demand payment or deposit his share certificates where
required, each by the date set in the Dissenters' Notice, is not entitled to
payment for his shares under Article 13.
12
<PAGE> 529
Within 10 days of the later of the Effective Time or receipt of a payment
demand, the Company must offer to pay each dissenting Shareholder who complied
with Article 13 the amount the Company estimates to be the fair value of his
shares, plus accrued interest from the Effective Time. Such offer of payment
must be accompanied by (i) certain recent Company financial statements, (ii) the
Company's estimate of the fair value of the shares and interest due, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Article 13 and (v) a copy of Article
13. If the Shareholder accepts the Company's offer by written notice to the
Company within 30 days after the Company's offer, the Company must make payment
within 60 days after the later of the making of the offer or the Effective Time.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing share certificates, the Company must return the
deposited certificates. If, after such return, the Merger is consummated, the
Company must send a new Dissenters' Notice and repeat the payment procedure
described above.
A dissenting Shareholder may notify the Company in writing of his own
estimate of the fair value of his shares and the interest due, and may demand
payment of his estimate, if (i) he believes that the amount offered by the
Company is less than the fair value of his shares or that the interest due has
been calculated incorrectly or (ii) the Company, having failed to consummate the
Merger, does not return the deposited certificates within 60 days after the date
set for demanding payment. A dissenting Shareholder waives his right to demand
payment unless he notifies the Company of his demand in writing within 30 days
after the Company makes or offers payment for his shares. If the Company does
not offer payment within 10 days of the later of the Effective Time or receipt
of a payment demand, then (i) the Shareholder may demand the financial
statements and other information of the Company, and the Company must provide
such information within 10 days after receipt of the written demand and (ii) the
Shareholder may notify the Company of his own estimate of the fair value of his
shares and the amount of interest due, and may demand payment of that estimate.
If a demand for payment by a Shareholder remains unsettled, the Company
must commence a nonjury equity valuation proceeding in the appropriate court, as
specified in Article 13, within 60 days after receiving the payment demand and
must petition the court to determine the fair value of the shares and accrued
interest. If the Company does not commence a valuation proceeding within 60
days, the Company is required to pay each dissenting Shareholder whose demand
remains unsettled, the amount demanded. The Company is required to make all
dissenting Shareholders whose demands remain unsettled parties to the proceeding
and to serve a copy of the petition upon each dissenting Shareholder. The court
may appoint appraisers to receive evidence and to recommend a decision on fair
value. Each dissenting Shareholder made a party to the proceeding is entitled to
judgment for the fair value of his shares plus interest to the date of judgment.
In an appraisal proceeding commenced under Article 13, the court must
determine the costs of the proceeding, excluding fees and expenses of attorneys
and experts for the respective parties, and must assess those costs against the
Company, except that the court may assess the costs against all or some of the
dissenting Shareholders to the extent the court finds they acted arbitrarily,
vexatiously or not in good faith in demanding payment under Article 13. The
court also may assess the fees and expenses of attorneys and experts for the
respective parties against the Company if the court finds the Company did not
substantially comply with the requirements of Article 13, or against either the
Company or a dissenting Shareholder if the court finds that such party acted
arbitrarily, vexatiously or not in good faith with respect to the rights
provided by Article 13.
If the court finds that the services of the attorneys for any dissenting
Shareholder were of substantial benefit to other dissenting Shareholders
similarly situated, and that the fees for those services should not be assessed
against the Company, the court may award those attorneys reasonable fees out of
the amounts awarded the dissenting Shareholders who were benefited. No action by
any dissenting Shareholder to enforce dissenters' rights may be brought more
than three years after the Effective Time, regardless of whether notice of the
Merger and of the right to dissent was given by the Company in compliance with
the provisions of Article 13.
13
<PAGE> 530
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ------ -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $5,461,147 $5,461,147 0.6 $(533,558) $3,810,247
EBITDA............... 337,578 337,578 7 (533,558) 2,896,605
EBIT................. 282,040 282,040 10 (533,558) 3,353,959
Net Income........... 221,212 221,213 15 -- 3,318,195
Book Equity.......... 3,795,342 3,795,342 1 -- 3,795,342
</TABLE>
14
<PAGE> 531
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
PERCENTAGE OF OTHER TOTAL RELATIVE VALUE RELATIVE OPERATING
BELK OF VALUE OF
OTHER BELK COMPANIES COMPANIES OWNED BY OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
N/A N/A% X $ N/A = $ N/A
-----------
Total $ N/A
===========
Relative Operating Value of Company $ 3,810,247
Relative Operating Value of Other Companies Owned by Company + --
-----------
Total Relative Value of Company = $ 3,810,247
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
TOTAL RELATIVE VALUE
PERCENTAGE OWNERSHIP OF
OF OTHER BELK COMPANY OWNED BY
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OTHER
THAT OWN COMPANY IN COMPANY OF COMPANY BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Gallant-Belk
Company --
Anderson, SC 15.2091% X $ 3,810,247 = $ 579,504
Belk Brothers Company 4.7529% X 3,810,247 = 181,097
Belk Enterprises,
Inc. 3.0418% X 3,810,247 = 115,900
Belk of Dalton, Ga.,
Inc. .3802% X 3,810,247 = 14,487
Belk of LaGrange,
Ga., Inc. 11.2167 X 3,810,247 = 427,384
Belk of Thomaston,
Ga., Inc. .1426 X 3,810,247 = 5,433
-----------
Total $ 1,323,806
===========
Total Relative Value of Company $ 3,810,247
Total Relative Value of Company Owned by Other Belk Companies - 1,323,806
-----------
Net Relative Value of Company = $ 2,486,441
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
PERCENTAGE OF NEW BELK CLASS
AGGREGATE NET RELATIVE VALUE A
NET RELATIVE VALUE OF OF ALL COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 2,486,441 / $1,156,226,577 = .2150%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.2150% X 59,998,834) / 4,119 = 31.3247
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
15
<PAGE> 532
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 533
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 35.05
Dividends(2).............................................. 15.00
Book value per share(3)................................... 601.29
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 30.07
Dividends(2).............................................. 8.14
Book value per share...................................... 392.19
</TABLE>
- ---------------
(1) Based on 6,312 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 6,312 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
17
<PAGE> 534
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 5,769 $ 5,541 $ 5,461
Net income.................................................. 374 280 221
Per common share
Net income (loss)(1)...................................... 59.28 44.43 35.05
Net dividends............................................. 10.00 15.00 15.00
Book value(2)............................................. 551.81 581.24 601.29
Total assets................................................ 4,152 4,064 4,175
Shareholders' equity........................................ 3,483 3,669 3,795
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $ 3,738 $ 4,275
Income from operations...................................... 104 177
</TABLE>
- ---------------
(1) Based on 6,312 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 6,312 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 535
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Main Street
Shopping Center in Cartersville, Georgia. The Company's store operates in a
manner consistent with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is managed out of the Kerr group office in
Norcross, Georgia.
The Company closed its store at Cartersville Plaza and opened its store at
Main Street Shopping Center in 1997. The Company has no continuing obligations
with respect to the Cartersville Plaza lease.
Facilities. The Company leases its store building, which contains
approximately 60,000 square feet of floor area. The current term of the lease
expires in 2017. The Company believes the building is adequate to meet its
current needs.
Competition. Specific competitors in the Company's market include Target,
Goody's and Wal-Mart.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 536
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d).............................................. 4,449 70.5%
Thomas M. Belk, Jr. (Director and Executive Officer)
(a)(b)(c)(d).............................................. 3,273 51.9%
H. W. McKay Belk (Director and Executive Officer)
(a)(b)(c)(d).............................................. 3,249 51.5%
John R. Belk (Director and Executive Officer)
(a)(b)(c)(d).............................................. 3,321 52.6%
Henderson Belk (Director)................................... 0 *
Sarah Belk Gambrell......................................... 960 15.2%
Leroy Robinson (Director) (a)(b)............................ 1,008 16.0%
Robert K. Kerr, Jr. (Director and Executive Officer)........ 0 *
Katherine McKay Belk (a)(b)................................. 1,008 16.0%
Katherine Belk Morris (a)(b)................................ 1,056 16.7%
Gallant-Belk Company........................................ 960 15.2%
Belk of LaGrange, Ga., Inc. ................................ 708 11.2%
Thomas M. Belk, Trustee U/A dated September 15, 1993........ 960 15.2%
All Directors and Executive Officers as a group (7
persons).................................................. 4,689 74.3%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson, Katherine McKay Belk and Katherine Belk
Morris -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk
Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207; Robert K. Kerr,
Jr. -- 1890-D Beaver Ridge Circle, Norcross, Ga. 30071; Gallant-Belk Company,
Belk of LaGrange, Ga., Inc., and Thomas M. Belk, Trustee U/A dated September 15,
1993 -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 48 shares held by Brothers Investment Company, which Corporation
is equally owned by John M. Belk and the Estate of Thomas M. Belk. Voting
and investment power is shared by John M. Belk, Katherine McKay Belk,
Katherine Belk Morris, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk
and Leroy Robinson.
(b) Includes 960 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(c) Includes 192 shares held by Belk Enterprises, Inc., 960 shares held by
Gallant-Belk Company, 24 shares held by Belk of Dalton, Ga., Inc., 708
shares held by Belk of LaGrange, Ga., Inc. and 9 shares held by Belk of
Thomaston, Ga., Inc., which shares are voted by the members of the
Executive Committee of the Board of Directors of each such Corporation,
under authority given by the directors of each such Corporation at the
annual meeting of directors held in March, 1997. The Executive Committee of
each such Corporation consists of John M. Belk, Thomas M. Belk, Jr., H. W.
McKay Belk and John R. Belk.
20
<PAGE> 537
(d) Includes 300 shares held by J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
21
<PAGE> 538
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
</TABLE>
F-1
<PAGE> 539
BELK'S DEPARTMENT STORE OF CARTERSVILLE, GEORGIA, INCORPORATED
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 30,779 $ 55,829
Accounts receivable, net.................................. 724,201 871,691
Merchandise inventory..................................... 1,017,975 1,024,203
Receivable from affiliates, net........................... 278,634 377,730
Refundable income taxes................................... 31,284 1,865
Deferred income taxes..................................... 10,086 --
Other..................................................... 43,549 45,674
---------- ----------
Total current assets........................................ 2,136,508 2,376,992
Loans receivable from affiliates, net....................... 1,400,000 100,000
Property, plant and equipment, net.......................... 506,154 1,680,114
Other noncurrent assets..................................... 20,984 17,414
---------- ----------
$4,063,646 $4,174,520
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 327,754 $ 295,253
Deferred income taxes..................................... -- 5,882
Accrued income taxes...................................... -- 21,399
---------- ----------
Total current liabilities................................... 327,754 322,534
Deferred income taxes....................................... 34,152 24,326
Other noncurrent liabilities................................ 32,930 32,318
---------- ----------
Total liabilities........................................... 394,836 379,178
Shareholders' equity:
Common stock.............................................. 631,200 631,200
Additional paid in capital................................ 97,309 97,309
Retained earnings......................................... 2,940,301 3,066,833
---------- ----------
Total shareholders' equity.................................. 3,668,810 3,795,342
---------- ----------
$4,063,646 $4,174,520
========== ==========
</TABLE>
F-2
<PAGE> 540
BELK'S DEPARTMENT STORE OF CARTERSVILLE, GEORGIA, INCORPORATED
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $5,768,692 $5,540,588 $5,461,147
Operating costs and expenses............................... 5,221,001 5,189,136 5,179,267
---------- ---------- ----------
Income from operations..................................... 547,691 351,452 281,880
---------- ---------- ----------
Other income (expense):
Interest, net............................................ 68,326 96,588 71,047
Miscellaneous, net....................................... (6,550) 824 160
---------- ---------- ----------
Total other expense, net................................... 61,776 97,412 71,207
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 609,467 448,864 353,087
Income tax expense (benefit)............................... 235,310 168,425 131,875
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 374,157 280,439 221,212
---------- ---------- ----------
Net earnings............................................... 374,157 280,439 221,212
Retained earnings at beginning of period................... 2,443,505 2,754,542 2,940,301
Dividends paid............................................. (63,120) (94,680) (94,680)
---------- ---------- ----------
Retained earnings at end of period......................... $2,754,542 $2,940,301 $3,066,833
========== ========== ==========
</TABLE>
F-3
<PAGE> 541
BELK'S DEPARTMENT STORE OF CARTERSVILLE, GEORGIA, INCORPORATED
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31. Fiscal years 1997, 1996 and 1995 ended on February 1, 1997, February
3, 1996 and January 31, 1995, respectively.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
F-4
<PAGE> 542
BELL'S DEPARTMENT STORE OF CARTERSVILLE, GEORGIA, INCORPORATED
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements
F-5
<PAGE> 543
BELL'S DEPARTMENT STORE OF CARTERSVILLE, GEORGIA, INCORPORATED
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
issued for all fiscal periods starting after December 15, 1995 and requires the
recognition of impairment losses on long-lived assets when book values exceed
expected future cash flows.
F-6
<PAGE> 544
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 14, CHAPTER 2
BUSINESS CORPORATIONS
STATE OF GEORGIA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
A-1
<PAGE> 545
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's right.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
A-2
<PAGE> 546
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
A-3
<PAGE> 547
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing
A-4
<PAGE> 548
under subsection (a) of this Code section within 30 days after the corporation
offered payment for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
A-5
<PAGE> 549
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
A-6
<PAGE> 550
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statement of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
---------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement.................... $5,461,147 $221,212 $282,040 $337,578 $3,795,342
Adjustments to eliminate less than wholly-owned
subsidiaries................................. -- -- -- -- --
---------- -------- -------- -------- ----------
Adjusted Shareholders' Statement............... $5,461,147 221,212 282,040 337,578 3,795,342
========== -------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E................ -- -- --
Gain/loss on sale of securities.............. -- -- --
Impairment loss.............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries............................... -- -- --
Gain/loss on discontinued operations......... -- -- --
Adjustment to tax expense.................... -- -- -- --
-------- -------- --------
Total non-operating items...................... -- -- --
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities.............................. -- -- --
Adjustment for ownership in other Belk
entities................................... --
-------- -------- -------- ----------
Per Model...................................... $221,212 $282,040 $337,578 $3,795,342
======== ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER SHAREHOLDERS'
STATEMENT
Assets
Cash & cash equivalents.................... $ (55,829)
Negative cash balances reclassified to
accounts payable......................... --
Receivables from affiliates, net........... (377,730)
Loans receivable from affiliates, net...... (100,000)
Liabilities
Notes payable.............................. --
Current installments of long-term debt..... --
Current portion of obligations under
capital leases........................... --
Payables to affiliates, net................ --
Long-term debt, excluding current
installments............................. --
Obligations under capital leases, excluding
current portion.......................... --
Loans payable to affiliates, net........... --
----------
Net debt (cash)................................ (533,559)
Adjustments to eliminate less than wholly-owned
subsidiaries................................. --
----------
Per Model...................................... $ (533,559)
==========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 551
SUPPLEMENT NO. 10
<PAGE> 552
BELK'S DEPARTMENT STORE CARTERSVILLE, GEORGIA, INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 9:10 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
-------------------
-------------------------------
Signature
-------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 10
<PAGE> 553
BELK OF CORNELIA, GA., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk of Cornelia, Ga., Inc. (the "Company"), to
be held on April 15, 1998, at 8:50 a.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Georgia law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 37.1405 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 127,169 shares of New Belk Class A Common Stock which will
represent approximately 0.2120% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage paid
(11)
<PAGE> 554
envelope. If you plan to attend the Special Meeting, you may vote in person if
you wish, even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 555
BELK OF CORNELIA, GA., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK OF CORNELIA, GA., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk of Cornelia, Ga., Inc. (the "Company") will be held on April
15, 1998, at 8:50 a.m., local time, at the offices of Belk Stores Services,
Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for the
following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Georgia law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 37.1405 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 556
BELK OF CORNELIA, GA., INC.
SUPPLEMENT NO. 11
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 11 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK OF CORNELIA,
GA., INC. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE DISCUSSION IN
THE PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED HEREIN ASSUMES
THAT ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION. IF ANY ONE OR
MORE BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE INFORMATION
CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 557
THE COMPANY
The Company was incorporated as a Georgia corporation in 1940 as
Belk-Gallant Company of Cornelia, Ga. The Company changed its name to Belk of
Cornelia, Ga., Inc. on July 23, 1997. The mailing address of the Company's
principal executive offices is 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, and its telephone number at that address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 8:50 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under Georgia law),
will be converted, without any action on the part of the Shareholder, into the
right to receive 37.1405 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk (the "New Belk Class A Common Stock"). All
of the shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 6,912 shares of Common Stock
outstanding held of record by 31 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 81.6% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock
2
<PAGE> 558
vote in favor of the Merger, the vote of such persons, corporations and trusts
in favor of the Merger would be sufficient to approve the Merger under the
governing documents of the Company and applicable state law.
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Georgia Business Corporation Code (the "GBCC"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 14,400 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A
3
<PAGE> 559
Common Stock are convertible into New Belk Class B Common Stock, in whole or in
part, at any time and from time to time at the option of the holder, on the
basis of one share of New Belk Class B Common Stock for each share of New Belk
Class A Common Stock converted. Shares of New Belk Class A Common Stock held by
a New Belk Stockholder who is a Class A Permitted Holder will also automatically
convert into New Belk Class B Common Stock in the event that such New Belk
Stockholder no longer meets the requirements of a Class A Permitted Holder. New
Belk Class B Common Stock has no conversion rights. The Company Articles provide
for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the GBCC, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as the
effect of such distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to
4
<PAGE> 560
be less than the sum of its total liabilities plus (unless the articles of
incorporation permit otherwise) the amount that would be needed if the
corporation dissolved at the time of the payment of the dividend to satisfy the
preferential rights upon dissolution of shareholders whose preferential rights
are superior to those receiving the distribution. The Company Bylaws provide
that the Board of Directors of the Company (the "Company Board") may from time
to time declare dividends on the Company's outstanding shares in the manner and
upon the terms and conditions provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The GBCC permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 25%, or such
greater or lesser percentages as may be provided in the articles of
incorporation or bylaws, of all votes entitled to be cast on the proposed
corporate action to call a special meeting. The Company Bylaws authorize the
Chairman, President, Secretary, the Company Board and any Shareholder pursuant
to the written request of the holders of not less than 10% of all the shares
entitled to vote at the meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the GBCC, unless the articles of incorporation, the bylaws or
the provisions regarding meetings in the GBCC specify a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the shareholders. The Company Articles specify that to liquidate and
discontinue the business of the Company requires a two-thirds vote.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class, or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
5
<PAGE> 561
Under the GBCC, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the GBCC
requires an amendment to the articles of incorporation to be recommended by the
board of directors to the shareholders and approved by a majority (unless the
articles of incorporation or the board of directors requires a greater vote or a
vote by voting groups) of the votes entitled to be cast on the amendment by any
voting group. As under the DGCL, the holders of the outstanding shares of a
class or series are entitled to vote as a separate voting group (if shareholder
voting is otherwise required by the GBCC) on a proposed amendment if the
amendment would change certain fundamental rights and preferences of that class
or series. The Company Articles do not specify a greater vote or a vote by
voting groups to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the GBCC, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or the
GBCC reserves this power exclusively to the shareholders in whole or part or
(ii) the shareholders in amending or repealing a particular bylaw provided
expressly that the board of directors may not amend or repeal that bylaw. The
shareholders of the corporation may amend or repeal the bylaws of the
corporation even though such bylaws may be amended or repealed by the board of
directors of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board, or by the affirmative vote of a majority of the shares
outstanding and entitled to vote at any regular or special meeting of the
Shareholders. Further, the Company Bylaws provide that the Company Board has no
power to adopt a bylaw: (i) requiring more than a majority of the voting shares
for a quorum at a meeting of the Shareholders, except where higher percentages
are required by law; (ii) providing for the management of the Company otherwise
than by the Company Board or its executive committees; (iii) increasing or
decreasing the number of directors; or (iv) classifying and staggering the
election of directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the GBCC, any action that may be taken by an annual or special
meeting of shareholders may be taken without a meeting and without prior notice,
if all holders of outstanding shares entitled to vote on such action or, if so
provided in the articles of incorporation, by persons entitled to vote at a
meeting shares having voting power to cast not less than the minimum number (or
numbers, in the case of voting groups) of votes that would be necessary to
authorize or take the action at which all shareholders entitled to vote were
present and voted sign the written consent(s) describing such action. The
Company Bylaws permit any action which may be taken at a meeting of the
Shareholders to be taken without a meeting if a consent in writing, setting
forth the action so taken, is signed by all of the persons who would be entitled
to vote upon such action at a meeting and filed with the Secretary of the
Company.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
6
<PAGE> 562
If at the time of filling any vacancy or newly created directorship, the
directors then in office constitute less than a majority of the whole board as
constituted immediately prior to such increase, the Delaware Court of Chancery
may, upon application of stockholders holding at least 10% of the total number
of shares outstanding having the right to vote for such directors, order an
election to be held to fill any such vacancies or newly created directorships or
to replace the directors chosen by the directors then in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation or a bylaw
approved by the shareholders, the GBCC permits a vacancy in the board of
directors to be filled by the shareholders or by the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board and if
the vacancy is one that the directors are authorized to fill, then the directors
may fill the vacancy by the affirmative vote of a majority of all the directors
remaining in office.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors may be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The GBCC requires a corporation to have at least one director. The articles
of incorporation or the bylaws may authorize the shareholders or the board of
directors to change the number of directors. If the articles of incorporation or
the bylaws establish a variable range for the size of directors, the number of
directors may be changed, within the prescribed range, by the shareholders or,
if the articles of incorporation so provide, by the board of directors. The
Company Bylaws require the Company Board to consist of at least three, but no
more than 15, directors.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
Under the GBCC, a director must be a natural person and at least 18 years
of age, but does not have to be a resident of Georgia or a shareholder of the
corporation unless otherwise provided for in the articles of incorporation. The
Company Articles do not require directors of the Company to be residents of
Georgia or
7
<PAGE> 563
shareholders of the Company. The GBCC also allows the articles of incorporation
or the bylaws to provide for additional qualifications of directors.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each class expiring at the
annual meeting in successive years beginning with the first class and
progressing to the third class, if any. Thereafter, directors are chosen for a
full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
Under the GBCC, the articles of incorporation may allow for staggering the
terms of directors by dividing the total number of directors into two or three
groups, with each group containing one-half or one-third of the total. The term
of each group expires in each successive year beginning with the first group and
progressing to the third group, if any. Thereafter, directors are chosen for a
term of two or three years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
According to the GBCC, unless the articles of incorporation or bylaws
provide that directors may be removed only for cause, the shareholders may
remove one or more directors with or without cause. If a director is elected by
a voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove him. If cumulative voting is not authorized, a
director may be removed only by a majority of votes entitled to be cast.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under both the DGCL and the GBCC, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the GBCC generally permits transactions involving a
Georgia corporation and an interested director of that corporation if: (i) the
transaction received the affirmative vote of a majority (but not less than two)
of those qualified directors on the board of directors or on a duly empowered
committee thereof who voted on the transaction after required disclosure to them
(ii) if a majority of the votes entitled to be cast by the holders of all
qualified shares were cast in favor of the transaction after (a) notice to
shareholders describing the director's conflicting interest transaction, (b)
provision of the information with
8
<PAGE> 564
regard to any unqualified shares and (c) required disclosure to the shareholders
who voted on the transaction (to the extent the information was not known by
them); or (iii) the transaction, judged in the circumstances at the time of
commitment, is established to have been fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the GBCC, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the GBCC (i) in connection with a
proceeding by or in the right of the corporation, except for reasonable expenses
incurred in connection with the proceeding if it is determined that the director
or officer has met the relevant standard of conduct under the GBCC or (ii) in
connection with any proceeding with respect to conduct for which he was adjudged
liable on the basis that personal benefit was improperly received by him,
whether or not involving action in his official capacity. A Georgia corporation
must indemnify a director or officer who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party because he
was a director or officer of the corporation against reasonable expenses
incurred by the director or officer in connection with the proceeding.
The Company Bylaws authorize indemnification as provided in the GBCC. In
addition, the Company Bylaws provide that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not
9
<PAGE> 565
indemnify a director or officer against liability or litigation expense that he
may incur on account of his activities which were, at the time taken, known or
believed by him to be clearly in conflict with the best interest of the Company.
The Company will likewise and to the same extent indemnify any person who, at
the request of the Company, is or was serving as a director or as an officer of
another corporation, joint venture, trust or other enterprise, as a partner of a
partnership or as a trustee or administrator under an employee benefit plan. The
Company will also indemnify a director or officer for reasonable costs, expenses
and attorneys' fees in connection with the enforcement of rights to
indemnification granted therein, if it is so determined in accordance with the
Company Articles that the director or officer is entitled to indemnification
thereunder. The Company Articles provide that to the fullest extent permitted by
the GBCC, a director will not be personally liable to the Company or any of its
Shareholders or otherwise for monetary damages for breach of duty of care or
other duty as a director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The GBCC concerning the approval of mergers and share exchanges is similar
in all material respects to the DGCL, except action by the shareholders of the
surviving corporation is not required if the number and kind of shares
outstanding immediately after the merger or share exchange, plus the number and
kind of shares issuable as a result of the merger or share exchange and by the
conversion of securities issued pursuant to the merger or share exchange or the
exercise of rights and warrants issued pursuant to the merger or share exchange
does not exceed the total number and kind of shares of the surviving or
acquiring corporation authorized by its articles of incorporation immediately
before the merger or share exchange. The GBCC and DGCL provisions concerning the
approval of the sale of all or substantially all of the assets of a corporation
are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the GBCC include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined in the DGCL and the
GBCC, "business combinations" generally encompass (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder, (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested shareholder of a substantial percentage of assets of the corporation,
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested shareholder,
except in certain circumstances, (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested shareholder, except
in certain circumstances or (v) any receipt by the interested shareholder of the
benefit of any loans, advances, guarantees, pledges or other financial benefits
(other than those expressly permitted in (i) through (iv) above) provided by or
through the corporation.
The DGCL defines an "interested stockholder" as any person who (i) is the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation and within three years of the date in
question was the direct
10
<PAGE> 566
or indirect owner of at least 15% of the voting power of any class or series of
the then outstanding stock of the corporation. Under the GBCC, an "interested
shareholder" is any person who owns 10% of the outstanding voting shares or is
an affiliate of the corporation owning 10% of the outstanding voting shares
within the prior two years, and a "continuing director" is a director not
associated or affiliated with any interested shareholder.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
According to the GBCC, if at least three continuing directors serve on the
board of directors, then those directors must unanimously approve the business
combination. If three continuing directors do not serve on the board of
directors, then 66 2/3% of the continuing directors must recommend the business
combination and a majority of shareholders entitled to cast a vote must approve
the business combination. Also, except under certain circumstances, no mergers
may occur between a corporation and an interested shareholder within five years
of the date the shareholder became an interested shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the GBCC provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The GBCC concerning preemptive rights is equivalent to the DGCL. The
Company Articles do not contain any provision with respect to preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other
11
<PAGE> 567
books and records and to make copies or extracts therefrom. A proper purpose
means a purpose reasonably related to such person's interest as a stockholder.
Pursuant to the GBCC, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) excerpts from minutes of any
meeting of the board of directors, records of any action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporations; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the GBCC ("Article 13") has
the right to receive in cash the fair value of such Shareholder's shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN
ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
To exercise appraisal rights under Article 13, a holder of Common Stock
must (i) deliver to the Company before the taking of the vote of Shareholders on
the Reorganization Agreement written notice of his intent to demand payment for
his shares if the Merger is effected and (ii) not vote his shares in favor of
the Reorganization Agreement. A Shareholder who does not satisfy these two
requirements is not entitled to payment for his shares under Article 13. In
addition, any Shareholder who returns a signed proxy but fails to provide
instructions as to the manner in which such shares are to be voted will be
deemed to have voted in favor of the Reorganization Agreement and will not be
entitled to assert dissenters' rights of appraisal.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial Shareholder and he notifies the Company
in writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of such a partial dissenter are determined as if
the shares as to which he dissents and his other shares are registered in the
names of different Shareholders.
If the Reorganization Agreement is approved at the Special Meeting, the
Company must deliver a written dissenters' notice (the "Dissenters' Notice") to
all Shareholders who satisfied the notice requirements of Article 13. The
Dissenters' Notice must be sent within 10 days after the Effective Time and must
(i) state where the demand for payment must be sent and where and when
certificates for shares must be deposited, (ii) inform holders of uncertificated
shares to what extent transfer of those shares will be restricted after the
demand for payment is received, (iii) set a date by which the Company must
receive the demand for payment (which date may not be fewer than 30 nor more
than 60 days after the Dissenters' Notice is delivered) and (iv) be accompanied
by a copy of Article 13.
A record Shareholder who receives the Dissenters' Notice must demand
payment and deposit his certificates in accordance with the Dissenters' Notice.
Such Shareholder will retain all other rights of a Shareholder until those
rights are canceled or modified by the consummation of the Merger. A record
Shareholder who does not demand payment or deposit his share certificates where
required, each by the date set in the Dissenters' Notice, is not entitled to
payment for his shares under Article 13.
12
<PAGE> 568
Within 10 days of the later of the Effective Time or receipt of a payment
demand, the Company must offer to pay each dissenting Shareholder who complied
with Article 13 the amount the Company estimates to be the fair value of his
shares, plus accrued interest from the Effective Time. Such offer of payment
must be accompanied by (i) certain recent Company financial statements, (ii) the
Company's estimate of the fair value of the shares and interest due, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Article 13 and (v) a copy of Article
13. If the Shareholder accepts the Company's offer by written notice to the
Company within 30 days after the Company's offer, the Company must make payment
within 60 days after the later of the making of the offer or the Effective Time.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing share certificates, the Company must return the
deposited certificates. If, after such return, the Merger is consummated, the
Company must send a new Dissenters' Notice and repeat the payment procedure
described above.
A dissenting Shareholder may notify the Company in writing of his own
estimate of the fair value of his shares and the interest due, and may demand
payment of his estimate, if (i) he believes that the amount offered by the
Company is less than the fair value of his shares or that the interest due has
been calculated incorrectly or (ii) the Company, having failed to consummate the
Merger, does not return the deposited certificates within 60 days after the date
set for demanding payment. A dissenting Shareholder waives his right to demand
payment unless he notifies the Company of his demand in writing within 30 days
after the Company makes or offers payment for his shares. If the Company does
not offer payment within 10 days of the later of the Effective Time or receipt
of a payment demand, then (i) the Shareholder may demand the financial
statements and other information of the Company, and the Company must provide
such information within 10 days after receipt of the written demand and (ii) the
Shareholder may notify the Company of his own estimate of the fair value of his
shares and the amount of interest due, and may demand payment of that estimate.
If a demand for payment by a Shareholder remains unsettled, the Company
must commence a nonjury equity valuation proceeding in the appropriate court, as
specified in Article 13, within 60 days after receiving the payment demand and
must petition the court to determine the fair value of the shares and accrued
interest. If the Company does not commence a valuation proceeding within 60
days, the Company is required to pay each dissenting Shareholder whose demand
remains unsettled, the amount demanded. The Company is required to make all
dissenting Shareholders whose demands remain unsettled parties to the proceeding
and to serve a copy of the petition upon each dissenting Shareholder. The court
may appoint appraisers to receive evidence and to recommend a decision on fair
value. Each dissenting Shareholder made a party to the proceeding is entitled to
judgment for the fair value of his shares plus interest to the date of judgment.
In an appraisal proceeding commenced under Article 13, the court must
determine the costs of the proceeding, excluding fees and expenses of attorneys
and experts for the respective parties, and must assess those costs against the
Company, except that the court may assess the costs against all or some of the
dissenting Shareholders to the extent the court finds they acted arbitrarily,
vexatiously or not in good faith in demanding payment under Article 13. The
court also may assess the fees and expenses of attorneys and experts for the
respective parties against the Company if the court finds the Company did not
substantially comply with the requirements of Article 13, or against either the
Company or a dissenting Shareholder if the court finds that such party acted
arbitrarily, vexatiously or not in good faith with respect to the rights
provided by Article 13.
If the court finds that the services of the attorneys for any dissenting
Shareholder were of substantial benefit to other dissenting Shareholders
similarly situated, and that the fees for those services should not be assessed
against the Company, the court may award those attorneys reasonable fees out of
the amounts awarded the dissenting Shareholders who were benefited. No action by
any dissenting Shareholder to enforce dissenters' rights may be brought more
than three years after the Effective Time, regardless of whether notice of the
Merger and of the right to dissent was given by the Company in compliance with
the provisions of Article 13.
13
<PAGE> 569
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ------ -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales................... $5,162,618 $5,162,618 0.6 $(1,687,337) $4,784,908
EBITDA...................... 349,375 347,775 7 (1,687,337) 4,121,762
EBIT........................ 295,900 294,300 10 (1,687,337) 4,630,337
Net Income.................. 234,730 233,725 15 -- 3,505,875
Book Equity................. 3,398,658 3,300,230 1 -- 3,300,230
</TABLE>
14
<PAGE> 570
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk of Covington,
Ga., Inc. 2.6190% X $ 4,579,688 = $ 119,942
Belk of Toccoa, Ga.,
Inc. .9717% X 4,349,985 = 42,269
----------
Total $ 162,211
==========
Relative Operating Value of Company $4,784,908
Relative Operating Value of Other Companies Owned by Company + 162,211
----------
Total Relative Value of Company = $4,947,119
==========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Gallant-Belk Company 9.2014% X $ 4,947,119 = $ 455,204
Belk Brothers Company 16.3484% X 4,947,119 = 808,775
Belk Enterprises,
Inc. 19.3287% X 4,947,119 = 956,214
Belk of Dalton, Ga.,
Inc. 1.2153 X 4,947,119 = 60,122
Belk of La Grange,
Ga., Inc. 3.6169% X 4,947,119 = 178,933
Belk of Thomaston,
Ga., Inc. .7523 X 4,947,119 = 37,217
----------
Total $2,496,465
==========
Total Relative Value of Company $4,947,119
Total Relative Value of Company Owned by Other Belk Companies - 2,496,465
----------
Net Relative Value of Company = $2,450,654
==========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 2,450,654 / $1,156,226,577 = .2120%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.2120% X 59,998,834) / 3,424 = 37.1405
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
15
<PAGE> 571
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 572
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 33.96
Dividends(2).............................................. 16.00
Book value per share(3)................................... 491.70
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 35.65
Dividends(2).............................................. 9.66
Book value per share...................................... 465.00
</TABLE>
- ---------------
(1) Based on 6,912 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 6,912 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
17
<PAGE> 573
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 5,302 $ 5,103 $ 5,163
Net income.................................................. 368 282 235
Per common share
Net income (loss)(1)...................................... 53.22 40.74 33.96
Dividends................................................. 16.00 16.00 15.00
Book value(2)............................................. 449.00 473.74 491.70
Total assets................................................ 3,686 3,686 3,830
Shareholders' equity........................................ 3,104 3,275 3,399
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $3,538 $3,395
Income from operations...................................... 93 232
</TABLE>
- ---------------
(1) Based on 6,912 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 6,912 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 574
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Habersham
County Shopping Center in Cornelia, Georgia. The Company's store operates in a
manner consistent with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is managed out of the Kerr group office in
Norcross, Georgia.
Facilities. The Company leases its store building, which contains
approximately 47,000 square feet of floor area. The current term of the lease
expires in 1999, but the Company has options to extend the lease through 2019.
The Company believes the building is adequate to meet its current needs.
Competition. Specific competitors in the Company's market include Wal-Mart
and K-Mart.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 575
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)........................................... 5,400 78.1%
Thomas M. Belk, Jr. (Director and Executive Officer)
(a)(d)(e)................................................. 4,382 63.4%
H. W. McKay Belk (Director and Executive Officer)
(a)(d)(e)................................................. 4,386 63.4%
John R. Belk (Director and Executive Officer) (a)(d)(e)..... 4,502 65.1%
Katherine McKay Belk (a).................................... 856 12.4%
Katherine Belk Morris (a)................................... 892 12.9%
Henderson Belk (Director) (b)(c)............................ 84 1.2%
Leroy Robinson (Director) (a)............................... 856 12.4%
Sarah Belk Gambrell (b)(c).................................. 932 13.5%
Robert K. Kerr, Jr. (Director and Executive Director)....... 0 *
Thomas M. Belk, Trustee U/A dated September 15, 1993........ 856 12.4%
Gallant-Belk Company........................................ 636 9.2%
Belk Enterprises, Inc....................................... 1,336 19.3%
J.V. Properties............................................. 1,130 16.3%
All Directors and Executive Officers as a group (7
persons).................................................. 5,638 81.6%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson, Katherine McKay Belk and Katherine Belk
Morris -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk
Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207; Robert K. Kerr,
Jr. -- 1890-D Beaver Ridge Circle, Norcross, Ga. 30071; Gallant-Belk Company,
Belk Enterprises, Inc., J.V. Properties and Thomas M. Belk, Trustee U/A dated
September 15, 1993 -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 856 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(b) Includes 40 shares held in several Trusts established by the Will of W. H.
Belk for the benefit of his children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(c) Includes 44 shares held in several Trusts established by the Will of Mary I.
Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power
20
<PAGE> 576
of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson Belk is
shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, and W. H. Belk,
Jr. and Irwin Belk.
(d) Included are 1,336 shares held by Belk Enterprises, Inc., 636 shares held by
Gallant-Belk Company, 250 shares held by Belk of LaGrange, Ga, Inc., 84
shares held by Belk of Dalton, Ga., Inc. and 52 shares held by Belk of
Thomaston, Ga., Inc., which shares are voted by the members of the Executive
Committee of the Board of Directors of each such Corporation, under
authority given by the directors of each such Corporation at the annual
meeting of directors held in March, 1997. The Executive Committee of each
such Corporation consists of John M. Belk, Thomas M. Belk, Jr., H. W. McKay
Belk and John R. Belk.
(e) Included are 1,130 shares of J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
21
<PAGE> 577
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
</TABLE>
F-1
<PAGE> 578
BELK OF CORNELIA, GA., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 59,371 $ 68,948
Accounts receivable, net.................................. 583,177 705,060
Merchandise inventory..................................... 1,066,448 1,099,865
Receivable from affiliates, net........................... 235,481 218,389
Refundable income taxes................................... 7,429 --
Deferred income taxes..................................... 7,800 --
Other..................................................... 48,765 46,480
---------- ----------
Total current assets........................................ 2,008,471 2,138,742
Loans receivable from affiliates, net....................... 1,400,000 1,400,000
Investments................................................. 98,528 98,528
Property, plant and equipment, net.......................... 147,029 163,521
Other noncurrent assets..................................... 31,950 28,939
---------- ----------
$3,685,978 $3,829,730
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 351,539 $ 311,714
Deferred income taxes..................................... -- 7,982
Accrued income taxes...................................... 3,536 55,215
---------- ----------
Total current liabilities................................... 355,075 374,911
Deferred income taxes....................................... 14,552 13,115
Other noncurrent liabilities................................ 41,830 43,046
---------- ----------
Total liabilities........................................... 411,457 431,072
Shareholders' equity:
Common stock.............................................. 691,200 691,200
Additional paid in capital................................ 1,312 1,312
Retained earnings......................................... 2,582,009 2,706,146
---------- ----------
Total shareholders' equity.................................. 3,274,521 3,398,658
---------- ----------
$3,685,978 $3,829,730
========== ==========
</TABLE>
F-2
<PAGE> 579
BELK OF CORNELIA, GA., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $5,302,174 $5,103,243 $5,162,618
Operating costs and expenses............................... 4,789,386 4,749,289 4,869,102
---------- ---------- ----------
Income from operations..................................... 512,788 353,954 293,516
---------- ---------- ----------
Other income (expense):
Interest, net............................................ 75,883 92,561 78,355
Dividend income.......................................... 3,360 2,480 1,600
Miscellaneous, net....................................... (5,517) 1,097 784
---------- ---------- ----------
Total other expense, net................................... 73,726 96,138 80,739
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 586,514 450,092 374,255
Income tax expense (benefit)............................... 218,667 168,501 139,526
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 367,847 281,591 234,729
---------- ---------- ----------
Net earnings............................................... 367,847 281,591 234,729
Retained earnings at beginning of period................... 2,146,843 2,411,010 2,582,009
Dividends paid............................................. (103,680) (110,592) (110,592)
---------- ---------- ----------
Retained earnings at end of period......................... $2,411,010 $2,582,009 $2,706,146
========== ========== ==========
</TABLE>
F-3
<PAGE> 580
BELK OF CORNELIA, GA., INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31. Fiscal years 1997, 1996 and 1995 ended on February 1, 1997, February
3, 1996 and January 31, 1995, respectively.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
F-4
<PAGE> 581
BELK OF CORNELIA, GA., INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements
F-5
<PAGE> 582
BELK OF CORNELIA, GA., INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
issued for all fiscal periods starting after December 15, 1995 and requires the
recognition of impairment losses on long-lived assets when book values exceed
expected future cash flows.
F-6
<PAGE> 583
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 14, CHAPTER 2
BUSINESS CORPORATIONS
STATE OF GEORGIA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
A-1
<PAGE> 584
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's right.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
A-2
<PAGE> 585
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
A-3
<PAGE> 586
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing
A-4
<PAGE> 587
under subsection (a) of this Code section within 30 days after the corporation
offered payment for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
A-5
<PAGE> 588
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
A-6
<PAGE> 589
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................... $ 5,162,618 $234,729 $295,900 $349,375 $3,398,658
Adjustments to eliminate less than
wholly-owned subsidiaries................... -- -- -- -- --
----------- -------- -------- -------- ----------
Adjusted Shareholders' Statement.............. $ 5,162,618 234,729 295,900 349,375 3,398,658
=========== -------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............... -- -- --
Gain/loss on sale of securities............. -- -- --
Impairment loss............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries.............................. -- -- --
Gain/loss on discontinued operations........ -- -- --
Adjustment to tax expense................... -- -- -- --
-------- -------- --------
Total non-operating items..................... -- -- --
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities............................. (1,004) (1,600) (1,600)
Adjustment for ownership in other Belk
entities.................................. (98,428)
-------- -------- -------- ----------
Per Model..................................... $233,725 $294,300 $347,775 $3,300,230
======== ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................... $ (68,948)
Negative cash balances reclassified to
accounts payable........................ --
Receivables from affiliates, net.......... (218,389)
Loans receivable from affiliates, net..... (1,400,000)
Liabilities
Notes payable............................. --
Current installments of long-term debt.... --
Current portion of obligations under
capital leases.......................... --
Payables to affiliates, net............... --
Long-term debt, excluding current
installments............................ --
Obligations under capital leases,
excluding current portion............... --
Loans payable to affiliates, net.......... --
-----------
Net debt (cash)............................... (1,687,337)
Adjustments to eliminate less than
wholly-owned subsidiaries................... --
-----------
Per Model..................................... $(1,687,337)
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 590
SUPPLEMENT NO. 11
<PAGE> 591
BELK OF CORNELIA, GA., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 8:50 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
-------------------
-------------------------------
Signature
-------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 11
<PAGE> 592
BELK OF COVINGTON, GA., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk of Covington, Ga., Inc. (the "Company"),
to be held on April 15, 1998, at 9:20 a.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Georgia law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 35.3644 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 136,082 shares of New Belk Class A Common Stock which will
represent approximately 0.2268% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage paid
(12)
<PAGE> 593
envelope. If you plan to attend the Special Meeting, you may vote in person if
you wish, even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 594
BELK OF COVINGTON, GA., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK OF COVINGTON, GA., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk of Covington, Ga., Inc. (the "Company") will be held on April
15, 1998, at 9:20 a.m., local time, at the offices of Belk Stores Services,
Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for the
following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Georgia law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 35.3644 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 595
BELK OF COVINGTON, GA., INC.
SUPPLEMENT NO. 12
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 12 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK OF COVINGTON,
GA. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE DISCUSSION IN THE
PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED HEREIN ASSUMES THAT
ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION. IF ANY ONE OR MORE
BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE INFORMATION
CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION.................................. B-1
</TABLE>
<PAGE> 596
THE COMPANY
The Company was incorporated as a Georgia corporation in 1944 as
Belk-Gallant Company of Covington, Ga., Inc. The Company changed its name to
Belk of Covington, Ga., Inc. on July 23, 1997. The mailing address of the
Company's principal executive offices is 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500, and its telephone number at that address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 9:20 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under Georgia law),
will be converted, without any action on the part of the Shareholder, into the
right to receive 35.3644 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk (the "New Belk Class A Common Stock"). All
of the shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 6,720 shares of Common Stock
outstanding held of record by 28 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 70.7% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock
2
<PAGE> 597
vote in favor of the Merger, the vote of such persons, corporations and trusts
in favor of the Merger would be sufficient to approve the Merger under the
governing documents of the Company and applicable state law.
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Georgia Business Corporation Code (the "GBCC"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 6,720 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A
3
<PAGE> 598
Common Stock are convertible into New Belk Class B Common Stock, in whole or in
part, at any time and from time to time at the option of the holder, on the
basis of one share of New Belk Class B Common Stock for each share of New Belk
Class A Common Stock converted. Shares of New Belk Class A Common Stock held by
a New Belk Stockholder who is a Class A Permitted Holder will also automatically
convert into New Belk Class B Common Stock in the event that such New Belk
Stockholder no longer meets the requirements of a Class A Permitted Holder. New
Belk Class B Common Stock has no conversion rights. The Company Articles provide
for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the GBCC, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as the
effect of such distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to
4
<PAGE> 599
be less than the sum of its total liabilities plus (unless the articles of
incorporation permit otherwise) the amount that would be needed if the
corporation dissolved at the time of the payment of the dividend to satisfy the
preferential rights upon dissolution of shareholders whose preferential rights
are superior to those receiving the distribution. The Company Bylaws provide
that the Board of Directors of the Company (the "Company Board") may from time
to time declare dividends on the Company's outstanding shares in the manner and
upon the terms and conditions provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The GBCC permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 25%, or such
greater or lesser percentages as may be provided in the articles of
incorporation or bylaws, of all votes entitled to be cast on the proposed
corporate action to call a special meeting. The Company Bylaws authorize the
Chairman, President, Secretary, the Company Board and any Shareholder pursuant
to the written request of the holders of not less than 10% of all the shares
entitled to vote at the meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the GBCC, unless the articles of incorporation, the bylaws or
the provisions regarding meetings in the GBCC specify a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the shareholders. The Company Articles specify that to liquidate and
discontinue the business of the Company requires a two-thirds vote.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
5
<PAGE> 600
Under the GBCC, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the GBCC
requires an amendment to the articles of incorporation to be recommended by the
board of directors to the shareholders and approved by a majority (unless the
articles of incorporation or the board of directors requires a greater vote or a
vote by voting groups) of the votes entitled to be cast on the amendment by any
voting group. As under the DGCL, the holders of the outstanding shares of a
class or series are entitled to vote as a separate voting group (if shareholder
voting is otherwise required by the GBCC) on a proposed amendment if the
amendment would change certain fundamental rights and preferences of that class
or series. The Company Articles do not specify a greater vote or a vote by
voting groups to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the GBCC, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or the
GBCC reserves this power exclusively to the shareholders in whole or part or
(ii) the shareholders in amending or repealing a particular bylaw provided
expressly that the board of directors may not amend or repeal that bylaw. The
shareholders of the corporation may amend or repeal the bylaws of the
corporation even though such bylaws may be amended or repealed by the board of
directors of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board, or by the affirmative vote of a majority of the shares
outstanding and entitled to vote at any regular or special meeting of the
Shareholders. Further, the Company Bylaws provide that the Company Board has no
power to adopt a bylaw: (i) requiring more than a majority of the voting shares
for a quorum at a meeting of the Shareholders, except where higher percentages
are required by law; (ii) providing for the management of the Company otherwise
than by the Company Board or its executive committees; (iii) increasing or
decreasing the number of directors; or (iv) classifying and staggering the
election of directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the GBCC, any action that may be taken by an annual or special
meeting of shareholders may be taken without a meeting and without prior notice,
if all holders of outstanding shares entitled to vote on such action or, if so
provided in the articles of incorporation, by persons entitled to vote at a
meeting shares having voting power to cast not less than the minimum number (or
numbers, in the case of voting groups) of votes that would be necessary to
authorize or take the action at which all shareholders entitled to vote were
present and voted sign the written consent(s) describing such action. The
Company Bylaws permit any action which may be taken at a meeting of the
Shareholders to be taken without a meeting if a consent in writing, setting
forth the action so taken, is signed by all of the persons who would be entitled
to vote upon such action at a meeting and filed with the Secretary of the
Company.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
6
<PAGE> 601
If at the time of filling any vacancy or newly created directorship, the
directors then in office constitute less than a majority of the whole board as
constituted immediately prior to such increase, the Delaware Court of Chancery
may, upon application of stockholders holding at least 10% of the total number
of shares outstanding having the right to vote for such directors, order an
election to be held to fill any such vacancies or newly created directorships or
to replace the directors chosen by the directors then in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation or a bylaw
approved by the shareholders, the GBCC permits a vacancy in the board of
directors to be filled by the shareholders or by the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board and if
the vacancy is one that the directors are authorized to fill, then the directors
may fill the vacancy by the affirmative vote of a majority of all the directors
remaining in office.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors may be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The GBCC requires a corporation to have at least one director. The articles
of incorporation or the bylaws may authorize the shareholders or the board of
directors to change the number of directors. If the articles of incorporation or
the bylaws establish a variable range for the size of directors, the number of
directors may be changed, within the prescribed range, by the shareholders or,
if the articles of incorporation so provide, by the board of directors. The
Company Bylaws require the Company Board to consist of at least three, but no
more than 15, directors.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
Under the GBCC, a director must be a natural person and at least 18 years
of age, but does not have to be a resident of Georgia or a shareholder of the
corporation unless otherwise provided for in the articles of incorporation. The
Company Articles do not require directors of the Company to be residents of
Georgia or
7
<PAGE> 602
shareholders of the Company. The GBCC also allows the articles of incorporation
or the bylaws to provide for additional qualifications of directors.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each class expiring at the
annual meeting in successive years beginning with the first class and
progressing to the third class, if any. Thereafter, directors are chosen for a
full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
Under the GBCC, the articles of incorporation may allow for staggering the
terms of directors by dividing the total number of directors into two or three
groups, with each group containing one-half or one-third of the total. The term
of each group expires in each successive year beginning with the first group and
progressing to the third group, if any. Thereafter, directors are chosen for a
term of two or three years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
According to the GBCC, unless the articles of incorporation or bylaws
provide that directors may be removed only for cause, the shareholders may
remove one or more directors with or without cause. If a director is elected by
a voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove him. If cumulative voting is not authorized, a
director may be removed only by a majority of votes entitled to be cast.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under both the DGCL and the GBCC, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the GBCC generally permits transactions involving a
Georgia corporation and an interested director of that corporation if: (i) the
transaction received the affirmative vote of a majority (but not less than two)
of those qualified directors on the board of directors or on a duly empowered
committee thereof who voted on the transaction after required disclosure to
them; (ii) if a majority of the votes entitled to be cast by the holders of all
qualified shares were cast in favor of the transaction after (a) notice to
shareholders describing the director's conflicting interest transaction, (b)
provision of the information with
8
<PAGE> 603
regard to any unqualified shares and (c) required disclosure to the shareholders
who voted on the transaction (to the extent the information was not known by
them); or (iii) the transaction, judged in the circumstances at the time of
commitment, is established to have been fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the GBCC, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the GBCC (i) in connection with a
proceeding by or in the right of the corporation, except for reasonable expenses
incurred in connection with the proceeding if it is determined that the director
or officer has met the relevant standard of conduct under the GBCC or (ii) in
connection with any proceeding with respect to conduct for which he was adjudged
liable on the basis that personal benefit was improperly received by him,
whether or not involving action in his official capacity. A Georgia corporation
must indemnify a director or officer who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party because he
was a director or officer of the corporation against reasonable expenses
incurred by the director or officer in connection with the proceeding.
The Company Bylaws authorize indemnification as provided in the GBCC. In
addition, the Company Bylaws provide that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not
9
<PAGE> 604
indemnify a director or officer against liability or litigation expense that he
may incur on account of his activities which were, at the time taken, known or
believed by him to be clearly in conflict with the best interest of the Company.
The Company will likewise and to the same extent indemnify any person who, at
the request of the Company, is or was serving as a director or as an officer of
another corporation, joint venture, trust or other enterprise, as a partner of a
partnership or as a trustee or administrator under an employee benefit plan. The
Company will also indemnify a director or officer for reasonable costs, expenses
and attorneys' fees in connection with the enforcement of rights to
indemnification granted therein, if it is so determined in accordance with the
Company Articles that the director or officer is entitled to indemnification
thereunder. The Company Articles provide that to the fullest extent permitted by
the GBCC, a director will not be personally liable to the Company or any of its
Shareholders or otherwise for monetary damages for breach of duty of care or
other duty as a director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The GBCC concerning the approval of mergers and share exchanges is similar
in all material respects to the DGCL, except action by the shareholders of the
surviving corporation is not required if the number and kind of shares
outstanding immediately after the merger or share exchange, plus the number and
kind of shares issuable as a result of the merger or share exchange and by the
conversion of securities issued pursuant to the merger or share exchange or the
exercise of rights and warrants issued pursuant to the merger or share exchange
does not exceed the total number and kind of shares of the surviving or
acquiring corporation authorized by its articles of incorporation immediately
before the merger or share exchange. The GBCC and DGCL provisions concerning the
approval of the sale of all or substantially all of the assets of a corporation
are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the GBCC include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined in the DGCL and the
GBCC, "business combinations" generally encompass (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder, (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested shareholder of a substantial percentage of assets of the corporation,
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested shareholder,
except in certain circumstances, (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested shareholder, except
in certain circumstances or (v) any receipt by the interested shareholder of the
benefit of any loans, advances, guarantees, pledges or other financial benefits
(other than those expressly permitted in (i) through (iv) above) provided by or
through the corporation.
The DGCL defines an "interested stockholder" as any person who (i) is the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation and within three years of the date in
question was the direct
10
<PAGE> 605
or indirect owner of at least 15% of the voting power of any class or series of
the then outstanding stock of the corporation. Under the GBCC, an "interested
shareholder" is any person who owns 10% of the outstanding voting shares or is
an affiliate of the corporation owning 10% of the outstanding voting shares
within the prior two years, and a "continuing director" is a director not
associated or affiliated with any interested shareholder.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (a) by persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
According to the GBCC, if at least three continuing directors serve on the
board of directors, then those directors must unanimously approve the business
combination. If three continuing directors do not serve on the board of
directors, then 66 2/3% of the continuing directors must recommend the business
combination and a majority of shareholders entitled to cast a vote must approve
the business combination. Also, except under certain circumstances, no mergers
may occur between a corporation and an interested shareholder within five years
of the date the shareholder became an interested shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the GBCC provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The GBCC concerning preemptive rights is equivalent to the DGCL. The
Company Articles do not contain any provision with respect to preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other
11
<PAGE> 606
books and records and to make copies or extracts therefrom. A proper purpose
means a purpose reasonably related to such person's interest as a stockholder.
Pursuant to the GBCC, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to
inspect,(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) excerpts from minutes of any
meeting of the board of directors, records of any action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporations; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the GBCC ("Article 13") has
the right to receive in cash the fair value of such Shareholder's shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN
ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
To exercise appraisal rights under Article 13, a holder of Common Stock
must (i) deliver to the Company before the taking of the vote of Shareholders on
the Reorganization Agreement written notice of his intent to demand payment for
his shares if the Merger is effected and (ii) not vote his shares in favor of
the Reorganization Agreement. A Shareholder who does not satisfy these two
requirements is not entitled to payment for his shares under Article 13. In
addition, any Shareholder who returns a signed proxy but fails to provide
instructions as to the manner in which such shares are to be voted will be
deemed to have voted in favor of the Reorganization Agreement and will not be
entitled to assert dissenters' rights of appraisal.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial Shareholder and he notifies the Company
in writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of such a partial dissenter are determined as if
the shares as to which he dissents and his other shares are registered in the
names of different Shareholders.
If the Reorganization Agreement is approved at the Special Meeting, the
Company must deliver a written dissenters' notice (the "Dissenters' Notice") to
all Shareholders who satisfied the notice requirements of Article 13. The
Dissenters' Notice must be sent within 10 days after the Effective Time and must
(i) state where the demand for payment must be sent and where and when
certificates for shares must be deposited, (ii) inform holders of uncertificated
shares to what extent transfer of those shares will be restricted after the
demand for payment is received, (iii) set a date by which the Company must
receive the demand for payment (which date may not be fewer than 30 nor more
than 60 days after the Dissenters' Notice is delivered), and (iv) be accompanied
by a copy of Article 13.
A record Shareholder who receives the Dissenters' Notice must demand
payment and deposit his certificates in accordance with the Dissenters' Notice.
Such Shareholder will retain all other rights of a Shareholder until those
rights are canceled or modified by the consummation of the Merger. A record
Shareholder who does not demand payment or deposit his share certificates where
required, each by the date set in the Dissenters' Notice, is not entitled to
payment for his shares under Article 13.
12
<PAGE> 607
Within 10 days of the later of the Effective Time or receipt of a payment
demand, the Company must offer to pay each dissenting Shareholder who complied
with Article 13 the amount the Company estimates to be the fair value of his
shares, plus accrued interest from the Effective Time. Such offer of payment
must be accompanied by (i) certain recent Company financial statements, (ii) the
Company's estimate of the fair value of the shares and interest due, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Article 13 and (v) a copy of Article
13. If the Shareholder accepts the Company's offer by written notice to the
Company within 30 days after the Company's offer, the Company must make payment
within 60 days after the later of the making of the offer or the Effective Time.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing share certificates, the Company must return the
deposited certificates. If, after such return, the Merger is consummated, the
Company must send a new Dissenters' Notice and repeat the payment procedure
described above.
A dissenting Shareholder may notify the Company in writing of his own
estimate of the fair value of his shares and the interest due, and may demand
payment of his estimate, if (i) he believes that the amount offered by the
Company is less than the fair value of his shares or that the interest due has
been calculated incorrectly or (ii) the Company, having failed to consummate the
Merger, does not return the deposited certificates within 60 days after the date
set for demanding payment. A dissenting Shareholder waives his right to demand
payment unless he notifies the Company of his demand in writing within 30 days
after the Company makes or offers payment for his shares. If the Company does
not offer payment within 10 days of the later of the Effective Time or receipt
of a payment demand, then (i) the Shareholder may demand the financial
statements and other information of the Company, and the Company must provide
such information within 10 days after receipt of the written demand and (ii) the
Shareholder may notify the Company of his own estimate of the fair value of his
shares and the amount of interest due, and may demand payment of that estimate.
If a demand for payment by a Shareholder remains unsettled, the Company
must commence a nonjury equity valuation proceeding in the appropriate court, as
specified in Article 13, within 60 days after receiving the payment demand and
must petition the court to determine the fair value of the shares and accrued
interest. If the Company does not commence a valuation proceeding within 60
days, the Company is required to pay each dissenting Shareholder whose demand
remains unsettled, the amount demanded. The Company is required to make all
dissenting Shareholders whose demands remain unsettled parties to the proceeding
and to serve a copy of the petition upon each dissenting Shareholder. The court
may appoint appraisers to receive evidence and to recommend a decision on fair
value. Each dissenting Shareholder made a party to the proceeding is entitled to
judgment for the fair value of his shares plus interest to the date of judgment.
In an appraisal proceeding commenced under Article 13, the court must
determine the costs of the proceeding, excluding fees and expenses of attorneys
and experts for the respective parties, and must assess those costs against the
Company, except that the court may assess the costs against all or some of the
dissenting Shareholders to the extent the court finds they acted arbitrarily,
vexatiously or not in good faith in demanding payment under Article 13. The
court also may assess the fees and expenses of attorneys and experts for the
respective parties against the Company if the court finds the Company did not
substantially comply with the requirements of Article 13, or against either the
Company or a dissenting Shareholder if the court finds that such party acted
arbitrarily, vexatiously or not in good faith with respect to the rights
provided by Article 13.
If the court finds that the services of the attorneys for any dissenting
Shareholder were of substantial benefit to other dissenting Shareholders
similarly situated, and that the fees for those services should not be assessed
against the Company, the court may award those attorneys reasonable fees out of
the amounts awarded the dissenting Shareholders who were benefited. No action by
any dissenting Shareholder to enforce dissenters' rights may be brought more
than three years after the Effective Time, regardless of whether notice of the
Merger and of the right to dissent was given by the Company in compliance with
the provisions of Article 13.
13
<PAGE> 608
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales.................... $6,130,815 $6,130,815 0.6 $ (414,996) $4,093,485
EBITDA....................... 594,956 594,956 7 (414,996) 4,579,688
EBIT......................... 309,563 309,563 10 (414,996) 3,510,636
Net Income................... 241,658 222,494 15 -- 3,337,410
Book Equity.................. 3,939,016 3,938,603 1 -- 3,938,603
</TABLE>
14
<PAGE> 609
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
N/A N/A% X $ N/A = $ N/A
-----------
Total $ N/A
===========
Relative Operating Value of Company $ 4,579,688
Relative Operating Value of Other Companies Owned by Company + --
-----------
Total Relative Value of Company = $ 4,579,688
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Gallant-Belk Company 4.7619% X $ 4,579,688 = $ 218,080
Belk Brothers Company 11.9048% X 4,579,688 = 545,203
Belk of Cornelia,
Ga., Inc. 2.619% X 4,579,688 = 119,942
Belk of LaGrange,
Ga., Inc. 20.2976% X 4,579,688 = 929,567
Belk Brothers of
Monroe, North
Carolina,
Incorporated 2.7381 X 4,579,688 = 125,396
Belk of Thomaston,
Ga., Inc. .4167 X 4,579,688 = 19,084
-----------
Total $ 1,957,272
===========
Total Relative Value of Company $ 4,579,688
Total Relative Value of Company Owned by Other Belk Companies - 1,957,272
-----------
Net Relative Value of Company = $ 2,622,416
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 2,622,416 / $1,156,226,577 = .2268%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.2268% X 59,998,834) / 3,848 = 35.3644
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
15
<PAGE> 610
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 611
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 35.96
Dividends(2).............................................. 5.00
Book value per share(3)................................... 586.16
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 33.95
Dividends(2).............................................. 9.19
Book value per share...................................... 442.76
</TABLE>
- ---------------
(1) Based on 6,720 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 6,720 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
17
<PAGE> 612
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 4,839 $ 5,507 $ 6,131
Net income.................................................. 406 142 242
Per common share
Net Income (loss)(1)...................................... 60.34 21.14 35.96
Dividends................................................. 15.00 10.00 5.00
Book value(2)............................................. 544.06 555.20 586.16
Total assets................................................ 4,252 5,997 7,463
Shareholders' equity........................................ 3,656 3,731 3,939
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $4,199 $4,219
Income from operations...................................... 155 265
</TABLE>
- ---------------
(1) Based on 6,720 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 6,720 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 613
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Newton Plaza
Mall in Covington, Georgia. The Company's store operates in a manner consistent
with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is managed out of the Kerr group office in
Norcross, Georgia.
Facilities. The Company leases its store building, which contains
approximately 43,000 square feet of floor area. The current term of the store
lease expires in 2005. The Company believes the building is adequate to meet its
current needs.
Competition. Specific competitors in the Company's market include Wal-Mart
and Goody's.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 614
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)(f)........................................ 4,120 61.3%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(c)(e)(f).............................................. 3,264 48.6%
H. W. McKay Belk (Director and Executive Officer)
(b)(c)(e)(f).............................................. 3,264 48.6%
John R. Belk (Director and Executive Officer)
(b)(c)(e)(f).............................................. 3,344 49.8%
Henderson Belk (Director) (d)............................... 32 *
Sarah Belk Gambrell (d)..................................... 924 13.8%
Sarah Gambrell Knight....................................... 480 7.1%
Katherine Belk Morris (b)(c)................................ 392 5.8%
Leroy Robinson (Director) (b)(c)............................ 208 3.1%
Robert K. Kerr, Jr. (Director and Executive Officer)........ 0 *
Belk of LaGrange, Ga., Inc.................................. 1,364 20.3%
J.V. Properties............................................. 800 11.9%
Montgomery Investment Company............................... 816 12.1%
All Directors and Executive Officers as a group (7
persons).................................................. 4,752 70.7%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson and Katherine Morris -- 2801 West Tyvola Road,
Charlotte, N.C. 28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road, Charlotte,
N.C. 28207; Sarah Gambrell Knight -- 810 Colville Road, Charlotte, N.C. 28207;
Robert K. Kerr, Jr. -- 1890-D Beaver Ridge Circle, Norcross, Ga. 30071; Belk of
LaGrange, Ga., Inc., Montgomery Investment Company and J.V. Properties -- 2801
West Tyvola Road, Charlotte, N.C. 28217-4500.
All shares of common stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 816 shares held by Montgomery Investment Company, of which John M.
Belk is the majority shareholder.
(b) Includes 88 shares held by Brothers Investment Company, which corporation is
equally owned by John M. Belk and the Estate of Thomas M. Belk. Voting and
investment power is shared by John M. Belk, Katherine McKay Belk, Katherine
Belk Morris, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk and Leroy
Robinson.
(c) Includes 120 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(d) Includes 32 shares held in several Trusts established by the Will of Mary I.
Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power
20
<PAGE> 615
of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson Belk is
shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H. Belk, Jr.
and Irwin Belk.
(e) Includes 184 shares held by Belk Brothers Company of Monroe, North Carolina,
Incorporated, 320 shares held by Gallant-Belk Company, 1,364 shares held by
Belk of LaGrange, Ga., Inc., 176 shares held by Belk of Cornelia, Ga., Inc.,
and 28 shares held by Belk of Thomaston, Ga., Inc., which shares are voted
by the members of the executive Committee of the Board of Directors of each
such Corporation, under authority given by the directors of each such
Corporation at the annual meeting of directors held in March, 1997. The
Executive Committee of each such Corporation consists of John M. Belk,
Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(f) Includes 800 shares of J. V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
21
<PAGE> 616
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 617
BELK OF COVINGTON, GA., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 60,965 $ 72,511
Accounts receivable, net.................................. 763,934 986,805
Merchandise inventory..................................... 1,081,255 1,196,783
Refundable income taxes................................... 58,954 --
Deferred income taxes..................................... 20,560 40,413
Other..................................................... 58,989 55,627
---------- ----------
Total current assets........................................ 2,044,657 2,352,139
Loans receivable from affiliates, net....................... 1,900,000 3,400,000
Investments................................................. 413 413
Property, plant and equipment, net.......................... 2,029,833 1,691,958
Other noncurrent assets..................................... 21,607 18,402
---------- ----------
$5,996,510 $7,462,912
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 470,472 $ 342,374
Payables to affiliates, net............................... 1,748,023 3,057,517
Accrued income taxes...................................... -- 34,446
---------- ----------
Total current liabilities................................... 2,218,495 3,434,337
Deferred income taxes....................................... 25,639 65,281
Other noncurrent liabilities................................ 21,418 24,278
---------- ----------
Total liabilities........................................... 2,265,552 3,523,896
Shareholders' equity:
Common stock.............................................. 672,000 672,000
Retained earnings......................................... 3,058,958 3,267,016
---------- ----------
Total shareholders' equity.................................. 3,730,958 3,939,016
---------- ----------
$5,996,510 $7,462,912
========== ==========
</TABLE>
F-2
<PAGE> 618
BELK OF COVINGTON, GA., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $4,839,029 $5,506,961 $6,130,815
Operating costs and expenses............................... 4,292,407 5,250,770 5,822,937
---------- ---------- ----------
Income from operations..................................... 546,622 256,191 307,878
---------- ---------- ----------
Other income (expense):
Interest, net............................................ 110,609 13,768 2,957
Gain (loss) on disposal of property, plant and
equipment............................................. -- (64,199) --
Miscellaneous, net....................................... (5,355) 4,804 1,685
---------- ---------- ----------
Total other expense, net................................... 105,254 (45,627) 4,642
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 651,876 210,564 312,520
Income tax expense (benefit)............................... 246,363 68,473 70,862
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 405,513 142,091 241,658
---------- ---------- ----------
Net earnings............................................... 405,513 142,091 241,658
Retained earnings at beginning of period................... 2,679,354 2,984,067 3,058,958
Dividends paid............................................. (100,800) (67,200) (33,600)
---------- ---------- ----------
Retained earnings at end of period......................... $2,984,067 $3,058,958 $3,267,016
========== ========== ==========
</TABLE>
F-3
<PAGE> 619
BELK OF COVINGTON, GA., INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31. Fiscal years 1997, 1996 and 1995 end on February 1, 1997, February
3, 1996 and January 31, 1995, respectively.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
F-4
<PAGE> 620
BELK OF COVINGTON, GA., INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements
F-5
<PAGE> 621
BELK OF COVINGTON, GA., INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
issued for all fiscal periods starting after December 15, 1995 and requires the
recognition of impairment losses on long-lived assets when book values exceed
expected future cash flows.
F-6
<PAGE> 622
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 14, CHAPTER 2
BUSINESS CORPORATIONS
STATE OF GEORGIA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
A-1
<PAGE> 623
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's right.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
A-2
<PAGE> 624
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
A-3
<PAGE> 625
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing
A-4
<PAGE> 626
under subsection (a) of this Code section within 30 days after the corporation
offered payment for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
A-5
<PAGE> 627
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
A-6
<PAGE> 628
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................... $ 6,130,815 $241,658 $309,563 $594,956 $3,939,016
Adjustments to eliminate less than
wholly-owned subsidiaries................... -- -- -- -- --
----------- -------- -------- -------- ----------
Adjusted Shareholders' Statement.............. $ 6,130,815 241,658 309,563 594,956 3,939,016
=========== -------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............... -- -- --
Gain/loss on sale of securities............. -- -- --
Impairment loss............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries.............................. -- -- --
Gain/loss on discontinued operations........ -- -- --
Adjustment to tax expense................... (19,164) -- -- --
-------- -------- --------
Total non-operating items..................... (19,164) -- --
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities............................. -- -- --
Adjustment for ownership in other Belk
entities.................................. (413)
-------- -------- -------- ----------
Per Model..................................... $222,494 $309,563 $594,956 $3,938,603
======== ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................... $ (72,513)
Negative cash balances reclassified to
accounts payable........................ --
Receivables from affiliates, net.......... --
Loans receivable from affiliates, net..... (3,400,000)
Liabilities
Notes payable............................. --
Current installments of long-term debt.... --
Current portion of obligations under
capital leases.......................... --
Payables to affiliates, net............... 3,057,517
Long-term debt, excluding current
installments............................ --
Obligations under capital leases,
excluding current portion............... --
Loans payable to affiliates, net.......... --
-----------
Net debt (cash)............................... (414,996)
Adjustments to eliminate less than
wholly-owned subsidiaries................... --
-----------
Per Model..................................... $ (414,996)
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 629
SUPPLEMENT NO. 12
<PAGE> 630
BELK OF COVINGTON, GA., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 9:20 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 12
<PAGE> 631
BELK OF DALTON, GA., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk of Dalton, Ga., Inc. (the "Company"), to
be held on April 15, 1998, at 9:50 a.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Georgia law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 53.0073 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 256,502 shares of New Belk Class A Common Stock which will
represent approximately 0.4275% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage paid
(13)
<PAGE> 632
envelope. If you plan to attend the Special Meeting, you may vote in person if
you wish, even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 633
BELK OF DALTON, GA., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK OF DALTON, GA., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk of Dalton, Ga., Inc. (the "Company") will be held on April 15,
1998, at 9:50 a.m., local time, at the offices of Belk Stores Services, Inc.,
2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for the following
purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Georgia law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 53.0073 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 634
BELK OF DALTON, GA., INC.
SUPPLEMENT NO. 13
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 13 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK OF DALTON, GA.
(THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE DISCUSSION IN THE PROXY
STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED HEREIN ASSUMES THAT ALL
OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION. IF ANY ONE OR MORE BELK
COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE INFORMATION CONTAINED
HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE REORGANIZATION ON THE
COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE "RISK FACTORS" IN THE
PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED HEREIN WHICH ARE NOT
OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE PROXY
STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 635
THE COMPANY
The Company was incorporated as a Georgia corporation in 1942 as
Belk-Gallant Company of Dalton, Ga., Inc. The Company changed its name to Belk
of Dalton, Ga., Inc. on July 23, 1997. The mailing address of the Company's
principal executive offices is 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, and its telephone number at that address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 9:50 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization dated as of November 25, 1997 (the "Reorganization Agreement"),
by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk Acquisition
Co., a South Carolina corporation, and the 112 Belk companies named therein (the
"Belk Companies"), including the Company, pursuant to which the Company will be
merged with and into New Belk (the "Merger") and (ii) the Merger. A copy of the
Reorganization Agreement is attached as Annex A to the Proxy Statement/
Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under Georgia law),
will be converted, without any action on the part of the Shareholder, into the
right to receive 53.0073 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk (the "New Belk Class A Common Stock"). All
of the shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 8,424 shares of Common Stock
outstanding held of record by 36 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 74.5% of such outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and the
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock
2
<PAGE> 636
vote in favor of the Merger, the vote of such persons, corporations and trusts
in favor of the Merger would be sufficient to approve the Merger under the
governing documents of the Company and applicable state law.
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Georgia Business Corporation Code (the "GBCC"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws"). This summary does not purport to be a complete statement of all of the
differences between the rights of the Shareholders and the New Belk
Stockholders. This summary is qualified in its entirety by reference to the full
text of the New Belk Certificate, the New Belk Bylaws, the DGCL, the Company
Articles, the Company Bylaws and the GBCC.
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 8,424 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer
3
<PAGE> 637
restrictions in respect of New Belk Class A Common Stock. The holders of New
Belk Class A Common Stock are entitled to 10 votes per share. The holders of New
Belk Class B Common Stock are entitled to one vote per share. Shares of New Belk
Class A Common Stock may be owned only by Class A Permitted Holders. If a share
of New Belk Class A Common Stock is transferred to any person other than a Class
A Permitted Holder, whether by sale, assignment, gift, bequest, appointment or
otherwise, such share will be converted automatically into a share of New Belk
Class B Common Stock. Shares of New Belk Class A Common Stock are convertible
into New Belk Class B Common Stock, in whole or in part, at any time and from
time to time at the option of the holder, on the basis of one share of New Belk
Class B Common Stock for each share of New Belk Class A Common Stock converted.
Shares of New Belk Class A Common Stock held by a New Belk Stockholder who is a
Class A Permitted Holder will also automatically convert into New Belk Class B
Common Stock in the event that such New Belk Stockholder no longer meets the
requirements of a Class A Permitted Holder. New Belk Class B Common Stock has no
conversion rights. The Company Articles provide for only one class of common
stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same
4
<PAGE> 638
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock.
Pursuant to the GBCC, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as the
effect of such distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to be less than the sum of its total liabilities plus
(unless the articles of incorporation permit otherwise) the amount that would be
needed if the corporation dissolved at the time of the payment of the dividend
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The GBCC permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 25%, or such
greater or lesser percentages as may be provided in the articles of
incorporation or bylaws, of all votes entitled to be cast on the proposed
corporate action to call a special meeting. The Company Bylaws authorize the
Chairman, President, Secretary, the Company Board and any Shareholder pursuant
to the written request of the holders of not less than 10% of all the shares
entitled to vote at the meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the GBCC, unless the articles of incorporation, the bylaws or
the provisions regarding meetings in the GBCC specify a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the shareholders. The Company Articles specify that to liquidate and
discontinue the business of the Company requires a two-thirds vote.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or
5
<PAGE> 639
alter or change the powers, preferences or special rights of the shares of such
class so as to affect them adversely. If any proposed amendment would alter or
change the powers, preferences or special rights of one or more series of any
class so as to affect them adversely, but would not so affect the entire class,
then only the shares of the series so affected by the amendment will be
considered a separate class for purposes of voting by classes. The New Belk
Certificate is consistent with the foregoing provisions of the DGCL.
Under the GBCC, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the GBCC
requires an amendment to the articles of incorporation to be recommended by the
board of directors to the shareholders and approved by a majority (unless the
articles of incorporation or the board of directors requires a greater vote or a
vote by voting groups) of the votes entitled to be cast on the amendment by any
voting group. As under the DGCL, the holders of the outstanding shares of a
class or series are entitled to vote as a separate voting group (if shareholder
voting is otherwise required by the GBCC) on a proposed amendment if the
amendment would change certain fundamental rights and preferences of that class
or series. The Company Articles do not specify a greater vote or a vote by
voting groups to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the GBCC, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or the
GBCC reserves this power exclusively to the shareholders in whole or part or
(ii) the shareholders in amending or repealing a particular bylaw provided
expressly that the board of directors may not amend or repeal that bylaw. The
shareholders of the corporation may amend or repeal the bylaws of the
corporation even though such bylaws may be amended or repealed by the board of
directors of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board, or by the affirmative vote of a majority of the shares
outstanding and entitled to vote at any regular or special meeting of the
Shareholders. Further, the Company Bylaws provide that the Company Board has no
power to adopt a bylaw: (i) requiring more than a majority of the voting shares
for a quorum at a meeting of the Shareholders, except where higher percentages
are required by law; (ii) providing for the management of the Company otherwise
than by the Company Board or its executive committees; (iii) increasing or
decreasing the number of directors; or (iv) classifying and staggering the
election of directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the GBCC, any action that may be taken by an annual or special
meeting of shareholders may be taken without a meeting and without prior notice,
if all holders of outstanding shares entitled to vote on such action or, if so
provided in the articles of incorporation, by persons entitled to vote at a
meeting shares having voting power to cast not less than the minimum number (or
numbers, in the case of voting groups) of votes that would be necessary to
authorize or take the action at which all shareholders entitled to vote were
present and voted sign the written consent(s) describing such action. The
Company Bylaws permit any action
6
<PAGE> 640
which may be taken at a meeting of the Shareholders to be taken without a
meeting if a consent in writing, setting forth the action so taken, is signed by
all of the persons who would be entitled to vote upon such action at a meeting
and filed with the Secretary of the Company.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation or a bylaw
approved by the shareholders, the GBCC permits a vacancy in the board of
directors to be filled by the shareholders or by the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board and if
the vacancy is one that the directors are authorized to fill, then the directors
may fill the vacancy by the affirmative vote of a majority of all the directors
remaining in office.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors may be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The GBCC requires a corporation to have at least one director. The articles
of incorporation or the bylaws may authorize the shareholders or the board of
directors to change the number of directors. If the articles of incorporation or
the bylaws establish a variable range for the size of directors, the number of
directors may be changed, within the prescribed range, by the shareholders or,
if the articles of incorporation so provide, by the board of directors. The
Company Bylaws require the Company Board to consist of at least three, but no
more than 15, directors.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless
7
<PAGE> 641
otherwise provided in the certificate of incorporation or the bylaws. The New
Belk Bylaws and the New Belk Certificate do not provide for any qualifications
for directors of the New Belk Board.
Under the GBCC, a director must be a natural person and at least 18 years
of age, but does not have to be a resident of Georgia or a shareholder of the
corporation unless otherwise provided for in the articles of incorporation. The
Company Articles do not require directors of the Company to be residents of
Georgia or shareholders of the Company. The GBCC also allows the articles of
incorporation or the bylaws to provide for additional qualifications of
directors.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each class expiring at the
annual meeting in successive years beginning with the first class and
progressing to the third class, if any. Thereafter, directors are chosen for a
full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
Under the GBCC, the articles of incorporation may allow for staggering the
terms of directors by dividing the total number of directors into two or three
groups, with each group containing one-half or one-third of the total. The term
of each group expires in each successive year beginning with the first group and
progressing to the third group, if any. Thereafter, directors are chosen for a
term of two or three years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
According to the GBCC, unless the articles of incorporation or bylaws
provide that directors may be removed only for cause, the shareholders may
remove one or more directors with or without cause. If a director is elected by
a voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove him. If cumulative voting is not authorized, a
director may be removed only by a majority of votes entitled to be cast.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under both the DGCL and the GBCC, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
8
<PAGE> 642
Similar to the DGCL, the GBCC generally permits transactions involving a
Georgia corporation and an interested director of that corporation if: (i) the
transaction received the affirmative vote of a majority (but not less than two)
of those qualified directors on the board of directors or on a duly empowered
committee thereof who voted on the transaction after required disclosure to
them; (ii) if a majority of the votes entitled to be cast by the holders of all
qualified shares were cast in favor of the transaction after (a) notice to
shareholders describing the director's conflicting interest transaction, (b)
provision of the information with regard to any unqualified shares and (c)
required disclosure to the shareholders who voted on the transaction (to the
extent the information was not known by them); or (iii) the transaction, judged
in the circumstances at the time of commitment, is established to have been fair
to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the GBCC, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the GBCC (i) in connection with a
proceeding by or in the right of the corporation, except for reasonable expenses
incurred in connection with the proceeding if it is determined that the director
or officer has met the relevant standard of conduct under the GBCC or (ii) in
connection with any proceeding with respect to conduct for which he was adjudged
liable on the basis that personal benefit was improperly received by him,
whether or not involving action in his official capacity. A Georgia corporation
must indemnify a director or officer who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party because he
9
<PAGE> 643
was a director or officer of the corporation against reasonable expenses
incurred by the director or officer in connection with the proceeding.
The Company Bylaws authorize indemnification as provided in the GBCC. In
addition, the Company Bylaws provide that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify a director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the GBCC, a director
will not be personally liable to the Company or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The GBCC concerning the approval of mergers and share exchanges is similar
in all material respects to the DGCL, except action by the shareholders of the
surviving corporation is not required if the number and kind of shares
outstanding immediately after the merger or share exchange, plus the number and
kind of shares issuable as a result of the merger or share exchange and by the
conversion of securities issued pursuant to the merger or share exchange or the
exercise of rights and warrants issued pursuant to the merger or share exchange
does not exceed the total number and kind of shares of the surviving or
acquiring corporation authorized by its articles of incorporation immediately
before the merger or share exchange. The GBCC and DGCL provisions concerning the
approval of the sale of all or substantially all of the assets of a corporation
are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the GBCC include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined in the DGCL and the
GBCC, "business combinations" generally encompass (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder, (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested shareholder of a substantial percentage of assets of the corporation,
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested shareholder,
except in certain circumstances, (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested shareholder, except
in certain
10
<PAGE> 644
circumstances or (v) any receipt by the interested shareholder of the benefit of
any loans, advances, guarantees, pledges or other financial benefits (other than
those expressly permitted in (i) through (iv) above) provided by or through the
corporation.
The DGCL defines an "interested stockholder" as any person who (i) is the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation and within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation. Under the
GBCC, an "interested shareholder" is any person who owns 10% of the outstanding
voting shares or is an affiliate of the corporation owning 10% of the
outstanding voting shares within the prior two years, and a "continuing
director" is a director not associated or affiliated with any interested
shareholder.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
According to the GBCC, if at least three continuing directors serve on the
board of directors, then those directors must unanimously approve the business
combination. If three continuing directors do not serve on the board of
directors, then 66 2/3% of the continuing directors must recommend the business
combination and a majority of shareholders entitled to cast a vote must approve
the business combination. Also, except under certain circumstances, no mergers
may occur between a corporation and an interested shareholder within five years
of the date the shareholder became an interested shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the GBCC provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
11
<PAGE> 645
The GBCC concerning preemptive rights is equivalent to the DGCL. The
Company Articles do not contain any provision with respect to preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the GBCC, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) excerpts from minutes of any
meeting of the board of directors, records of any action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporations; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the GBCC ("Article 13") has
the right to receive in cash the fair value of such Shareholder's shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN
ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
To exercise appraisal rights under Article 13, a holder of Common Stock
must (i) deliver to the Company before the taking of the vote of Shareholders on
the Reorganization Agreement written notice of his intent to demand payment for
his shares if the Merger is effected and (ii) not vote his shares in favor of
the Reorganization Agreement. A Shareholder who does not satisfy these two
requirements is not entitled to payment for his shares under Article 13. In
addition, any Shareholder who returns a signed proxy but fails to provide
instructions as to the manner in which such shares are to be voted will be
deemed to have voted in favor of the Reorganization Agreement and will not be
entitled to assert dissenters' rights of appraisal.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial Shareholder and he notifies the Company
in writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of such a partial dissenter are determined as if
the shares as to which he dissents and his other shares are registered in the
names of different Shareholders.
If the Reorganization Agreement is approved at the Special Meeting, the
Company must deliver a written dissenters' notice (the "Dissenters' Notice") to
all Shareholders who satisfied the notice requirements of Article 13. The
Dissenters' Notice must be sent within 10 days after the Effective Time and must
(i) state where the demand for payment must be sent and where and when
certificates for shares must be deposited, (ii) inform holders of uncertificated
shares to what extent transfer of those shares will be restricted after the
demand for payment is received, (iii) set a date by which the Company must
receive the demand for payment (which date may not be fewer than 30 nor more
than 60 days after the Dissenters' Notice is delivered) and (iv) be accompanied
by a copy of Article 13.
12
<PAGE> 646
A record Shareholder who receives the Dissenters' Notice must demand
payment and deposit his certificates in accordance with the Dissenters' Notice.
Such Shareholder will retain all other rights of a Shareholder until those
rights are canceled or modified by the consummation of the Merger. A record
Shareholder who does not demand payment or deposit his share certificates where
required, each by the date set in the Dissenters' Notice, is not entitled to
payment for his shares under Article 13.
Within 10 days of the later of the Effective Time or receipt of a payment
demand, the Company must offer to pay each dissenting Shareholder who complied
with Article 13 the amount the Company estimates to be the fair value of his
shares, plus accrued interest from the Effective Time. Such offer of payment
must be accompanied by (i) certain recent Company financial statements, (ii) the
Company's estimate of the fair value of the shares and interest due, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Article 13 and (v) a copy of Article
13. If the shareholder accepts the Company's offer by written notice to the
Company within 30 days after the Company's offer, the Company must make payment
within 60 days after the later of the making of the offer or the Effective Time.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing share certificates, the Company must return the
deposited certificates. If, after such return, the Merger is consummated, the
Company must send a new Dissenters' Notice and repeat the payment procedure
described above.
A dissenting Shareholder may notify the Company in writing of his own
estimate of the fair value of his shares and the interest due, and may demand
payment of his estimate, if (i) he believes that the amount offered by the
Company is less than the fair value of his shares or that the interest due has
been calculated incorrectly or (ii) the Company, having failed to consummate the
Merger, does not return the deposited certificates within 60 days after the date
set for demanding payment. A dissenting Shareholder waives his right to demand
payment unless he notifies the Company of his demand in writing within 30 days
after the Company makes or offers payment for his shares. If the Company does
not offer payment within 10 days of the later of the Effective Time or receipt
of a payment demand, then (i) the Shareholder may demand the financial
statements and other information of the Company, and the Company must provide
such information within 10 days after receipt of the written demand and (ii) the
Shareholder may notify the Company of his own estimate of the fair value of his
shares and the amount of interest due, and may demand payment of that estimate.
If a demand for payment by a Shareholder remains unsettled, the Company
must commence a nonjury equity valuation proceeding in the appropriate court, as
specified in Article 13, within 60 days after receiving the payment demand and
must petition the court to determine the fair value of the shares and accrued
interest. If the Company does not commence a valuation proceeding within 60
days, the Company is required to pay each dissenting Shareholder whose demand
remains unsettled, the amount demanded. The Company is required to make all
dissenting Shareholders whose demands remain unsettled parties to the proceeding
and to serve a copy of the petition upon each dissenting Shareholder. The court
may appoint appraisers to receive evidence and to recommend a decision on fair
value. Each dissenting Shareholder made a party to the proceeding is entitled to
judgment for the fair value of his shares plus interest to the date of judgment.
In an appraisal proceeding commenced under Article 13, the court must
determine the costs of the proceeding, excluding fees and expenses of attorneys
and experts for the respective parties, and must assess those costs against the
Company, except that the court may assess the costs against all or some of the
dissenting Shareholders to the extent the court finds they acted arbitrarily,
vexatiously or not in good faith in demanding payment under Article 13. The
court also may assess the fees and expenses of attorneys and experts for the
respective parties against the Company if the court finds the Company did not
substantially comply with the requirements of Article 13, or against either the
Company or a dissenting Shareholder if the court finds that such party acted
arbitrarily, vexatiously or not in good faith with respect to the rights
provided by Article 13.
If the court finds that the services of the attorneys for any dissenting
Shareholder were of substantial benefit to other dissenting Shareholders
similarly situated, and that the fees for those services should not be assessed
against the Company, the court may award those attorneys reasonable fees out of
the amounts
13
<PAGE> 647
awarded the dissenting Shareholders who were benefited. No action by any
dissenting Shareholder to enforce dissenters' rights may be brought more than
three years after the Effective Time, regardless of whether notice of the Merger
and of the right to dissent was given by the Company in compliance with the
provisions of Article 13.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period")multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales.................... $9,013,744 $9,013,744 0.6 $2,962,176 $$2,466,071
EBITDA....................... 603,831 598,863 7 2,962,176 1,229,865
EBIT......................... 349,756 344,788 10 2,962,176 485,704
Net Income................... 124,616 121,129 15 -- 1,816,935
Book Equity.................. 5,423,640 814,634 1 -- 814,634
</TABLE>
14
<PAGE> 648
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk of Athens, Ga.,
Inc. .2944% X $14,290,078 = $ 42,070
Belk-Rhodes Company,
of Carrollton, Ga. 15.7870 X 10,536,260 = 1,663,359
Belk's Department
Store of
Cartersville,
Georgia,
Incorporated .3802 X 3,810,247 = 14,487
Belk of Cornelia,
Ga., Inc. 1.2153 X 4,947,119 = 60,122
Belk of Elberton,
Ga., Inc. .1356 X 1,662,410 = 2,254
Belk of Hartwell,
Ga., Inc. 4.8333 X 1,270,811 = 61,422
Belk of LaGrange,
Ga., Inc. 1.6387 X 25,267,594 = 414,060
Belk of
Lawrenceville, Ga.,
Inc. 4.1186 X 6,024,824 = 248,138
Belk-Matthews Company
of Milledgeville,
Ga., Inc. 16.4815 X 6,178,663 = 1,018,336
Belk of Monroe, Ga.,
Inc. 7.4934 X 1,961,637 = 146,993
Belk of Newnan, Ga.,
Inc. 3.9631 X 1,320,331 = 52,326
Belk-Rhodes Company,
(Rome, Georgia) 15.6373 X 6,599,184 = 1,031,934
Belk of Seneca, S.C.,
Inc. 10.2462 X 4,287,122 = 439,267
Belk-Matthews
Company, Vidalia,
Georgia, Inc. 5.3686 X 4,962,587 = 266,421
Belk of Washington,
Ga., Inc. 3.3969 X 1,274,815 = 43,304
Belk of Waycross,
Ga., Inc. 1.3652 X 43,828,148 = 598,342
Belk of Canton, Ga.,
Inc. 2.1739 X 2,207,655 = 47,992
Belk of Americus,
Ga., Inc. .3436 X 2,375,853 = 8,163
-----------
Total $ 6,158,993
===========
Relative Operating Value of Company $ 2,446,071
Relative Operating Value of Other Companies Owned by Company + 6,158,993
-----------
Total Relative Value of Company = $ 8,605,064
===========
</TABLE>
15
<PAGE> 649
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Gallant-Belk Company 7.5973% X $ 8,605,064 = $ 653,753
Belk of Athens, Ga.,
Inc. .6292 X 8,605,064 = 54,143
Belk Brothers Company 9.4967 X 8,605,064 = 817,197
Belk Enterprises,
Inc. 7.5973 X 8,605,064 = 653,753
Belk of Thomaston,
Ga., Inc. .6292 X 8,605,064 = 54,143
Belk of Toccoa, Ga.,
Inc. 7.5024 X 8,605,064 = 645,586
Belk of Waycross,
Ga., Inc. 9.1049 X 8,605,064 = 783,482
-----------
Total $ 3,662,057
===========
Total Relative Value of Company $ 8,605,064
Total Relative Value of Company Owned by Other Belk Companies - 3,662,057
-----------
Net Relative Value of Company = $ 4,943,007
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 4,943,007 / $1,156,226,557 = .4275%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.4275% X 59,998,834) / 4,839 = 53.0073
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 650
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 14.79
Dividends(2).............................................. 15.00
Book value per share(3)................................... 643.83
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 50.89
Dividends(2).............................................. 13.78
Book value per share...................................... 663.65
</TABLE>
- ---------------
(1) Based on 8,424 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 8,424 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
17
<PAGE> 651
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 9,233 $ 8,998 $ 9,014
Net income.................................................. 435 251 125
Per common share
Net Income (loss)(1)...................................... 51.64 29.76 14.79
Dividends................................................. 10.00 15.00 15.00
Book value(2)............................................. 629.28 644.04 643.83
Total assets................................................ 6,181 6,158 10,215
Shareholders' equity........................................ 5,301 5,425 5,424
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $6,008 $5,909
Income from operations...................................... 96 228
</TABLE>
- ---------------
(1) Based on 8,424 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 8,424 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 652
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
To the extent a discussion of the financial condition and results of
operations of the Company for any of the fiscal years ended January 31, 1995,
February 3, 1996 or February 1, 1997 or for either of the nine-month periods
ended November 2, 1996 or November 1, 1997 is necessary to identify certain
trends or conditions that differ from the combined Belk Companies and that are
material to Shareholders' understanding of the financial condition or results of
operations of the Company, such discussion is included below. The discussion
which follows is based upon and should be read in conjunction with the
historical financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus Supplement.
In fiscal year 1997 other income (expense), net decreased due to increased
interest income resulting from additional debt incurred to purchase stock in
related Belk companies.
Projected cash flow is not expected to be sufficient to fully service the
Company's existing debt. The Company intends to rely on affiliated entities to
fund any principle repayment shortfalls.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Walnut Square
in Dalton, Georgia. The Company's store operates in a manner consistent with the
business of the Belk Companies described in the Proxy Statement/Prospectus. The
store is managed out of the Kerr group office in Norcross, Georgia.
Facilities. The Company leases its store building, which contains
approximately 73,000 square feet of floor area. The current term of the lease
expires in 2000. The Company believes the building is adequate to meet its
current needs.
Competition. Specific competitors in the Company's market include Sears,
Penney and Proffitt's.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 653
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)........................................... 5,677 67.4%
Thomas M. Belk, Jr. (Director and Executive Officer)
(a)(b)(d)(e).............................................. 4,477 53.1%
H. W. McKay Belk (Director and Executive Officer)
(a)(b)(d)(e).............................................. 4,473 53.1%
John R. Belk (Director and Executive Officer)
(a)(b)(d)(e).............................................. 4,313 51.2%
Henderson Belk (Director) (c)............................... 24 *
Sarah Belk Gambrell (c)..................................... 796 9.4%
Sarah Gambrell Knight....................................... 432 5.1%
Leroy Robinson (Director) (a)(b)............................ 640 7.6%
Katherine McKay Belk (a)(b)................................. 640 7.6%
Katherine Belk Morris (a)(b)................................ 892 10.6%
Robert K. Kerr, Jr. (Director and Executive Officer)........ 8 *
Gallant-Belk Company........................................ 640 7.6%
Belk of Toccoa, Ga., Inc.................................... 632 7.5%
Belk Enterprises, Inc....................................... 640 7.6%
Belk of Waycross, Ga., Inc.................................. 767 9.1%
J.V. Properties............................................. 800 9.5%
Thomas M. Belk (Trustee U/A) dated September 15, 1993....... 584 6.9%
All Directors and Executive Officers as a group (7
persons).................................................. 6,273 74.5%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson, Katherine McKay Belk and Katherine Belk
Morris -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk
Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207; Sarah Gambrell
Knight -- 810 Colville Road, Charlotte, N.C. 28207; Robert K. Kerr,
Jr. -- 1890-D Beaver Ridge Circle, Norcross, Ga. 30071; Thomas M. Belk, Trustee
U/A dated September 15, 1993, Gallant-Belk Company, Belk of Toccoa, Ga., Inc.,
Belk Enterprises, Inc., Belk of Waycross, Ga., Inc. and J.V. Properties --2801
West Tyvola Road, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 56 shares held by Brothers Investment Company, which Corporation is
equally owned by John M. Belk and the Estate of Thomas M. Belk. Voting and
investment power is shared by John M. Belk, Katherine McKay Belk, Katherine
Belk Morris, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk and Leroy
Robinson.
(b) Includes 584 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
20
<PAGE> 654
(c) Includes 24 shares held in several Trusts established by the Will of Mary I.
Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power for the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(d) Includes 640 shares held by Belk Enterprises, Inc., 640 shares held by
Gallant-Belk Company, 53 shares held by Belk of Athens, Ga., Inc., 632
shares held by Belk of Toccoa, Ga., Inc., 767 shares held by Belk of
Waycross, Ga., Inc., and 53 shares held by Belk of Thomaston, Ga., Inc.,
which shares are voted by the members of the Executive Committee of the
Board of Directors each such Corporation, under authority given by the
directors of each such Corporation at the annual meeting of directors held
in March, 1997. The Executive Committee each such Corporation consists of
John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(e) Includes 800 shares of J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
21
<PAGE> 655
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 656
BELK OF DALTON, GA., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 58,288 $ 95,540
Accounts receivable, net.................................. 1,241,870 1,429,401
Merchandise inventory..................................... 1,857,966 2,064,454
Receivable from affiliates, net........................... 477,752 --
Refundable income taxes................................... 20,715 --
Deferred income taxes..................................... 17,990 --
Other..................................................... 91,178 84,445
---------- -----------
Total current assets........................................ 3,765,759 3,673,840
Loans receivable from affiliates, net....................... 1,000,000 1,000,000
Investments................................................. 257,611 4,609,006
Property, plant and equipment, net.......................... 1,068,574 868,563
Other noncurrent assets..................................... 65,677 63,279
---------- -----------
$6,157,621 $10,214,688
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 520,162 $ 491,465
Payables to affiliates, net............................... -- 4,057,714
Deferred income taxes..................................... -- 8,726
Accrued income taxes...................................... 4,230 30,399
---------- -----------
Total current liabilities................................... 524,392 4,588,304
Deferred income taxes....................................... 76,061 58,613
Other noncurrent liabilities................................ 131,784 144,131
---------- -----------
Total liabilities........................................... 732,237 4,791,048
Shareholders' equity:
Common stock.............................................. 842,400 842,400
Additional paid in capital................................ 2,066 2,066
Retained earnings......................................... 4,580,918 4,579,174
---------- -----------
Total shareholders' equity.................................. 5,425,384 5,423,640
---------- -----------
$6,157,621 $10,214,688
========== ===========
</TABLE>
F-2
<PAGE> 657
BELK OF DALTON, GA., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $9,233,342 $8,997,581 $9,013,744
Operating costs and expenses............................... 8,587,024 8,681,780 8,666,767
---------- ---------- ----------
Income from operations..................................... 646,318 315,801 346,977
---------- ---------- ----------
Other income (expense):
Interest, net............................................ 50,497 67,986 (172,207)
Dividend income.......................................... 2,996 4,410 4,968
Gain (loss) on disposal of property, plant and
equipment............................................. (21) -- --
Miscellaneous, net....................................... (7,958) (552) (2,189)
---------- ---------- ----------
Total other expense, net................................... 45,514 71,844 (169,428)
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 691,832 387,645 177,549
Income tax expense (benefit)............................... 256,792 136,951 52,933
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 435,040 250,694 124,616
---------- ---------- ----------
Net earnings............................................... 435,040 250,694 124,616
Retained earnings at beginning of period................... 4,105,784 4,456,584 4,580,918
Dividends paid............................................. (84,240) (126,360) (126,360)
---------- ---------- ----------
Retained earnings at end of period......................... $4,456,584 $4,580,918 $4,579,174
========== ========== ==========
</TABLE>
F-3
<PAGE> 658
BELK OF DALTON, GA., INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31. Fiscal years 1997, 1996 and 1995 ended on February 1, 1997, February
3, 1996 and January 31, 1995, respectively.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
F-4
<PAGE> 659
BELK OF DALTON, GA., INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements
F-5
<PAGE> 660
BELK OF DALTON, GA., INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
issued for all fiscal periods starting after December 15, 1995 and requires the
recognition of impairment losses on long-lived assets when book values exceed
expected future cash flows.
F-6
<PAGE> 661
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 14, CHAPTER 2
BUSINESS CORPORATIONS
STATE OF GEORGIA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
A-1
<PAGE> 662
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's right.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
A-2
<PAGE> 663
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
A-3
<PAGE> 664
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing
A-4
<PAGE> 665
under subsection (a) of this Code section within 30 days after the corporation
offered payment for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
A-5
<PAGE> 666
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
A-6
<PAGE> 667
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
---------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement.................... $9,013,744 $124,616 $349,756 $603,831 $5,423,640
Adjustments to eliminate less than wholly-owned
subsidiaries................................. -- -- -- -- --
---------- -------- -------- -------- ----------
Adjusted Shareholders' Statement............... $9,013,744 124,616 349,756 603,831 5,423,640
========== -------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E................ -- -- --
Gain/loss on sale of securities.............. -- -- --
Impairment loss.............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries............................... -- -- --
Gain/loss on discontinued operations......... -- -- --
Adjustment to tax expense.................... -- -- -- --
-------- -------- --------
Total non-operating items...................... -- -- --
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities.............................. (3,487) (4,968) (4,967)
Adjustment for ownership in other Belk
entities................................... (4,609,006)
-------- -------- -------- ----------
Per Model...................................... $121,129 $344,788 $598,863 $ 814,634
======== ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER SHAREHOLDERS'
STATEMENT
Assets
Cash & cash equivalents.................... $ (95,538)
Negative cash balances reclassified to
accounts payable......................... --
Receivables from affiliates, net........... --
Loans receivable from affiliates, net...... (1,000,000)
Liabilities
Notes payable.............................. --
Current installments of long-term debt..... --
Current portion of obligations under
capital leases........................... --
Payables to affiliates, net................ 4,057,714
Long-term debt, excluding current
installments............................. --
Obligations under capital leases, excluding
current portion.......................... --
Loans payable to affiliates, net........... --
----------
Net debt (cash)................................ 2,962,176
Adjustments to eliminate less than wholly-owned
subsidiaries................................. --
----------
Per Model...................................... $2,962,176
==========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 668
SUPPLEMENT NO. 13
<PAGE> 669
BELK OF DALTON, GA., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 9:50 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1988
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 13
<PAGE> 670
BELK-MATTHEWS COMPANY OF DUBLIN, GEORGIA
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk-Matthews Company of Dublin, Georgia (the
"Company"), to be held on April 15, 1998, at 1:50 p.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Georgia law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 59.7949 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 290,085 shares of New Belk Class A Common Stock which will
represent approximately 0.4835% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(14)
<PAGE> 671
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 672
BELK-MATTHEWS COMPANY OF DUBLIN, GEORGIA
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK-MATTHEWS COMPANY OF DUBLIN, GEORGIA:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk-Matthews Company of Dublin, Georgia (the "Company") will be
held on April 15, 1998, at 1:50 p.m., local time, at the offices of Belk Stores
Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for
the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Georgia law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 59.7949 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 673
BELK-MATTHEWS COMPANY OF DUBLIN, GEORGIA
SUPPLEMENT NO. 14
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 14 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK-MATTHEWS
COMPANY OF DUBLIN, GEORGIA (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE
DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED
HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION.
IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE
INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 13
COMPARATIVE PER SHARE DATA.................................. 16
SELECTED HISTORICAL FINANCIAL INFORMATION................... 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 18
BUSINESS OF THE COMPANY..................................... 18
SECURITY OWNERSHIP OF THE COMPANY........................... 19
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets............................... F-2
Unaudited Statements of Earnings and Retained
Earnings.............................................. F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................ F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION.................................. B-1
</TABLE>
<PAGE> 674
THE COMPANY
The Company was incorporated as a Georgia corporation in 1946. The mailing
address of the Company's principal executive offices is 2801 West Tyvola Road,
Charlotte, North Carolina 28217-4500, and its telephone number at that address
is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 1:50 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under Georgia law),
will be converted, without any action on the part of the Shareholder, into the
right to receive, 59.7949 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk (the "New Belk Class A Common Stock"). All
of the shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 5,760 shares of Common Stock
outstanding held of record by 27 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 65.7% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 675
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Georgia Business Corporation Code (the "GBCC"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 5,760 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock held by a New Belk Stockholder who is a Class A Permitted
Holder will also automatically convert into New
3
<PAGE> 676
Belk Class B Common Stock in the event that such New Belk Stockholder no longer
meets the requirements of a Class A Permitted Holder. New Belk Class B Common
Stock has no conversion rights. The Company Articles provide for only one class
of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the GBCC, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as the
effect of such distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to be less than the sum of its total liabilities plus
(unless the articles of incorporation permit otherwise) the amount that would be
needed if the corporation dissolved at the time of the payment of the dividend
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
4
<PAGE> 677
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The GBCC permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 25%, or such
greater or lesser percentages as may be provided in the articles of
incorporation or bylaws, of all votes entitled to be cast on the proposed
corporate action to call a special meeting. The Company Bylaws authorize the
Chairman, President, Secretary, the Company Board and any Shareholder pursuant
to the written request of the holders of not less than 10% of all the shares
entitled to vote at the meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the GBCC, unless the articles of incorporation, the bylaws or
the provisions regarding meetings in the GBCC specify a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the shareholders. The Company Articles specify that to liquidate and
discontinue the business of the Company requires a two-thirds vote.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
Under the GBCC, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the GBCC
requires an amendment to the articles of incorporation to be recommended by the
board of directors to the
5
<PAGE> 678
shareholders and approved by a majority (unless the articles of incorporation or
the board of directors requires a greater vote or a vote by voting groups) of
the votes entitled to be cast on the amendment by any voting group. As under the
DGCL, the holders of the outstanding shares of a class or series are entitled to
vote as a separate voting group (if shareholder voting is otherwise required by
the GBCC) on a proposed amendment if the amendment would change certain
fundamental rights and preferences of that class or series. The Company Articles
do not specify a greater vote or a vote by voting groups to amend the Company
Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the GBCC, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or the
GBCC reserves this power exclusively to the shareholders in whole or part or
(ii) the shareholders in amending or repealing a particular bylaw provided
expressly that the board of directors may not amend or repeal that bylaw. The
shareholders of the corporation may amend or repeal the bylaws of the
corporation even though such bylaws may be amended or repealed by the board of
directors of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board, or by the affirmative vote of a majority of the shares
outstanding and entitled to vote at any regular or special meeting of the
Shareholders. Further, the Company Bylaws provide that the Company Board has no
power to adopt a bylaw: (i) requiring more than a majority of the voting shares
for a quorum at a meeting of the Shareholders, except where higher percentages
are required by law; (ii) providing for the management of the Company otherwise
than by the Company Board or its executive committees; (iii) increasing or
decreasing the number of directors; or (iv) classifying and staggering the
election of directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the GBCC, any action that may be taken by an annual or special
meeting of shareholders may be taken without a meeting and without prior notice,
if all holders of outstanding shares entitled to vote on such action or, if so
provided in the articles of incorporation, by persons entitled to vote at a
meeting shares having voting power to cast not less than the minimum number (or
numbers, in the case of voting groups) of votes that would be necessary to
authorize or take the action at which all shareholders entitled to vote were
present and voted sign the written consent(s) describing such action. The
Company Bylaws permit any action which may be taken at a meeting of the
Shareholders to be taken without a meeting if a consent in writing, setting
forth the action so taken, is signed by all of the persons who would be entitled
to vote upon such action at a meeting and filed with the Secretary of the
Company, to be kept in the Minute Books of the Company.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding
6
<PAGE> 679
having the right to vote for such directors, order an election to be held to
fill any such vacancies or newly created directorships or to replace the
directors chosen by the directors then in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation or a bylaw
approved by the shareholders, the GBCC permits a vacancy in the board of
directors to be filled by the shareholders or by the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board and if
the vacancy is one that the directors are authorized to fill, then the directors
may fill the vacancy by the affirmative vote of a majority of all the directors
remaining in office.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors may be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The GBCC requires a corporation to have at least one director. The articles
of incorporation or the bylaws may authorize the shareholders or the board of
directors to change the number of directors. If the articles of incorporation or
the bylaws establish a variable range for the size of directors, the number of
directors may be changed, within the prescribed range, by the shareholders or,
if the articles of incorporation so provide, by the board of directors. The
Company Bylaws require the Company Board to consist of at least three, but no
more than 15, directors.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
Under the GBCC, a director must be a natural person and at least 18 years
of age, but does not have to be a resident of Georgia or a shareholder of the
corporation unless otherwise provided for in the articles of incorporation. The
Company Articles do not require directors of the Company to be residents of
Georgia or shareholders of the Company. The GBCC also allows the articles of
incorporation or the bylaws to provide for additional qualifications of
directors.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each
7
<PAGE> 680
class expiring at the annual meeting in successive years beginning with the
first class and progressing to the third class, if any. Thereafter, directors
are chosen for a full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
Under the GBCC, the articles of incorporation may allow for staggering the
terms of directors by dividing the total number of directors into two or three
groups, with each group containing one-half or one-third of the total. The term
of each group expires in each successive year beginning with the first group and
progressing to the third group, if any. Thereafter, directors are chosen for a
term of two or three years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
According to the GBCC, unless the articles of incorporation or bylaws
provide that directors may be removed only for cause, the shareholders may
remove one or more directors with or without cause. If a director is elected by
a voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove him. If cumulative voting is not authorized, a
director may be removed only by a majority of votes entitled to be cast.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under both the DGCL and the GBCC, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the GBCC generally permits transactions involving a
Georgia corporation and an interested director of that corporation if: (i) the
transaction received the affirmative vote of a majority (but not less than two)
of those qualified directors on the board of directors or on a duly empowered
committee thereof who voted on the transaction after required disclosure to
them; (ii) if a majority of the votes entitled to be cast by the holders of all
qualified shares were cast in favor of the transaction after (a) notice to
shareholders describing the director's conflicting interest transaction, (b)
provision of the information with regard to any unqualified shares and (c)
required disclosure to the shareholders who voted on the transaction (to the
extent the information was not known by them); or (iii) the transaction, judged
in the circumstances at the time of commitment, is established to have been fair
to the corporation.
8
<PAGE> 681
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the GBCC, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the GBCC (i) in connection with a
proceeding by or in the right of the corporation, except for reasonable expenses
incurred in connection with the proceeding if it is determined that the director
or officer has met the relevant standard of conduct under the GBCC or (ii) in
connection with any proceeding with respect to conduct for which he was adjudged
liable on the basis that personal benefit was improperly received by him,
whether or not involving action in his official capacity. A Georgia corporation
must indemnify a director or officer who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party because he
was a director or officer of the corporation against reasonable expenses
incurred by the director or officer in connection with the proceeding.
The Company Bylaws authorize indemnification as provided in the GBCC. In
addition, the Company Bylaws provide that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture,
9
<PAGE> 682
trust or other enterprise, as a partner of a partnership or as a trustee or
administrator under an employee benefit plan. The Company will also indemnify a
director or officer for reasonable costs, expenses and attorneys' fees in
connection with the enforcement of rights to indemnification granted therein, if
it is so determined in accordance with the Company Articles that the director or
officer is entitled to indemnification thereunder. The Company Articles provide
that to the fullest extent permitted by the GBCC, a director will not be
personally liable to the Company or any of its Shareholders or otherwise for
monetary damages for breach of duty of care or other duty as a director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The GBCC concerning the approval of mergers and share exchanges is similar
in all material respects to the DGCL, except action by the shareholders of the
surviving corporation is not required if the number and kind of shares
outstanding immediately after the merger or share exchange, plus the number and
kind of shares issuable as a result of the merger or share exchange and by the
conversion of securities issued pursuant to the merger or share exchange or the
exercise of rights and warrants issued pursuant to the merger or share exchange
does not exceed the total number and kind of shares of the surviving or
acquiring corporation authorized by its articles of incorporation immediately
before the merger or share exchange. The GBCC and DGCL provisions concerning the
approval of the sale of all or substantially all of the assets of a corporation
are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the GBCC include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined in the DGCL and the
GBCC, "business combinations" generally encompass (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder, (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested shareholder of a substantial percentage of assets of the corporation,
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested shareholder,
except in certain circumstances, (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested shareholder, except
in certain circumstances or (v) any receipt by the interested shareholder of the
benefit of any loans, advances, guarantees, pledges or other financial benefits
(other than those expressly permitted in (i) through (iv) above) provided by or
through the corporation.
The DGCL defines an "interested stockholder" as any person who (i) is the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation and within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation. Under the
GBCC, an "interested shareholder" is any person who owns 10% of the outstanding
voting shares or is an affiliate of the corporation owning 10% of the
outstanding voting shares within the prior two years, and a "continuing
director" is a director not associated or affiliated with any interested
shareholder.
10
<PAGE> 683
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
According to the GBCC, if at least three continuing directors serve on the
board of directors, then those directors must unanimously approve the business
combination. If three continuing directors do not serve on the board of
directors, then 66 2/3% of the continuing directors must recommend the business
combination and a majority of shareholders entitled to cast a vote must approve
the business combination. Also, except under certain circumstances, no mergers
may occur between a corporation and an interested shareholder within five years
of the date the shareholder became an interested shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the GBCC provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The GBCC concerning preemptive rights is equivalent to the DGCL. The
Company Articles do not contain any provision with respect to preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the GBCC, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the
11
<PAGE> 684
purpose and the records the shareholder desires to inspect, (iii) the records
are directly connected with the purpose and (iv) the shareholder gives the
corporation written notice of the demand at least five business days before the
date on which the shareholder wishes to inspect and copy such records. Such
documents include: (i) excerpts from minutes of any meeting of the board of
directors, records of any action of a committee of the board of directors while
acting in place of the board of directors on behalf of the corporation, minutes
of any meeting of the shareholders and records of action taken by the
shareholders or board of directors without a meeting; (ii) accounting records of
the corporations; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the GBCC ("Article 13") has
the right to receive in cash the fair value of such Shareholder's shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN
ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
To exercise appraisal rights under Article 13, a holder of Common Stock
must (i) deliver to the Company before the taking of the vote of Shareholders on
the Reorganization Agreement written notice of his intent to demand payment for
his shares if the Merger is effected and (ii) not vote his shares in favor of
the Reorganization Agreement. A Shareholder who does not satisfy these two
requirements is not entitled to payment for his shares under Article 13. In
addition, any Shareholder who returns a signed proxy but fails to provide
instructions as to the manner in which such shares are to be voted will be
deemed to have voted in favor of the Reorganization Agreement and will not be
entitled to assert dissenters' rights of appraisal.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial Shareholder and he notifies the Company
in writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of such a partial dissenter are determined as if
the shares as to which he dissents and his other shares are registered in the
names of different Shareholders.
If the Reorganization Agreement is approved at the Special Meeting, the
Company must deliver a written dissenters' notice (the "Dissenters' Notice") to
all Shareholders who satisfied the notice requirements of Article 13. The
Dissenters' Notice must be sent within 10 days after the Effective Time and must
(i) state where the demand for payment must be sent and where and when
certificates for shares must be deposited, (ii) inform holders of uncertificated
shares to what extent transfer of those shares will be restricted after the
demand for payment is received, (iii) set a date by which the Company must
receive the demand for payment (which date may not be fewer than 30 nor more
than 60 days after the Dissenters' Notice is delivered) and (iv) be accompanied
by a copy of Article 13.
A record Shareholder who receives the Dissenters' Notice must demand
payment and deposit his certificates in accordance with the Dissenters' Notice.
Such Shareholder will retain all other rights of a Shareholder until those
rights are canceled or modified by the consummation of the Merger. A record
Shareholder who does not demand payment or deposit his share certificates where
required, each by the date set in the Dissenters' Notice, is not entitled to
payment for his shares under Article 13.
Within 10 days of the later of the Effective Time or receipt of a payment
demand, the Company must offer to pay each dissenting Shareholder who complied
with Article 13 the amount the Company estimates to be the fair value of his
shares, plus accrued interest from the Effective Time. Such offer of payment
must be accompanied by (i) certain recent Company financial statements, (ii) the
Company's estimate of the fair value of the shares and interest due, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Article 13 and (v) a copy of Article
13. If the Shareholder
12
<PAGE> 685
accepts the Company's offer by written notice to the Company within 30 days
after the Company's offer, the Company must make payment within 60 days after
the later of the making of the offer or the Effective Time.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing share certificates, the Company must return the
deposited certificates. If, after such return, the Merger is consummated, the
Company must send a new Dissenters' Notice and repeat the payment procedure
described above.
A dissenting Shareholder may notify the Company in writing of his own
estimate of the fair value of his shares and the interest due, and may demand
payment of his estimate, if (i) he believes that the amount offered by the
Company is less than the fair value of his shares or that the interest due has
been calculated incorrectly or (ii) the Company, having failed to consummate the
Merger, does not return the deposited certificates within 60 days after the date
set for demanding payment. A dissenting Shareholder waives his right to demand
payment unless he notifies the Company of his demand in writing within 30 days
after the Company makes or offers payment for his shares. If the Company does
not offer payment within 10 days of the later of the Effective Time or receipt
of a payment demand, then (i) the Shareholder may demand the financial
statements and other information of the Company, and the Company must provide
such information within 10 days after receipt of the written demand and (ii) the
Shareholder may notify the Company of his own estimate of the fair value of his
shares and the amount of interest due, and may demand payment of that estimate.
If a demand for payment by a Shareholder remains unsettled, the Company
must commence a nonjury equity valuation proceeding in the appropriate court, as
specified in Article 13, within 60 days after receiving the payment demand and
must petition the court to determine the fair value of the shares and accrued
interest. If the Company does not commence a valuation proceeding within 60
days, the Company is required to pay each dissenting Shareholder whose demand
remains unsettled, the amount demanded. The Company is required to make all
dissenting Shareholders whose demands remain unsettled parties to the proceeding
and to serve a copy of the petition upon each dissenting Shareholder. The court
may appoint appraisers to receive evidence and to recommend a decision on fair
value. Each dissenting Shareholder made a party to the proceeding is entitled to
judgment for the fair value of his shares plus interest to the date of judgment.
In an appraisal proceeding commenced under Article 13, the court must
determine the costs of the proceeding, excluding fees and expenses of attorneys
and experts for the respective parties, and must assess those costs against the
Company, except that the court may assess the costs against all or some of the
dissenting Shareholders to the extent the court finds they acted arbitrarily,
vexatiously or not in good faith in demanding payment under Article 13. The
court also may assess the fees and expenses of attorneys and experts for the
respective parties against the Company if the court finds the Company did not
substantially comply with the requirements of Article 13, or against either the
Company or a dissenting Shareholder if the court finds that such party acted
arbitrarily, vexatiously or not in good faith with respect to the rights
provided by Article 13.
If the court finds that the services of the attorneys for any dissenting
Shareholder were of substantial benefit to other dissenting Shareholders
similarly situated, and that the fees for those services should not be assessed
against the Company, the court may award those attorneys reasonable fees out of
the amounts awarded the dissenting Shareholders who were benefited. No action by
any dissenting Shareholder to enforce dissenters' rights may be brought more
than three years after the Effective Time, regardless of whether notice of the
Merger and of the right to dissent was given by the Company in compliance with
the provisions of Article 13.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated
13
<PAGE> 686
multiples and taking the highest of: (i) the Company's adjusted sales during the
period from February 4, 1996 to February 1, 1997 (the "Measurement Period")
multiplied by six-tenths, less Net Debt (calculated in accordance with Annex B
of this Prospectus Supplement under "Components of Net Debt (Cash) per
Shareholders' Statement") at the end of the Measurement Period; (ii) the
Company's adjusted earnings before interest, taxes, depreciation and
amortization ("EBITDA") during the Measurement Period multiplied by seven, less
Net Debt at the end of the Measurement Period; (iii) the Company's adjusted
earnings before interest and taxes ("EBIT") during the Measurement Period
multiplied by 10, less Net Debt at the end of the Measurement Period; (iv) the
Company's adjusted net income during the Measurement Period multiplied by 15;
and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $7,723,648 $7,723,648 0.6 $ (978,965) $5,613,153
EBITDA............... 808,322 808,322 7 (978,965) 6,637,219
EBIT................. 502,369 502,369 10 (978,965) 6,002,655
Net Income........... 366,057 366,057 15 -- 5,490,855
Book Equity.......... 5,184,698 5,184,375 1 -- 5,184,375
</TABLE>
14
<PAGE> 687
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
N/A N/A% X $ N/A = $ N/A
----------
Total $ N/A
==========
Relative Operating Value of Company $6,637,219
Relative Operating Value of Other Companies Owned by Company + --
----------
Total Relative Value of Company = $6,637,219
==========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk of La Grange,
Ga., Inc. 15.7753% X $6,637,219 = $1,047,042
----------
Total $1,047,042
==========
Total Relative Value of Company $6,637,219
Total Relative Value of Company Owned by Other Belk Companies - 1,047,042
----------
Net Relative Value of Company = $5,590,177
==========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$5,590,177 / $1,156,226,577 = .4835%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.4835% X 59,998,834) / 4,851.3333 = 59.7949
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
15
<PAGE> 688
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 63.55
Dividends(2).............................................. 12.50
Book value per share(3)................................... 900.12
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 57.40
Dividends(2).............................................. 15.55
Book value per share...................................... 748.63
</TABLE>
- ---------------
(1) Based on 5,760 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 5,760 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
16
<PAGE> 689
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 7,480 $ 7,620 $ 7,724
Net income.................................................. 186 186 366
Per common share
Net income (loss)(1)...................................... 32.32 32.29 63.55
Dividends................................................. 10.00 12.50 12.50
Book value(2)............................................. 829.28 849.07 900.12
Total assets................................................ 5,425 5,575 6,009
Shareholders' equity........................................ 4,777 4,891 5,185
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $5,298 $5,415
Income from operations...................................... 185 90
</TABLE>
- ---------------
(1) Based on 5,760 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the year ended January 31, 1995, February 3,
1996 and February 1, 1997.
(2) Based on 5,760 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
17
<PAGE> 690
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Dublin Mall in
Dublin, Georgia. The Company's store operates in a manner consistent with the
business of the Belk Companies described in the Proxy Statement/Prospectus. The
store is managed out of the Matthews group office in Macon, Georgia.
Facilities. The Company leases its store building, which contains
approximately 61,000 square feet of floor area. The current term of the lease
expires in 2007. The Company believes the building is adequate to meet its
current needs.
Competition. Specific competitors in the Company's market include
Wal-Mart, Penney and Goody's.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
18
<PAGE> 691
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(g).............................................. 1,553.33 27.0%
Thomas M. Belk, Jr. (Director and Executive Officer)
(a)(c).................................................... 1,242.67 21.6%
H. W. McKay Belk (Director and Executive Officer) (a)(c).... 1,242.67 21.6%
John R. Belk (Director and Executive Officer) (a)(c)........ 1,242.67 21.6%
Henderson Belk (Director) (b)............................... 80.00 1.4%
B. Frank Matthews, II (Director and Executive Officer)
(d)(e)(f)................................................. 970.67 16.9%
William M. Matthews, IV (Director and Executive Officer).... 960.00 16.7%
Katherine McKay Belk (a).................................... 334.00 5.8%
Katherine Belk Morris (a)................................... 334.00 5.8%
Sarah Belk Gambrell (b)..................................... 733.97 12.7%
Elizabeth Matthews Welton (d)(e)............................ 720.00 12.5%
Belk of LaGrange, Ga., Inc.................................. 908.67 15.8%
Robinson Investment Company................................. 400 6.9%
Elizabeth Matthews Welton Family Limited Partnership Phase
II........................................................ 320 5.6%
All Directors and Executive Officers as a group (7
persons).................................................. 3,784.00 65.7%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Katherine McKay Belk and Katherine Belk Morris -- 2801 West
Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk Gambrell -- 300 Cherokee
Road, Charlotte, N.C. 28207; B. Frank Matthews, II, Elizabeth Matthews Welton,
Elizabeth Matthews Welton Family Limited Partnership Phase II and Robinson
Investment Company -- 2240 Remount Road, Gastonia, N.C. 28053; William M.
Matthews, V -- 3661 Eisenhower Parkway, Macon, Ga. 31206; Belk of LaGrange, Ga.,
Inc. -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500.
All shares of common stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 234 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(b) Includes 80 shares held in several Trusts established by the Will of Mary I.
Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(c) Includes 908.67 shares held by Belk of LaGrange, Ga., Inc., which shares are
voted by the members of the Executive Committee of the Board of Directors of
such Corporation, under authority given by the directors of such Corporation
at the annual meeting of directors held in March, 1997. The Executive
19
<PAGE> 692
Committee of such Corporation consists of John M. Belk, Thomas M. Belk, Jr.,
H. W. McKay Belk and John R. Belk.
(d) Includes 320 shares held by Elizabeth Matthews Welton Family Limited
Partnership Phase II. Elizabeth M. Welton has voting and investment power
with respect to such shares.
(e) Includes 400 shares held by Robinson Investment Company. B. Frank Matthews,
II and Elizabeth M. Welton share the voting and investment power with
respect to such shares.
(f) Includes 160 shares held by First Union National Bank of N.C., B. Frank
Matthews, II and Annabelle Z. Royster, Co -- Trustees under the Will of J.
H. Matthews, Jr. The named Trustees have voting and investment power with
respect to such shares.
(g) Includes 50 shares held by Mary Claudia Belk Irrevocable Trust dated January
4, 1994. Claudia W. Belk, the Trustee, is John M. Belk's wife.
20
<PAGE> 693
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 694
BELK-MATTHEWS COMPANY OF DUBLIN, GEORGIA
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 118,299 $ 152,171
Accounts receivable, net.................................. 1,139,276 1,318,591
Merchandise inventory..................................... 1,534,865 1,761,179
Receivable from affiliates, net........................... 472,120 822,709
Deferred income taxes..................................... 25,390 11,887
Other..................................................... 992,995 940,014
---------- ----------
Total current assets........................................ 4,282,945 5,006,551
Loans receivable from affiliates, net....................... 4,274 4,274
Investments................................................. 324 324
Property, plant and equipment, net.......................... 1,259,295 974,492
Other noncurrent assets..................................... 28,289 23,516
---------- ----------
$5,575,127 $6,009,157
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 467,707 $ 481,264
Accrued income taxes...................................... 9,683 145,648
---------- ----------
Total current liabilities................................... 477,390 626,912
Deferred income taxes....................................... 180,595 165,980
Other noncurrent liabilities................................ 26,500 31,567
---------- ----------
Total liabilities........................................... 684,485 824,459
Shareholders' equity:
Common stock.............................................. 576,000 576,000
Retained earnings......................................... 4,314,642 4,608,698
---------- ----------
Total shareholders' equity.................................. 4,890,642 5,184,698
---------- ----------
$5,575,127 $6,009,157
========== ==========
</TABLE>
F-2
<PAGE> 695
BELK-MATTHEWS COMPANY OF DUBLIN, GEORGIA
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $7,480,265 $7,619,720 $7,723,647
Operating costs and expenses............................... 7,160,784 7,394,690 7,354,535
---------- ---------- ----------
Income from operations..................................... 319,481 225,030 369,112
---------- ---------- ----------
Other income (expense):
Interest, net............................................ 51,439 79,502 84,104
Gain (loss) on disposal of property, plant and
equipment............................................. 48 (785) --
Miscellaneous, net....................................... (2,347) 3,962 133,256
---------- ---------- ----------
Total other expense, net................................... 49,140 82,679 217,360
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 368,621 307,709 586,472
Income tax expense (benefit)............................... 182,481 121,736 220,416
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 186,140 185,973 366,056
---------- ---------- ----------
Net earnings............................................... 186,140 185,973 366,056
Retained earnings at beginning of period................... 4,072,129 4,200,669 4,314,642
Dividends paid............................................. (57,600) (72,000) (72,000)
---------- ---------- ----------
Retained earnings at end of period......................... $4,200,669 $4,314,642 $4,608,698
========== ========== ==========
</TABLE>
F-3
<PAGE> 696
BELK-MATTHEWS COMPANY OF DUBLIN, GEORGIA
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31. Fiscal years 1997, 1996 and 1995 ended on February 1, 1997, February
3, 1996 and January 31, 1995, respectively.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
F-4
<PAGE> 697
BELK-MATTHEWS COMPANY OF DUBLIN, GEORGIA
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements
F-5
<PAGE> 698
BELK-MATTHEWS COMPANY OF DUBLIN, GEORGIA
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
issued for all fiscal periods starting after December 15, 1995 and requires the
recognition of impairment losses on long-lived assets when book values exceed
expected future cash flows.
F-6
<PAGE> 699
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 14, CHAPTER 2
BUSINESS CORPORATIONS
STATE OF GEORGIA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
A-1
<PAGE> 700
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's right.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
A-2
<PAGE> 701
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
A-3
<PAGE> 702
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing
A-4
<PAGE> 703
under subsection (a) of this Code section within 30 days after the corporation
offered payment for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
A-5
<PAGE> 704
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
A-6
<PAGE> 705
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statement of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
---------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement.................... $7,723,648 $366,057 $502,369 $808,322 $5,184,698
Adjustments to eliminate less than wholly-owned
subsidiaries................................. -- -- -- -- --
---------- -------- -------- -------- ----------
Adjusted Shareholders' Statement............... $7,723,648 366,057 502,369 808,322 5,184,698
========== -------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E................ -- -- --
Gain/loss on sale of securities.............. -- -- --
Impairment loss.............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries............................... -- -- --
Gain/loss on discontinued operations......... -- -- --
Adjustment to tax expense.................... -- -- -- --
-------- -------- --------
Total non-operating items...................... -- -- --
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities.............................. -- -- --
Adjustment for ownership in other Belk
entities................................... (323)
-------- -------- -------- ----------
Per Model...................................... $366,057 $502,369 $808,322 $5,184,375
======== ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER SHAREHOLDERS'
STATEMENT
Assets
Cash & cash equivalents.................... $ (152,173)
Negative cash balances reclassified to
accounts payable......................... 191
Receivables from affiliates, net........... (822,709)
Loans receivable from affiliates, net...... (4,274)
Liabilities
Notes payable.............................. --
Current installments of long-term debt..... --
Current portion of obligations under
capital leases........................... --
Payables to affiliates, net................ --
Long-term debt, excluding current
installments............................. --
Obligations under capital leases, excluding
current portion.......................... --
Loans payable to affiliates, net........... --
----------
Net debt (cash)................................ (978,965)
Adjustments to eliminate less than wholly-owned
subsidiaries................................. --
----------
Per Model...................................... $ (978,965)
==========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 706
SUPPLEMENT NO. 14
<PAGE> 707
BELK-MATTHEWS COMPANY OF DUBLIN, GEORGIA
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 1:50 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
-------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 14
<PAGE> 708
BELK OF HARTWELL, GA., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk of Hartwell, Ga., Inc. (the "Company"), to
be held on April 15, 1998, at 4:10 p.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Georgia law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 27.4770 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 48,689 shares of New Belk Class A Common Stock which will
represent approximately 0.0812% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage paid
(15)
<PAGE> 709
envelope. If you plan to attend the Special Meeting, you may vote in person if
you wish, even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 710
BELK OF HARTWELL, GA., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK OF HARTWELL, GA., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk of Hartwell, Ga., Inc. (the "Company") will be held on April
15, 1998, at 4:10 p.m., local time, at the offices of Belk Stores Services,
Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for the
following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Georgia law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 27.4770 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 711
BELK OF HARTWELL, GA., INC.
SUPPLEMENT NO. 15
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 15 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK OF HARTWELL,
GA., INC. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE DISCUSSION IN
THE PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED HEREIN ASSUMES
THAT ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION. IF ANY ONE OR
MORE BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE INFORMATION
CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FORM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 16
SELECTED HISTORICAL FINANCIAL INFORMATION................... 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 18
BUSINESS OF THE COMPANY..................................... 18
SECURITY OWNERSHIP OF THE COMPANY........................... 19
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 712
THE COMPANY
The Company was incorporated as a Georgia corporation in 1933 as
Gallant-Belk Company. The Company changed its name to Belk of Hartwell, Ga.,
Inc. on July 23, 1997. The mailing address of the Company's principal executive
offices is 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, and its
telephone number at that address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 4:10 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under Georgia law),
will be converted, without any action on the part of the Shareholder, into the
right to receive 27.4770 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk (the "New Belk Class A Common Stock"). All
of the shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 2,400 shares of Common Stock
outstanding held of record by 17 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 73.3% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock
2
<PAGE> 713
vote in favor of the Merger, the vote of such persons, corporations and trusts
in favor of the Merger would be sufficient to approve the Merger under the
governing documents of the Company and applicable state law.
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Georgia Business Corporation Code (the "GBCC"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 2,400 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A
3
<PAGE> 714
Common Stock are convertible into New Belk Class B Common Stock, in whole or in
part, at any time and from time to time at the option of the holder, on the
basis of one share of New Belk Class B Common Stock for each share of New Belk
Class A Common Stock converted. Shares of New Belk Class A Common Stock held by
a New Belk Stockholder who is a Class A Permitted Holder will also automatically
convert into New Belk Class B Common Stock in the event that such New Belk
Stockholder no longer meets the requirements of a Class A Permitted Holder. New
Belk Class B Common Stock has no conversion rights. The Company Articles provide
for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the GBCC, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as the
effect of such distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to
4
<PAGE> 715
be less than the sum of its total liabilities plus (unless the articles of
incorporation permit otherwise) the amount that would be needed if the
corporation dissolved at the time of the payment of the dividend to satisfy the
preferential rights upon dissolution of shareholders whose preferential rights
are superior to those receiving the distribution. The Company Bylaws provide
that the Board of Directors of the Company (the "Company Board") may from time
to time declare dividends on the Company's outstanding shares in the manner and
upon the terms and conditions provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The GBCC permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 25%, or such
greater or lesser percentages as may be provided in the articles of
incorporation or bylaws, of all votes entitled to be cast on the proposed
corporate action to call a special meeting. The Company Bylaws authorize the
Chairman, President, Secretary, the Company Board and any Shareholder pursuant
to the written request of the holders of not less than 10% of all the shares
entitled to vote at the meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the GBCC, unless the articles of incorporation, the bylaws or
the provisions regarding meetings in the GBCC specify a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the shareholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
5
<PAGE> 716
Under the GBCC, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the GBCC
requires an amendment to the articles of incorporation to be recommended by the
board of directors to the shareholders and approved by a majority (unless the
articles of incorporation to or the board of directors requires a greater vote
or a vote by voting groups) of the votes entitled to be cast on the amendment by
any voting group. As under the DGCL, the holders of the outstanding shares of a
class or series are entitled to vote as a separate voting group (if shareholder
voting is otherwise required by the GBCC) on a proposed amendment if the
amendment would change certain fundamental rights and preferences of that class
or series. The Company Articles do not specify a greater vote or a vote by
voting groups to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the GBCC, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or the
GBCC reserves this power exclusively to the shareholders in whole or part or
(ii) the shareholders in amending or repealing a particular bylaw provided
expressly that the board of directors may not amend or repeal that bylaw. The
shareholders of the corporation may amend or repeal the bylaws of the
corporation even though such bylaws may be amended or repealed by the board of
directors of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board, or by the affirmative vote of a majority of the shares
outstanding and entitled to vote at any regular or special meeting of the
Shareholders. Further, the Company Bylaws provide that the Company Board has no
power to adopt a bylaw: (i) requiring more than a majority of the voting shares
for a quorum at a meeting of the Shareholders, except where higher percentages
are required by law; (ii) providing for the management of the Company otherwise
than by the Company Board or its executive committees; (iii) increasing or
decreasing the number of directors; or (iv) classifying and staggering the
election of directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the GBCC, any action that may be taken by an annual or special
meeting of shareholders may be taken without a meeting and without prior notice,
if all holders of outstanding shares entitled to vote on such action or, if so
provided in the articles of incorporation, by persons entitled to vote at a
meeting shares having voting power to cast not less than the minimum number (or
numbers, in the case of voting groups) of votes that would be necessary to
authorize or take the action at which all shareholders entitled to vote were
present and voted sign the written consent(s) describing such action. The
Company Bylaws permit any action which may be taken at a meeting of the
Shareholders to be taken without a meeting if a consent in writing, setting
forth the action so taken, is signed by all of the persons who would be entitled
to vote upon such action at a meeting and filed with the Secretary of the
Company.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be
6
<PAGE> 717
filled by a majority of the directors then in office, although less than a
quorum, or by a sole remaining director. If at the time of filling any vacancy
or newly created directorship, the directors then in office constitute less than
a majority of the whole board as constituted immediately prior to such increase,
the Delaware Court of Chancery may, upon application of stockholders holding at
least 10% of the total number of shares outstanding having the right to vote for
such directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation or a bylaw
approved by the shareholders, the GBCC permits a vacancy in the board of
directors to be filled by the shareholders or by the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board and if
the vacancy is one that the directors are authorized to fill, then the directors
may fill the vacancy by the affirmative vote of a majority of all the directors
remaining in office.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors may be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The GBCC requires a corporation to have at least one director. The articles
of incorporation or the bylaws may authorize the shareholders or the board of
directors to change the number of directors. If the articles of incorporation or
the bylaws establish a variable range for the size of directors, the number of
directors may be changed, within the prescribed range, by the shareholders or,
if the articles of incorporation so provide, by the board of directors. The
Company Bylaws require the Company Board to consist of at least three, but no
more than 15, directors.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
Under the GBCC, a director must be a natural person and at least 18 years
of age, but does not have to be a resident of Georgia or a shareholder of the
corporation unless otherwise provided for in the articles of incorporation. The
Company Articles do not require directors of the Company to be residents of
Georgia or
7
<PAGE> 718
shareholders of the Company. The GBCC also allows the articles of incorporation
or the bylaws to provide for additional qualifications of directors.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each class expiring at the
annual meeting in successive years beginning with the first class and
progressing to the third class, if any. Thereafter, directors are chosen for a
full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
Under the GBCC, the articles of incorporation may allow for staggering the
terms of directors by dividing the total number of directors into two or three
groups, with each group containing one-half or one-third of the total. The term
of each group expires in each successive year beginning with the first group and
progressing to the third group, if any. Thereafter, directors are chosen for a
term of two or three years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
According to the GBCC, unless the articles of incorporation or bylaws
provide that directors may be removed only for cause, the shareholders may
remove one or more directors with or without cause. If a director is elected by
a voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove him. If cumulative voting is not authorized, a
director may be removed only by a majority of votes entitled to be cast.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under both the DGCL and the GBCC, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the GBCC generally permits transactions involving a
Georgia corporation and an interested director of that corporation if: (i) the
transaction received the affirmative vote of a majority (but not less than two)
of those qualified directors on the board of directors or on a duly empowered
committee thereof who voted on the transaction after required disclosure to them
(ii) if a majority of the votes entitled to be cast by the holders of all
qualified shares were cast in favor of the transaction after (a) notice to
shareholders describing the director's conflicting interest transaction, (b)
provision of the information with
8
<PAGE> 719
regard to any unqualified shares and (c) required disclosure to the shareholders
who voted on the transaction (to the extent the information was not known by
them); or (iii) the transaction, judged in the circumstances at the time of
commitment, is established to have been fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the GBCC, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the GBCC (i) in connection with a
proceeding by or in the right of the corporation, except for reasonable expenses
incurred in connection with the proceeding if it is determined that the director
or officer has met the relevant standard of conduct under the GBCC or (ii) in
connection with any proceeding with respect to conduct for which he was adjudged
liable on the basis that personal benefit was improperly received by him,
whether or not involving action in his official capacity. A Georgia corporation
must indemnify a director or officer who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party because he
was a director or officer of the corporation against reasonable expenses
incurred by the director or officer in connection with the proceeding.
The Company Bylaws authorize indemnification as provided in the GBCC. In
addition, the Company Bylaws provide that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not
9
<PAGE> 720
indemnify a director or officer against liability or litigation expense that he
may incur on account of his activities which were, at the time taken, known or
believed by him to be clearly in conflict with the best interest of the Company.
The Company will likewise and to the same extent indemnify any person who, at
the request of the Company, is or was serving as a director or as an officer of
another corporation, joint venture, trust or other enterprise, as a partner of a
partnership or as a trustee or administrator under an employee benefit plan. The
Company will also indemnify a director or officer for reasonable costs, expenses
and attorneys' fees in connection with the enforcement of rights to
indemnification granted therein, if it is so determined in accordance with the
Company Articles that the director or officer is entitled to indemnification
thereunder. The Company Articles provide that to the fullest extent permitted by
the GBCC, a director will not be personally liable to the Company or any of its
Shareholders or otherwise for monetary damages for breach of duty of care or
other duty as a director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The GBCC concerning the approval of mergers and share exchanges is similar
in all material respects to the DGCL, except action by the shareholders of the
surviving corporation is not required if the number and kind of shares
outstanding immediately after the merger or share exchange, plus the number and
kind of shares issuable as a result of the merger or share exchange and by the
conversion of securities issued pursuant to the merger or share exchange or the
exercise of rights and warrants issued pursuant to the merger or share exchange
does not exceed the total number and kind of shares of the surviving or
acquiring corporation authorized by its articles of incorporation immediately
before the merger or share exchange. The GBCC and DGCL provisions concerning the
approval of the sale of all or substantially all of the assets of a corporation
are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the GBCC include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined in the DGCL and the
GBCC, "business combinations" generally encompass (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder, (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested shareholder of a substantial percentage of assets of the corporation,
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested shareholder,
except in certain circumstances, (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested shareholder, except
in certain circumstances or (v) any receipt by the interested shareholder of the
benefit of any loans, advances, guarantees, pledges or other financial benefits
(other than those expressly permitted in (i) through (iv) above) provided by or
through the corporation.
The DGCL defines an "interested stockholder" as any person who (i) is the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation and within three years of the date in
question was the direct
10
<PAGE> 721
or indirect owner of at least 15% of the voting power of any class or series of
the then outstanding stock of the corporation. Under the GBCC, an "interested
shareholder" is any person who owns 10% of the outstanding voting shares or is
an affiliate of the corporation owning 10% of the outstanding voting shares
within the prior two years, and a "continuing director" is a director not
associated or affiliated with any interested shareholder.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
According to the GBCC, if at least three continuing directors serve on the
board of directors, then those directors must unanimously approve the business
combination. If three continuing directors do not serve on the board of
directors, then 66 2/3% of the continuing directors must recommend the business
combination and a majority of shareholders entitled to cast a vote must approve
the business combination. Also, except under certain circumstances, no mergers
may occur between a corporation and an interested shareholder within five years
of the date the shareholder became an interested shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the GBCC provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The GBCC concerning preemptive rights is equivalent to the DGCL. The
Company Articles do not contain any provision with respect to preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other
11
<PAGE> 722
books and records and to make copies or extracts therefrom. A proper purpose
means a purpose reasonably related to such person's interest as a stockholder.
Pursuant to the GBCC, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) excerpts from minutes of any
meeting of the board of directors, records of any action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporations; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the GBCC ("Article 13") has
the right to receive in cash the fair value of such Shareholder's shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN
ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
To exercise appraisal rights under Article 13, a holder of Common Stock
must (i) deliver to the Company before the taking of the vote of Shareholders on
the Reorganization Agreement written notice of his intent to demand payment for
his shares if the Merger is effected and (ii) not vote his shares in favor of
the Reorganization Agreement. A Shareholder who does not satisfy these two
requirements is not entitled to payment for his shares under Article 13. In
addition, any Shareholder who returns a signed proxy but fails to provide
instructions as to the manner in which such shares are to be voted will be
deemed to have voted in favor of the Reorganization Agreement and will not be
entitled to assert dissenters' rights of appraisal.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial Shareholder and he notifies the Company
in writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of such a partial dissenter are determined as if
the shares as to which he dissents and his other shares are registered in the
names of different Shareholders.
If the Reorganization Agreement is approved at the Special Meeting, the
Company must deliver a written dissenters' notice (the "Dissenters' Notice") to
all Shareholders who satisfied the notice requirements of Article 13. The
Dissenters' Notice must be sent within 10 days after the Effective Time and must
(i) state where the demand for payment must be sent and where and when
certificates for shares must be deposited, (ii) inform holders of uncertificated
shares to what extent transfer of those shares will be restricted after the
demand for payment is received, (iii) set a date by which the Company must
receive the demand for payment (which date may not be fewer than 30 nor more
than 60 days after the Dissenters' Notice is delivered) and (iv) be accompanied
by a copy of Article 13.
A record Shareholder who receives the Dissenters' Notice must demand
payment and deposit his certificates in accordance with the Dissenters' Notice.
Such Shareholder will retain all other rights of a Shareholder until those
rights are canceled or modified by the consummation of the Merger. A record
Shareholder who does not demand payment or deposit his share certificates where
required, each by the date set in the Dissenters' Notice, is not entitled to
payment for his shares under Article 13.
12
<PAGE> 723
Within 10 days of the later of the Effective Time or receipt of a payment
demand, the Company must offer to pay each dissenting Shareholder who complied
with Article 13 the amount the Company estimates to be the fair value of his
shares, plus accrued interest from the Effective Time. Such offer of payment
must be accompanied by (i) certain recent Company financial statements, (ii) the
Company's estimate of the fair value of the shares and interest due, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Article 13 and (v) a copy of Article
13. If the Shareholder accepts the Company's offer by written notice to the
Company within 30 days after the Company's offer, the Company must make payment
within 60 days after the later of the making of the offer or the Effective Time.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing share certificates, the Company must return the
deposited certificates. If, after such return, the Merger is consummated, the
Company must send a new Dissenters' Notice and repeat the payment procedure
described above.
A dissenting Shareholder may notify the Company in writing of his own
estimate of the fair value of his shares and the interest due, and may demand
payment of his estimate, if (i) he believes that the amount offered by the
Company is less than the fair value of his shares or that the interest due has
been calculated incorrectly or (ii) the Company, having failed to consummate the
Merger, does not return the deposited certificates within 60 days after the date
set for demanding payment. A dissenting Shareholder waives his right to demand
payment unless he notifies the Company of his demand in writing within 30 days
after the Company makes or offers payment for his shares. If the Company does
not offer payment within 10 days of the later of the Effective Time or receipt
of a payment demand, then (i) the Shareholder may demand the financial
statements and other information of the Company, and the Company must provide
such information within 10 days after receipt of the written demand and (ii) the
Shareholder may notify the Company of his own estimate of the fair value of his
shares and the amount of interest due, and may demand payment of that estimate.
If a demand for payment by a Shareholder remains unsettled, the Company
must commence a nonjury equity valuation proceeding in the appropriate court, as
specified in Article 13, within 60 days after receiving the payment demand and
must petition the court to determine the fair value of the shares and accrued
interest. If the Company does not commence a valuation proceeding within 60
days, the Company is required to pay each dissenting Shareholder whose demand
remains unsettled, the amount demanded. The Company is required to make all
dissenting Shareholders whose demands remain unsettled parties to the proceeding
and to serve a copy of the petition upon each dissenting Shareholder. The court
may appoint appraisers to receive evidence and to recommend a decision on fair
value. Each dissenting Shareholder made a party to the proceeding is entitled to
judgment for the fair value of his shares plus interest to the date of judgment.
In an appraisal proceeding commenced under Article 13, the court must
determine the costs of the proceeding, excluding fees and expenses of attorneys
and experts for the respective parties, and must assess those costs against the
Company, except that the court may assess the costs against all or some of the
dissenting Shareholders to the extent the court finds they acted arbitrarily,
vexatiously or not in good faith in demanding payment under Article 13. The
court also may assess the fees and expenses of attorneys and experts for the
respective parties against the Company if the court finds the Company did not
substantially comply with the requirements of Article 13, or against either the
Company or a dissenting Shareholder if the court finds that such party acted
arbitrarily, vexatiously or not in good faith with respect to the rights
provided by Article 13.
If the court finds that the services of the attorneys for any dissenting
Shareholder were of substantial benefit to other dissenting Shareholders
similarly situated, and that the fees for those services should not be assessed
against the Company, the court may award those attorneys reasonable fees out of
the amounts awarded the dissenting Shareholders who were benefited. No action by
any dissenting Shareholder to enforce dissenters' rights may be brought more
than three years after the Effective Time, regardless of whether notice of the
Merger and of the right to dissent was given by the Company in compliance with
the provisions of Article 13.
13
<PAGE> 724
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales.................... $1,829,467 $1,829,467 0.6 $ (128,033) $1,225,713
EBITDA....................... 124,518 123,878 7 (128,033) 995,179
EBIT......................... 72,493 71,853 10 (128,033) 846,563
Net Income................... 53,465 52,924 15 -- 793,860
Book Equity.................. 1,089,699 1,081,427 1 -- 1,081,427
</TABLE>
14
<PAGE> 725
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk of Elberton,
Ga., Inc. 2.7128% X $ 1,662,410 = $ 45,098
-----------
Total $ 45,098
===========
Relative Operating Value of Company $ 1,225,713
Relative Operating Value of Other Companies Owned by Company + 45,098
-----------
Total Relative Value of Company = $ 1,270,811
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Gallant-Belk Company 6.1667% X $ 1,270,811 = $ 78,367
Belk Brothers Company 15.1667% X 1,270,811 = 192,740
Belk of Dalton, Ga.,
Inc. 4.8333% X 1,270,811 = 61,422
-----------
Total $ 332,529
===========
Total Relative Value of Company $ 1,270,811
Total Relative Value of Company Owned by Other Belk Companies - 332,529
-----------
Net Relative Value of Company = $ 938,282
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 938,282 / $1,156,226,577 = .0812%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.0812% X 59,998,834) / 1,772 = 27.4770
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
15
<PAGE> 726
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 22.28
Dividends(2).............................................. 10.00
Book value per share(3)................................... 454.04
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 26.38
Dividends(2).............................................. 7.14
Book value per share...................................... 344.01
</TABLE>
- ---------------
(1) Based on 2,400 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 2,400 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
16
<PAGE> 727
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 1,051 $ 1,305 $ 1,829
Net income.................................................. 39 19 53
Per common share
Net income (loss)(1)...................................... 16.30 8.10 22.28
Dividends................................................. 10.00 10.00 10.00
Book value(2)............................................. 443.67 441.76 454.04
Total assets................................................ 1,115 1,167 1,335
Shareholders' equity........................................ 1,065 1,060 1,090
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $1,263 $1,340
Income from operations...................................... 47 91
</TABLE>
- ---------------
(1) Based on 2,400 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 2,400 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
17
<PAGE> 728
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
To the extent a discussion of the financial condition and results of
operations of the Company for any of the fiscal years ended January 31, 1995,
February 3, 1996 or February 1, 1997 or for either of the nine-month periods
ended November 2, 1996 or November 1, 1997 is necessary to identify certain
trends or conditions that differ from the combined Belk Companies and that are
material to Shareholders' understanding of the financial condition or results of
operations of the Company, such discussion is included below. The discussion
which follows is based upon and should be read in conjunction with the
historical financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus Supplement.
The revenue increase in fiscal year 1997 and the increase for the nine
months ended November 1, 1997 is attributable to the relocation of the store in
December of fiscal year 1996 increasing square footage by 21%.
Other income (expense), net was composed primarily of interest income in
fiscal year 1995. The income was eliminated when the excess cash was used to
fund capital expenditures related to the store relocation.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Adams Square in
Hartwell, Georgia. The Company's store operates in a manner consistent with the
business of the Belk Companies described in the Proxy Statement/Prospectus. The
store is managed out of the Long group office in Anderson, South Carolina.
Facilities. The Company leases its store building, which contains
approximately 21,000 square feet of floor area. The current term of the lease
expires in 2003. The Company believes the building is adequate to meet its
current needs.
Competitor. The Company's principal competitor in the market is Wal-Mart.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
18
<PAGE> 729
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d).............................................. 1,580.00 65.8%
Thomas M. Belk, Jr. (Director and Executive Officer)
(a)(c)(d)................................................. 1,157.33 48.2%
H. W. McKay Belk (Director and Executive Officer)
(a)(c)(d)................................................. 1,161.33 48.4%
John R. Belk (Director and Executive Officer) (a)(c)(d)..... 1,157.33 48.0%
Henderson Belk (Director) (b)............................... 8.00 *
Sarah Belk Gambrell (b)..................................... 344.00 14.3%
Sally Gambrell Knight....................................... 148 6.2%
Leroy Robinson (Director) (a)............................... 471.33 19.6%
B. Neal Long (Director and Executive Officer)............... 0 *
Katherine McKay Belk (a).................................... 471.33 19.6%
Katherine Belk Morris (a)................................... 533.33 22.2%
Thomas M. Belk, Trustee U/A dated September 15, 1993........ 471.33 19.6%
J.V. Properties............................................. 364 15.2%
Gallant-Belk Company........................................ 148 6.2%
All Directors and Executive Officers as a group (7
persons).................................................. 1,758 73.3%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson, Katherine McKay Belk and Katherine Belk
Morris -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk
Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207; Sarah Gambrell
Knight -- 810 Colville Road, Charlotte, N.C. 28207; B. Neal Long -- 3101 N. Main
Street, Anderson, S.C. 29621; Thomas M. Belk, Trustee U/A dated September 15,
1993, J.V. Properties and Gallant-Belk Company -- 2801 West Tyvola Road,
Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 471.33 shares held by Thomas M. Belk, Trustee U/A dated September
15, 1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(b) Includes 8 shares held in several Trusts established by the Will of Mary I.
Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(c) Includes 148 shares held by Gallant-Belk Company and 116 shares held by
Belk of Dalton, Ga., Inc., which shares are voted by the members of the
Executive Committee of the Board of Directors of each such Corporation,
under authority given by the directors of each such Corporation at the
annual meeting
19
<PAGE> 730
of directors held in March, 1997. The Executive Committee of each such
Corporation consists of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk.
(d) Includes 364 shares held by J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
20
<PAGE> 731
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 732
BELK OF HARTWELL, GA., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 49,617 $ 22,769
Accounts receivable, net.................................. 200,999 280,091
Merchandise inventory..................................... 279,385 376,051
Receivable from affiliates, net........................... 2,375 --
Refundable income taxes................................... 1,864 --
Deferred income taxes..................................... 1,881 --
Other..................................................... 24,744 17,445
---------- ----------
Total current assets........................................ 560,865 696,356
Loans receivable from affiliates, net....................... 136,102 106,102
Investments................................................. 8,272 8,272
Property, plant and equipment, net.......................... 451,857 514,365
Deferred income taxes....................................... -- 721
Other noncurrent assets..................................... 9,783 8,868
---------- ----------
$1,166,879 $1,334,684
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 94,405 $ 105,291
Payables to affiliates, net............................... -- 838
Deferred income taxes..................................... -- 3,460
Accrued income taxes...................................... -- 8,668
---------- ----------
Total current liabilities................................... 94,405 118,257
Deferred income taxes....................................... 2,325 --
Other noncurrent liabilities................................ 9,915 11,343
---------- ----------
Total liabilities........................................... 106,645 129,600
Deferred income............................................. -- 115,385
Shareholders' equity:
Common stock.............................................. 240,000 240,000
Retained earnings......................................... 820,234 849,699
---------- ----------
Total shareholders' equity.................................. 1,060,234 1,089,699
---------- ----------
$1,166,879 $1,334,684
========== ==========
</TABLE>
F-2
<PAGE> 733
BELK OF HARTWELL, GA., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
---------------- ---------------- ----------------
<S> <C> <C> <C>
Net sales................................................... 1,051,109 1,305,000 1,829,467
Operating costs and expenses................................ 1,019,968 1,287,331 1,758,118
--------- --------- ---------
Income from operations...................................... 31,141 17,669 71,349
--------- --------- ---------
Other income (expense):
Interest, net............................................. 18,578 27,155 (9,287)
Dividend income........................................... 240 880 640
Gain (loss) on disposal of property, plant and
equipment.............................................. -- (22,869) --
Miscellaneous, net........................................ (292) 663 503
--------- --------- ---------
Total other expense, net.................................... 18,526 5,829 (8,144)
--------- --------- ---------
Earnings from continuing operations before income taxes, and
equity in earnings of unconsolidated entities............. 49,667 23,498 63,205
Income tax expense (benefit)................................ 10,557 4,061 9,740
--------- --------- ---------
Earnings from continuing operations before equity in
earnings of unconsolidated entities....................... 39,110 19,437 53,465
--------- --------- ---------
Net earnings................................................ 39,110 19,437 53,465
Retained earnings at beginning of period.................... 809,687 824,797 820,234
Dividends paid.............................................. (24,000) (24,000) (24,000)
--------- --------- ---------
Retained earnings at end of period.......................... 824,797 820,234 849,699
========= ========= =========
</TABLE>
F-3
<PAGE> 734
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 735
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 736
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 14, CHAPTER 2
BUSINESS CORPORATIONS
STATE OF GEORGIA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
A-1
<PAGE> 737
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's right.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
A-2
<PAGE> 738
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
A-3
<PAGE> 739
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing
A-4
<PAGE> 740
under subsection (a) of this Code section within 30 days after the corporation
offered payment for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
A-5
<PAGE> 741
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
A-6
<PAGE> 742
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................... $ 1,829,467 $ 53,465 $ 72,493 $124,518 $1,089,699
Adjustments to eliminate less than
wholly-owned subsidiaries................... -- -- -- -- --
----------- -------- -------- -------- ----------
Adjusted Shareholders' Statement.............. $ 1,829,467 53,465 72,493 124,518 1,089,699
=========== -------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............... -- -- --
Gain/loss on sale of securities............. -- -- --
Impairment loss............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries.............................. -- -- --
Gain/loss on discontinued operations........ -- -- --
Adjustment to tax expense................... -- -- -- --
-------- -------- --------
Total non-operating items..................... -- -- --
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities............................. (541) (641) (641)
Adjustment for ownership in other Belk
entities.................................. (8,272)
-------- -------- -------- ----------
Per Model..................................... $ 52,924 $ 71,853 $123,878 $1,081,427
======== ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................... $ (22,769)
Negative cash balances reclassified to
accounts payable........................ --
Receivables from affiliates, net.......... --
Loans receivable from affiliates, net..... (106,102)
Liabilities
Notes payable............................. --
Current installments of long-term debt.... --
Current portion of obligations under
capital leases.......................... --
Payables to affiliates, net............... 838
Long-term debt, excluding current
installments............................ --
Obligations under capital leases,
excluding current portion............... --
Loans payable to affiliates, net.......... --
-----------
Net debt (cash)............................... (128,033)
Adjustments to eliminate less than
wholly-owned subsidiaries................... --
-----------
Per Model..................................... $ (128,033)
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 743
SUPPLEMENT NO. 15
<PAGE> 744
BELK OF HARTWELL, GA., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 4:10 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: 1998
-------------------,
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 15
<PAGE> 745
BELK OF LAGRANGE, GA., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk of LaGrange, Ga., Inc. (the "Company"), to
be held on April 15, 1998, at 3:20 p.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $1.00 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Georgia law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 0.3852 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 712,547 shares of New Belk Class A Common Stock which will
represent approximately 1.1877% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage paid
(16)
<PAGE> 746
envelope. If you plan to attend the Special Meeting, you may vote in person if
you wish, even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 747
BELK OF LAGRANGE, GA., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK OF LAGRANGE, GA., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk of LaGrange, Ga., Inc. (the "Company") will be held on April
15, 1998, at 3:20 a.m., local time, at the offices of Belk Stores Services,
Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for the
following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $1.00 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Georgia law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 0.3852 shares of Class A Common Stock, par value $.01 per share, of
New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 748
BELK OF LAGRANGE, GA., INC.
SUPPLEMENT NO. 16
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 16 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK OF LAGRANGE,
GA., INC. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE DISCUSSION IN
THE PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED HEREIN ASSUMES
THAT ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION. IF ANY ONE OR
MORE BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE INFORMATION
CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 749
THE COMPANY
The Company was incorporated as a Georgia corporation in 1935 as
Gallant-Belk Company. The Company changed its name to Belk of LaGrange, Ga.,
Inc. on July 23, 1997. The mailing address of the Company's principal executive
offices is 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, and its
telephone number at that address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 3:20 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $1.00 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under Georgia law),
will be converted, without any action on the part of the Shareholder, into the
right to receive 0.3852 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk (the "New Belk Class A Common Stock"). All
of the shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 3,403,654 shares of Common Stock
outstanding held of record by 58 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 72.6% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock
2
<PAGE> 750
vote in favor of the Merger, the vote of such persons, corporations and trusts
in favor of the Merger would be sufficient to approve the Merger under the
governing documents of the Company and applicable state law.
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization--Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Georgia Business Corporation Code (the "GBCC"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 3,500,000 shares
of Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A
3
<PAGE> 751
Common Stock are convertible into New Belk Class B Common Stock, in whole or in
part, at any time and from time to time at the option of the holder, on the
basis of one share of New Belk Class B Common Stock for each share of New Belk
Class A Common Stock converted. Shares of New Belk Class A Common Stock held by
a New Belk Stockholder who is a Class A Permitted Holder will also automatically
convert into New Belk Class B Common Stock in the event that such New Belk
Stockholder no longer meets the requirements of a Class A Permitted Holder. New
Belk Class B Common Stock has no conversion rights. The Company Articles provide
for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the GBCC, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as the
effect of such distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to
4
<PAGE> 752
be less than the sum of its total liabilities plus (unless the articles of
incorporation permit otherwise) the amount that would be needed if the
corporation dissolved at the time of the payment of the dividend to satisfy the
preferential rights upon dissolution of shareholders whose preferential rights
are superior to those receiving the distribution. The Company Bylaws provide
that the Board of Directors of the Company (the "Company Board") may from time
to time declare dividends on the Company's outstanding shares in the manner and
upon the terms and conditions provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The GBCC permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 25%, or such
greater or lesser percentages as may be provided in the articles of
incorporation or bylaws, of all votes entitled to be cast on the proposed
corporate action to call a special meeting. The Company Bylaws authorize the
Chairman, President, Secretary, the Company Board and any Shareholder pursuant
to the written request of the holders of not less than 10% of all the shares
entitled to vote at the meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the GBCC, unless the articles of incorporation, the bylaws or
the provisions regarding meetings in the GBCC specify a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the shareholders. The Company Articles specify that to liquidate and
discontinue the business of the Company requires a two-thirds vote.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
5
<PAGE> 753
Under the GBCC, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the GBCC
requires an amendment to the articles of incorporation to be recommended by the
board of directors to the shareholders and approved by a majority (unless the
articles of incorporation or the board of directors requires a greater vote or a
vote by voting groups) of the votes entitled to be cast on the amendment by any
voting group. As under the DGCL, the holders of the outstanding shares of a
class or series are entitled to vote as a separate voting group (if shareholder
voting is otherwise required by the GBCC) on a proposed amendment if the
amendment would change certain fundamental rights and preferences of that class
or series. The Company Articles do not specify a greater vote or a vote by
voting groups to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the GBCC, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or the
GBCC reserves this power exclusively to the shareholders in whole or part or
(ii) the shareholders in amending or repealing a particular bylaw provided
expressly that the board of directors may not amend or repeal that bylaw. The
shareholders of the corporation may amend or repeal the bylaws of the
corporation even though such bylaws may be amended or repealed by the board of
directors of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board, or by the affirmative vote of a majority of the shares
outstanding and entitled to vote at any regular or special meeting of the
Shareholders. Further, the Company Bylaws provide that the Company Board has no
power to adopt a bylaw: (i) requiring more than a majority of the voting shares
for a quorum at a meeting of the Shareholders, except where higher percentages
are required by law; (ii) providing for the management of the Company otherwise
than by the Company Board or its executive committees; (iii) increasing or
decreasing the number of directors; or (iv) classifying and staggering the
election of directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the GBCC, any action that may be taken by an annual or special
meeting of shareholders may be taken without a meeting and without prior notice,
if all holders of outstanding shares entitled to vote on such action or, if so
provided in the articles of incorporation, by persons entitled to vote at a
meeting shares having voting power to cast not less than the minimum number (or
numbers, in the case of voting groups) of votes that would be necessary to
authorize or take the action at which all shareholders entitled to vote were
present and voted sign the written consent(s) describing such action. The
Company Bylaws permit any action which may be taken at a meeting of the
Shareholders to be taken without a meeting if a consent in writing, setting
forth the action so taken, is signed by all of the persons who would be entitled
to vote upon such action at a meeting and filed with the Secretary of the
Company.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
6
<PAGE> 754
If at the time of filling any vacancy or newly created directorship, the
directors then in office constitute less than a majority of the whole board as
constituted immediately prior to such increase, the Delaware Court of Chancery
may, upon application of stockholders holding at least 10% of the total number
of shares outstanding having the right to vote for such directors, order an
election to be held to fill any such vacancies or newly created directorships or
to replace the directors chosen by the directors then in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation or a bylaw
approved by the shareholders, the GBCC permits a vacancy in the board of
directors to be filled by the shareholders or by the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board and if
the vacancy is one that the directors are authorized to fill, then the directors
may fill the vacancy by the affirmative vote of a majority of all the directors
remaining in office.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors may be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of Directors of New Belk then in office.
The GBCC requires a corporation to have at least one director. The articles
of incorporation or the bylaws may authorize the shareholders or the board of
directors to change the number of directors. If the articles of incorporation or
the bylaws establish a variable range for the size of directors, the number of
directors may be changed, within the prescribed range, by the shareholders or,
if the articles of incorporation so provide, by the board of directors. The
Company Bylaws require the Company Board to consist of at least three, but no
more than 15, directors.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
Under the GBCC, a director must be a natural person and at least 18 years
of age, but does not have to be a resident of Georgia or a shareholder of the
corporation unless otherwise provided for in the articles of incorporation. The
Company Articles do not require directors of the Company to be residents of
Georgia or
7
<PAGE> 755
shareholders of the Company. The GBCC also allows the articles of incorporation
or the bylaws to provide for additional qualifications of directors.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each class expiring at the
annual meeting in successive years beginning with the first class and
progressing to the third class, if any. Thereafter, directors are chosen for a
full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
Under the GBCC, the articles of incorporation may allow for staggering the
terms of directors by dividing the total number of directors into two or three
groups, with each group containing one-half or one-third of the total. The term
of each group expires in each successive year beginning with the first group and
progressing to the third group, if any. Thereafter, directors are chosen for a
term of two or three years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
According to the GBCC, unless the articles of incorporation or bylaws
provide that directors may be removed only for cause, the shareholders may
remove one or more directors with or without cause. If a director is elected by
a voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove him. If cumulative voting is not authorized, a
director may be removed only by a majority of votes entitled to be cast.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under both the DGCL and the GBCC, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the GBCC generally permits transactions involving a
Georgia corporation and an interested director of that corporation if: (i) the
transaction received the affirmative vote of a majority (but not less than two)
of those qualified directors on the board of directors or on a duly empowered
committee thereof who voted on the transaction after required disclosure to
them; (ii) if a majority of the votes entitled to be cast by the holders of all
qualified shares were cast in favor of the transaction after (a) notice to
shareholders describing the director's conflicting interest transaction, (b)
provision of the information with
8
<PAGE> 756
regard to any unqualified shares and (c) required disclosure to the shareholders
who voted on the transaction (to the extent the information was not known by
them); or (iii) the transaction, judged in the circumstances at the time of
commitment, is established to have been fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the GBCC, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the GBCC (i) in connection with a
proceeding by or in the right of the corporation, except for reasonable expenses
incurred in connection with the proceeding if it is determined that the director
or officer has met the relevant standard of conduct under the GBCC or (ii) in
connection with any proceeding with respect to conduct for which he was adjudged
liable on the basis that personal benefit was improperly received by him,
whether or not involving action in his official capacity. A Georgia corporation
must indemnify a director or officer who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party because he
was a director or officer of the corporation against reasonable expenses
incurred by the director or officer in connection with the proceeding.
The Company Bylaws authorize indemnification as provided in the GBCC. In
addition, the Company Bylaws provide that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not
9
<PAGE> 757
indemnify a director or officer against liability or litigation expense that he
may incur on account of his activities which were, at the time taken, known or
believed by him to be clearly in conflict with the best interest of the Company.
The Company will likewise and to the same extent indemnify any person who, at
the request of the Company, is or was serving as a director or as an officer of
another corporation, joint venture, trust or other enterprise, as a partner of a
partnership or as a trustee or administrator under an employee benefit plan. The
Company will also indemnify a director or officer for reasonable costs, expenses
and attorneys' fees in connection with the enforcement of rights to
indemnification granted therein, if it is so determined in accordance with the
Company Articles that the director or officer is entitled to indemnification
thereunder. The Company Articles provide that to the fullest extent permitted by
the GBCC, a director will not be personally liable to the Company or any of its
Shareholders or otherwise for monetary damages for breach of duty of care or
other duty as a director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The GBCC concerning the approval of mergers and share exchanges is similar
in all material respects to the DGCL, except action by the shareholders of the
surviving corporation is not required if the number and kind of shares
outstanding immediately after the merger or share exchange, plus the number and
kind of shares issuable as a result of the merger or share exchange and by the
conversion of securities issued pursuant to the merger or share exchange or the
exercise of rights and warrants issued pursuant to the merger or share exchange
does not exceed the total number and kind of shares of the surviving or
acquiring corporation authorized by its articles of incorporation immediately
before the merger or share exchange. The GBCC and DGCL provisions concerning the
approval of the sale of all or substantially all of the assets of a corporation
are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the GBCC include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined in the DGCL and the
GBCC, "business combinations" generally encompass (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder, (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested shareholder of a substantial percentage of assets of the corporation,
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested shareholder,
except in certain circumstances, (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested shareholder, except
in certain circumstances or (v) any receipt by the interested shareholder of the
benefit of any loans, advances, guarantees, pledges or other financial benefits
(other than those expressly permitted in (i) through (iv) above) provided by or
through the corporation.
The DGCL defines an "interested stockholder" as any person who (i) is the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation and within three years of the date in
question was the direct
10
<PAGE> 758
or indirect owner of at least 15% of the voting power of any class or series of
the then outstanding stock of the corporation. Under the GBCC, an "interested
shareholder" is any person who owns 10% of the outstanding voting shares or is
an affiliate of the corporation owning 10% of the outstanding voting shares
within the prior two years, and a "continuing director" is a director not
associated or affiliated with any interested shareholder.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (a) by persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
According to the GBCC, if at least three continuing directors serve on the
board of directors, then those directors must unanimously approve the business
combination. If three continuing directors do not serve on the board of
directors, then 66 2/3% of the continuing directors must recommend the business
combination and a majority of shareholders entitled to cast a vote must approve
the business combination. Also, except under certain circumstances, no mergers
may occur between a corporation and an interested shareholder within five years
of the date the shareholder became an interested shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the GBCC provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The GBCC concerning preemptive rights is equivalent to the DGCL. The
Company Articles do not contain any provision with respect to preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other
11
<PAGE> 759
books and records and to make copies or extracts therefrom. A proper purpose
means a purpose reasonably related to such person's interest as a stockholder.
Pursuant to the GBCC, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) excerpts from minutes of any
meeting of the board of directors, records of any action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporations; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the GBCC ("Article 13") has
the right to receive in cash the fair value of such Shareholder's shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN
ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
To exercise appraisal rights under Article 13, a holder of Common Stock
must (i) deliver to the Company before the taking of the vote of Shareholders on
the Reorganization Agreement written notice of his intent to demand payment for
his shares if the Merger is effected and (ii) not vote his shares in favor of
the Reorganization Agreement. A Shareholder who does not satisfy these two
requirements is not entitled to payment for his shares under Article 13. In
addition, any Shareholder who returns a signed proxy but fails to provide
instructions as to the manner in which such shares are to be voted will be
deemed to have voted in favor of the Reorganization Agreement and will not be
entitled to assert dissenters' rights of appraisal.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial Shareholder and he notifies the Company
in writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of such a partial dissenter are determined as if
the shares as to which he dissents and his other shares are registered in the
names of different Shareholders.
If the Reorganization Agreement is approved at the Special Meeting, the
Company must deliver a written dissenters' notice (the "Dissenters' Notice") to
all Shareholders who satisfied the notice requirements of Article 13. The
Dissenters' Notice must be sent within 10 days after the Effective Time and must
(i) state where the demand for payment must be sent and where and when
certificates for shares must be deposited, (ii) inform holders of uncertificated
shares to what extent transfer of those shares will be restricted after the
demand for payment is received, (iii) set a date by which the Company must
receive the demand for payment (which date may not be fewer than 30 nor more
than 60 days after the Dissenters' Notice is delivered) and (iv) be accompanied
by a copy of Article 13.
A record Shareholder who receives the Dissenters' Notice must demand
payment and deposit his certificates in accordance with the Dissenters' Notice.
Such Shareholder will retain all other rights of a Shareholder until those
rights are canceled or modified by the consummation of the Merger. A record
Shareholder who does not demand payment or deposit his share certificates where
required, each by the date set in the Dissenters' Notice, is not entitled to
payment for his shares under Article 13.
12
<PAGE> 760
Within 10 days of the later of the Effective Time or receipt of a payment
demand, the Company must offer to pay each dissenting Shareholder who complied
with Article 13 the amount the Company estimates to be the fair value of his
shares, plus accrued interest from the Effective Time. Such offer of payment
must be accompanied by (i) certain recent Company financial statements, (ii) the
Company's estimate of the fair value of the shares and interest due, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Article 13, and (v) a copy of Article
13. If the Shareholder accepts the Company's offer by written notice to the
Company within 30 days after the Company's offer, the Company must make payment
within 60 days after the later of the making of the offer or the Effective Time.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing share certificates, the Company must return the
deposited certificates. If, after such return, the Merger is consummated, the
Company must send a new Dissenters' Notice and repeat the payment procedure
described above.
A dissenting Shareholder may notify the Company in writing of his own
estimate of the fair value of his shares and the interest due, and may demand
payment of his estimate, if (i) he believes that the amount offered by the
Company is less than the fair value of his shares or that the interest due has
been calculated incorrectly or (ii) the Company, having failed to consummate the
Merger, does not return the deposited certificates within 60 days after the date
set for demanding payment. A dissenting Shareholder waives his right to demand
payment unless he notifies the Company of his demand in writing within 30 days
after the Company makes or offers payment for his shares. If the Company does
not offer payment within 10 days of the later of the Effective Time or receipt
of a payment demand, then (i) the Shareholder may demand the financial
statements and other information of the Company, and the Company must provide
such information within 10 days after receipt of the written demand and (ii) the
Shareholder may notify the Company of his own estimate of the fair value of his
shares and the amount of interest due, and may demand payment of that estimate.
If a demand for payment by a Shareholder remains unsettled, the Company
must commence a nonjury equity valuation proceeding in the appropriate court, as
specified in Article 13, within 60 days after receiving the payment demand and
must petition the court to determine the fair value of the shares and accrued
interest. If the Company does not commence a valuation proceeding within 60
days, the Company is required to pay each dissenting Shareholder whose demand
remains unsettled, the amount demanded. The Company is required to make all
dissenting Shareholders whose demands remain unsettled parties to the proceeding
and to serve a copy of the petition upon each dissenting Shareholder. The court
may appoint appraisers to receive evidence and to recommend a decision on fair
value. Each dissenting Shareholder made a party to the proceeding is entitled to
judgment for the fair value of his shares plus interest to the date of judgment.
In an appraisal proceeding commenced under Article 13, the court must
determine the costs of the proceeding, excluding fees and expenses of attorneys
and experts for the respective parties, and must assess those costs against the
Company, except that the court may assess the costs against all or some of the
dissenting Shareholders to the extent the court finds they acted arbitrarily,
vexatiously or not in good faith in demanding payment under Article 13. The
court also may assess the fees and expenses of attorneys and experts for the
respective parties against the Company if the court finds the Company did not
substantially comply with the requirements of Article 13, or against either the
Company or a dissenting Shareholder if the court finds that such party acted
arbitrarily, vexatiously or not in good faith with respect to the rights
provided by Article 13.
If the court finds that the services of the attorneys for any dissenting
Shareholder were of substantial benefit to other dissenting Shareholders
similarly situated, and that the fees for those services should not be assessed
against the Company, the court may award those attorneys reasonable fees out of
the amounts awarded the dissenting Shareholders who were benefited. No action by
any dissenting Shareholder to enforce dissenters' rights may be brought more
than three years after the Effective Time, regardless of whether notice of the
Merger and of the right to dissent was given by the Company in compliance with
the provisions of Article 13.
13
<PAGE> 761
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ----------- ----------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales.................. $37,503,222 $37,503,222 0.6 $7,376,891 $15,125,042
EBITDA..................... 3,283,672 3,168,892 7 7,376,891 14,805,353
EBIT....................... 2,246,996 2,132,216 10 7,376,891 13,945,269
Net Income................. 1,099,531 1,025,390 15 -- 15,380,850
Book Equity................ 18,081,727 9,064,074 1 -- 9,064,074
</TABLE>
14
<PAGE> 762
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Gallant-Belk Company 5.6306% X $31,711,921 = $ 1,785,571
Belk of Athens, Ga.,
Inc. 9.1895% X 14,290,078 = 1,313,187
Belk's Department
Store of
Cartersville,
Georgia,
Incorporated 11.2167% X 3,810,247 = 427,384
Belks of Cornelia,
Ga., Inc. 3.6169% X 4,947,119 = 178,932
Belks of Covington,
Ga., Inc. 20.2976% X 4,579,688 = 929,567
Belks-Matthews
Company of Dublin,
Georgia 15.7753% X 6,637,219 = 1,047,041
Belk Department Store
of Greenwood, S.C.,
Inc. 6.5851% X 8,472,623 = 557,931
Belk-Matthews
Company, Macon,
Georgia, Inc. 15.0400% X 14,496,059 = 2,180,207
Belk of Thomaston,
Georgia, Inc. .00027 X 30,39,289 = 818
Belk of Toccoa, Ga.,
Inc. 9.0148 X 4,349,985 = 392,142
Belk-Matthews,
Vidalia, Georgia,
Inc. 10.0160 X 4,962,587 = 497,053
Belk of Waycross,
Ga., Inc. 1.3163 X 43,828,148 = 576,910
-----------
Total $ 9,886,744
===========
Relative Operating Value of Company $15,380,850
Relative Operating Value of Other Companies Owned by Company + 9,886,744
-----------
Total Relative Value of Company = $25,267,594
===========
</TABLE>
15
<PAGE> 763
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk of Athens, Ga.,
Inc. 6.3399% X $25,267,594 = $ 1,601,940
Belk Brothers Company 16.1591% X 25,267,594 = 4,083,016
Belk Enterprises,
Inc. 16.2920% X 25,267,594 = 4,116,596
Belk of Dalton, Ga.,
Inc. 1.6387% X 25,267,594 = 414,060
Belk of Seneca, SC.,
Inc. .0011% X 25,267,594 = 278
Belk of Thomaston,
Ga., Inc. 5.2214% X 25,267,594 = 1,319,322
-----------
Total $11,535,212
===========
Total Relative Value of Company $25,267,594
Total Relative Value of Company Owned by Other Belk Companies - 11,535,212
-----------
Net Relative Value of Company = $13,732,381
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$13,732,381 / $1,156,266,577 = 1.1877%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(1.1877% X 59,998,834) / 1,849,811 = .3852
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 764
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 0.32
Dividends(2).............................................. 0.05
Book value per share(3)................................... 5.31
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 0.37
Dividends(2).............................................. 0.10
Book value per share...................................... 4.82
</TABLE>
- ---------------
(1) Based on 3,403,654 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 3,403,654 shares
of Common Stock, the number of shares of Common Stock outstanding at the end
of the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
17
<PAGE> 765
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $34,875 $36,355 $37,503
Net income.................................................. 1,688 1,266 1,100
Per common share Income..................................... 0.50 0.37 0.32
Net income (loss)(1)...................................... -- -- --
Dividends................................................. 0.02 0.04 0.05
Book value(2)............................................. 4.71 5.04 5.31
Total assets................................................ 19,609 20,132 30,360
Shareholders' equity........................................ 16,022 17,152 18,082
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $25,479 $25,981
Income from operations...................................... 806 1,731
</TABLE>
- ---------------
(1) Based on 3,403,654 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding for the years ended January 31, 1995,
February 3, 1996 and February 1, 1997.
(2) Based on 3,403,654 shares of Common Stock outstanding as of January 31,
1995, February 3, 1996 and February 1, 1997.
18
<PAGE> 766
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates four retail department stores in the
following locations in Georgia: Lakeland Plaza Shopping Center in Cumming; Banks
Crossing in Fayetteville; Lakeshore Plaza in Gainesville; and West Georgia
Commons in LaGrange. The Company's stores operate in a manner consistent with
the business of the Belk Companies described in the Proxy Statement/Prospectus,
with the exception that the Company's store in Gainesville, Georgia operates
from two locations in Lakeshore Plaza. The stores are managed out of the Kerr
group office in Norcross, Georgia.
Facilities. The Company operates four stores, of which three are leased
under long-term leases and one is owned by the Company. The leases have
termination dates ranging from 1999 through 2007, and for the lease terminating
in 1999, the Company has options to extend the lease through 2019. The floor
space of the leased stores ranges from 41,000 to 140,000 square feet. The store
owned by the Company in Cumming contains approximately 51,000 square feet of
floor area. The Company believes the facilities are adequate to meet its current
needs, with the exception of the store building at Banks Crossing in
Fayetteville which the Company is considering expanding.
Competition. Specific competitors in the Company's markets include
Wal-Mart, Penney, Sears and Goody's.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 767
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)(f)(g)(h).................................. 2,243,235 65.9%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(d)(g)(h).............................................. 1,833,997 53.9%
H. W. McKay Belk (Director and Executive Officer)
(b)(d)(g)(h).............................................. 1,833,997 53.9%
John R. Belk (Director and Executive Officer)
(b)(d)(g)(h).............................................. 1,835,194 53.9%
Henderson Belk (Director) (e)(f)............................ 197,359 5.8%
Sarah Belk Gambrell (e)(f).................................. 397,974 11.7%
Sarah Gambrell Knight....................................... 275,620 8.1%
Leroy Robinson (Director) (b)(d)............................ 204,800 6.0%
Katherine McKay Belk (b)(d)................................. 240,727 7.1%
Katherine Belk Morris (b)(d)................................ 280,154 8.2%
Robert K. Kerr, Jr. (Director and Executive Officer)........ 0 *
Thomas M. Belk, Trustee U/A dated September 15, 1993........ 187,375 5.5%
Belk of Athens, Ga., Inc.................................... 215,787 6.3%
Belk Enterprises, Inc....................................... 554,522 16.3%
Belk of Thomaston, Ga., Inc................................. 177,719 5.2%
J.V. Properties............................................. 550,000 16.2%
All Directors and Executive Officers as a group (7
persons).................................................. 2,470,494 72.6%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson, Katherine McKay Belk and Katherine Belk
Morris -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk
Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207; Sarah Gambrell
Knight -- 810 Colville Road, Charlotte, N.C. 28207; Robert K. Kerr,
Jr. -- 1890-D Beaver Ridge Circle, Norcross, Ga. 30071; Thomas M. Belk, Trustee
U/A dated September 15, 1993; Belk of Athens, Ga., Inc., Belk Enterprises, Inc.,
Belk of Thomaston, Ga., Inc. and J.V. Properties -- 2801 West Tyvola Road,
Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 27,546 shares held by Montgomery Investment Company, of which John
M. Belk is the majority shareholder.
(b) Includes 17,425 shares held by Brothers Investment Company, which
corporation is equally owned by John M. Belk and the Estate of Thomas M.
Belk. Voting and investment power is shared by John M. Belk, Katherine
McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W. McKay Belk,
John R. Belk and Leroy Robinson.
(c) Includes 1,198 shares held by Claudia W. Belk, Tr. U/A f/b/o Mary Claudia
Belk. Claudia W. Belk, the Trustee, is John M. Belk's wife.
20
<PAGE> 768
(d) Includes 187,375 shares held by Thomas M. Belk, Trustee U/A dated September
15, 1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(e) Includes 191,850 shares held in several Trusts established by the Will of
W. H. Belk for the benefit of his children. Voting and investment power of
the Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk,
Sarah Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and
investment power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and
Henderson Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson
Belk, W. H. Belk, Jr. and Irwin Belk.
(f) Includes 5,509 shares held in several Trusts established by the Will of
Mary I. Belk for the benefit of her children. Voting and investment power
of the trusts for John M. Belk and Thomas M. Belk is shared by John M.
Belk, Sarah Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and
investment power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and
Henderson Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson
Belk, W. H. Belk, Jr. and Irwin Belk.
(g) Includes 215,787 shares held by Belk of Athens, Ga., Inc., 55,777 shares
held by Belk of Dalton, Ga., Inc., 38 shares held by Belk of Seneca, S.C.,
Inc., 554,522 shares held by Belk Enterprises, Inc. and 177,719 shares held
by Belk of Thomaston, Ga., Inc., which shares are voted by the members of
the Executive Committee of the Board of Directors of each such Corporation,
under the authority given by the directors of each such Corporation at the
annual meeting of directors held in March, 1997. The Executive Committee of
each such Corporation consists of John M. Belk, Thomas M. Belk, Jr., H. W.
McKay Belk and John R. Belk.
(h) Includes 550,000 shares held by J.V. Properties, a partnership. The Board
of Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay
Belk and John R. Belk, have voting and investment power with respect to
such shares.
21
<PAGE> 769
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
</TABLE>
F-1
<PAGE> 770
BELK OF LAGRANGE, GA., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 253,060 $ 401,998
Accounts receivable, net.................................. 4,159,156 5,157,243
Merchandise inventory..................................... 6,685,259 7,419,034
Receivable from affiliates, net........................... 889,301 --
Refundable income taxes................................... 62,338 --
Deferred income taxes..................................... 61,711 --
Other..................................................... 363,370 340,792
----------- -----------
Total current assets........................................ 12,474,195 13,319,067
Loans receivable from affiliates, net....................... -- 1,411,340
Investments................................................. 172,377 9,017,652
Property, plant and equipment, net.......................... 6,881,117 6,071,231
Other noncurrent assets..................................... 604,355 540,553
----------- -----------
$20,132,044 $30,359,843
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 2,115,827 $ 2,000,245
Payables to affiliates, net............................... -- 9,190,069
Deferred income taxes..................................... -- 26,853
Accrued income taxes...................................... 14,514 249,896
----------- -----------
Total current liabilities................................... 2,130,341 11,467,063
Deferred income taxes....................................... 208,624 231,055
Loans payable to affiliates, net............................ 88,660 --
Other noncurrent liabilities................................ 552,040 579,998
----------- -----------
Total liabilities........................................... 2,979,665 12,278,116
Shareholders' equity:
Common stock.............................................. 3,403,654 3,403,654
Retained earnings......................................... 13,748,725 14,678,073
----------- -----------
Total shareholders' equity.................................. 17,152,379 18,081,727
----------- -----------
$20,132,044 $30,359,843
=========== ===========
</TABLE>
F-2
<PAGE> 771
BELK OF LAGRANGE, GA., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Total store sales....................................... $34,874,800 $36,651,805 $37,852,279
Less: Leased Sales...................................... -- 296,791 349,056
----------- ----------- -----------
Net sales............................................... 34,874,800 36,355,014 37,503,223
Operating costs and expenses............................ 32,062,978 34,252,957 35,374,485
----------- ----------- -----------
Income from operations.................................. 2,811,822 2,102,057 2,128,738
----------- ----------- -----------
Other income (expense):
Interest, net......................................... (138,818) (153,809) (544,778)
Dividend income....................................... 25,547 19,748 11,639
Gain (loss) on disposal of property, plant and
equipment.......................................... -- (147) --
Gain (loss) on sale of securities..................... 59,814 -- --
Miscellaneous, net.................................... (40,636) (625) 3,480
----------- ----------- -----------
Total other expense, net................................ (94,093) (134,833) (529,659)
----------- ----------- -----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities..... 2,717,729 1,967,224 1,599,079
Income tax expense (benefit)............................ 1,029,506 701,113 566,170
----------- ----------- -----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities................... 1,688,223 1,266,111 1,032,909
Equity in earnings (loss) of unconsolidated entity, net
of tax................................................ -- -- 66,622
----------- ----------- -----------
Net earnings............................................ 1,688,223 1,266,111 1,099,531
Retained earnings at beginning of period................ 10,998,610 12,618,760 13,748,725
Dividends paid.......................................... (68,073) (136,146) (170,183)
----------- ----------- -----------
Retained earnings at end of period...................... $12,618,760 $13,748,725 $14,678,073
=========== =========== ===========
</TABLE>
F-3
<PAGE> 772
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 773
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 774
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 14, CHAPTER 2
BUSINESS CORPORATIONS
STATE OF GEORGIA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
A-1
<PAGE> 775
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's right.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
A-2
<PAGE> 776
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
A-3
<PAGE> 777
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing
A-4
<PAGE> 778
under subsection (a) of this Code section within 30 days after the corporation
offered payment for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
A-5
<PAGE> 779
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
A-6
<PAGE> 780
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................. $37,503,222 $1,099,530 $2,246,995 $3,283,671 $18,081,726
Adjustments to eliminate less than
wholly-owned subsidiaries................. -- -- -- -- --
----------- ---------- ---------- ---------- -----------
Adjusted Shareholders' Statement............ $37,503,222 1,099,530 2,246,995 3,283,671 18,081,726
=========== ---------- ---------- ---------- -----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............. -- -- --
Gain/loss on sale of securities........... -- -- --
Impairment loss........................... -- -- --
Equity in earnings of unconsolidated
subsidiaries............................ (66,622) (103,140) (103,140)
Gain/loss on discontinued operations...... -- -- --
Adjustment to tax expense................. -- -- -- --
---------- ---------- ----------
Total non-operating items................... (66,622) (103,140) (103,140)
---------- ---------- ----------
Other Adjustments:
Adjustment for dividends received from
other Belk entities..................... (7,518) (11,639) (11,639)
Adjustment for ownership in other Belk
entities................................ (9,017,652)
---------- ---------- ---------- -----------
Per Model................................... $1,025,390 $2,132,216 $3,168,892 $ 9,064,074
========== ========== ========== ===========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................. $ (401,998)
Negative cash balances reclassified to
accounts payable...................... 160
Receivables from affiliates, net........ --
Loans receivable from affiliates, net... (1,411,340)
Liabilities
Notes payable........................... --
Current installments of long-term
debt.................................. --
Current portion of obligations under
capital leases........................ --
Payables to affiliates, net............. 9,190,069
Long-term debt, excluding current
installments.......................... --
Obligations under capital leases,
excluding current portion............. --
Loans payable to affiliates, net........ --
-----------
Net debt (cash)............................. 7,376,891
Adjustments to eliminate less than
wholly-owned subsidiaries................. --
-----------
Per Model................................... $ 7,376,891
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 781
SUPPLEMENT NO. 16
<PAGE> 782
BELK OF LAGRANGE, GA., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 3:20 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 16
<PAGE> 783
BELK OF LAWRENCEVILLE, GA., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk of Lawrenceville, Ga., Inc. (the
"Company"), to be held on April 15, 1998, at 9:30 a.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Georgia law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 32.1911 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 144,989 shares of New Belk Class A Common Stock which will
represent approximately 0.2417% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage paid
(17)
<PAGE> 784
envelope. If you plan to attend the Special Meeting, you may vote in person if
you wish, even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 785
BELK OF LAWRENCEVILLE, GA., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK OF LAWRENCEVILLE, GA., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk of Lawrenceville, Ga., Inc. (the "Company") will be held on
April 15, 1998, at 9:30 a.m., local time, at the offices of Belk Stores
Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for
the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Georgia law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 32.1911 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 786
BELK OF LAWRENCEVILLE, GA., INC.
SUPPLEMENT NO. 17
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 17 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK OF
LAWRENCEVILLE, GA., INC. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE
DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED
HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION.
IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE
INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 16
SELECTED HISTORICAL FINANCIAL INFORMATION................... 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 18
BUSINESS OF THE COMPANY..................................... 18
SECURITY OWNERSHIP OF THE COMPANY........................... 19
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION.................................. B-1
</TABLE>
<PAGE> 787
THE COMPANY
The Company was incorporated as a Georgia corporation in 1945 as
Belk-Gallant Company of Lawrenceville, Georgia. The Company changed its name to
Belk of Lawrenceville, Ga., Inc. on July 23, 1997. The mailing address of the
Company's principal executive offices is 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500, and its telephone number at that address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 9:30 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement") by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under Georgia law),
will be converted, without any action on the part of the Shareholder, into the
right to receive 32.1911 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk (the "New Belk Class A Common Stock"). All
of the shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 9,712 shares of Common Stock
outstanding held of record by 36 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 82.2% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock
2
<PAGE> 788
vote in favor of the Merger, the vote of such persons, corporations and trusts
in favor of the Merger would be sufficient to approve the Merger under the
governing documents of the Company and applicable state law.
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Georgia Business Corporation Code (the "GBCC"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 9,712 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A
3
<PAGE> 789
Common Stock are convertible into New Belk Class B Common Stock, in whole or in
part, at any time and from time to time at the option of the holder, on the
basis of one share of New Belk Class B Common Stock for each share of New Belk
Class A Common Stock converted. Shares of New Belk Class A Common Stock held by
a New Belk Stockholder who is a Class A Permitted Holder will also automatically
convert into New Belk Class B Common Stock in the event that such New Belk
Stockholder no longer meets the requirements of a Class A Permitted Holder. New
Belk Class B Common Stock has no conversion rights. The Company Articles provide
for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the GBCC, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as the
effect of such distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to
4
<PAGE> 790
be less than the sum of its total liabilities plus (unless the articles of
incorporation permit otherwise) the amount that would be needed if the
corporation dissolved at the time of the payment of the dividend to satisfy the
preferential rights upon dissolution of shareholders whose preferential rights
are superior to those receiving the distribution. The Company Bylaws provide
that the Board of Directors of the Company (the "Company Board") may from time
to time declare dividends on the Company's outstanding shares in the manner and
upon the terms and conditions provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The GBCC permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 25%, or such
greater or lesser percentages as may be provided in the articles of
incorporation or bylaws, of all votes entitled to be cast on the proposed
corporate action to call a special meeting. The Company Bylaws authorize the
Chairman, President, Secretary, the Company Board and any Shareholder pursuant
to the written request of the holders of not less than 10% of all the shares
entitled to vote at the meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the GBCC, unless the articles of incorporation, the bylaws or
the provisions regarding meetings in the GBCC specify a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the shareholders. The Company Articles specify that to liquidate and
discontinue the business of the Company requires a two-thirds vote.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
5
<PAGE> 791
Under the GBCC, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the GBCC
requires an amendment to the articles of incorporation to be recommended by the
board of directors to the shareholders and approved by a majority (unless the
articles of incorporation or the board of directors requires a greater vote or a
vote by voting groups) of the votes entitled to be cast on the amendment by any
voting group. As under the DGCL, the holders of the outstanding shares of a
class or series are entitled to vote as a separate voting group (if shareholder
voting is otherwise required by the GBCC) on a proposed amendment if the
amendment would change certain fundamental rights and preferences of that class
or series. The Company Articles do not specify a greater vote or a vote by
voting groups to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the GBCC, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or the
GBCC reserves this power exclusively to the shareholders in whole or part or
(ii) the shareholders in amending or repealing a particular bylaw provided
expressly that the board of directors may not amend or repeal that bylaw. The
shareholders of the corporation may amend or repeal the bylaws of the
corporation even though such bylaws may be amended or repealed by the board of
directors of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board, or by the affirmative vote of a majority of the shares
outstanding and entitled to vote at any regular or special meeting of the
Shareholders. Further, the Company Bylaws provide that the Company Board has no
power to adopt a bylaw: (i) requiring more than a majority of the voting shares
for a quorum at a meeting of the Shareholders, except where higher percentages
are required by law; (ii) providing for the management of the Company otherwise
than by the Company Board or its executive committees; (iii) increasing or
decreasing the number of directors; or (iv) classifying and staggering the
election of directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the GBCC, any action that may be taken by an annual or special
meeting of shareholders may be taken without a meeting and without prior notice,
if all holders of outstanding shares entitled to vote on such action or, if so
provided in the articles of incorporation, by persons entitled to vote at a
meeting shares having voting power to cast not less than the minimum number (or
numbers, in the case of voting groups) of votes that would be necessary to
authorize or take the action at which all shareholders entitled to vote were
present and voted sign the written consent(s) describing such action. The
Company Bylaws permit any action which may be taken at a meeting of the
Shareholders to be taken without a meeting if a consent in writing, setting
forth the action so taken, is signed by all of the persons who would be entitled
to vote upon such action at a meeting and filed with the Secretary of the
Company.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
6
<PAGE> 792
If at the time of filling any vacancy or newly created directorship, the
directors then in office constitute less than a majority of the whole board as
constituted immediately prior to such increase, the Delaware Court of Chancery
may, upon application of stockholders holding at least 10% of the total number
of shares outstanding having the right to vote for such directors, order an
election to be held to fill any such vacancies or newly created directorships or
to replace the directors chosen by the directors then in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation or a bylaw
approved by the shareholders, the GBCC permits a vacancy in the board of
directors to be filled by the shareholders or by the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board and if
the vacancy is one that the directors are authorized to fill, then the directors
may fill the vacancy by the affirmative vote of a majority of all the directors
remaining in office.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors may be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The GBCC requires a corporation to have at least one director. The articles
of incorporation or the bylaws may authorize the shareholders or the board of
directors to change the number of directors. If the articles of incorporation or
the bylaws establish a variable range for the size of directors, the number of
directors may be changed, within the prescribed range, by the shareholders or,
if the articles of incorporation so provide, by the board of directors. The
Company Bylaws require the Company Board to consist of at least three, but no
more than 15, directors.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
Under the GBCC, a director must be a natural person and at least 18 years
of age, but does not have to be a resident of Georgia or a shareholder of the
corporation unless otherwise provided for in the articles of incorporation. The
Company Articles do not require directors of the Company to be residents of
Georgia or
7
<PAGE> 793
shareholders of the Company. The GBCC also allows the articles of incorporation
or the bylaws to provide for additional qualifications of directors.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each class expiring at the
annual meeting in successive years beginning with the first class and
progressing to the third class, if any. Thereafter, directors are chosen for a
full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
Under the GBCC, the articles of incorporation may allow for staggering the
terms of directors by dividing the total number of directors into two or three
groups, with each group containing one-half or one-third of the total. The term
of each group expires in each successive year beginning with the first group and
progressing to the third group, if any. Thereafter, directors are chosen for a
term of two or three years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
According to the GBCC, unless the articles of incorporation or bylaws
provide that directors may be removed only for cause, the shareholders may
remove one or more directors with or without cause. If a director is elected by
a voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove him. If cumulative voting is not authorized, a
director may be removed only by a majority of votes entitled to be cast.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under both the DGCL and the GBCC, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the GBCC generally permits transactions involving a
Georgia corporation and an interested director of that corporation if: (i) the
transaction received the affirmative vote of a majority (but not less than two)
of those qualified directors on the board of directors or on a duly empowered
committee thereof who voted on the transaction after required disclosure to
them; (ii) if a majority of the votes entitled to be cast by the holders of all
qualified shares were cast in favor of the transaction after (a) notice to
shareholders describing the director's conflicting interest transaction, (b)
provision of the information with
8
<PAGE> 794
regard to any unqualified shares and (c) required disclosure to the shareholders
who voted on the transaction (to the extent the information was not known by
them); or (iii) the transaction, judged in the circumstances at the time of
commitment, is established to have been fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the GBCC, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the GBCC (i) in connection with a
proceeding by or in the right of the corporation, except for reasonable expenses
incurred in connection with the proceeding if it is determined that the director
or officer has met the relevant standard of conduct under the GBCC or (ii) in
connection with any proceeding with respect to conduct for which he was adjudged
liable on the basis that personal benefit was improperly received by him,
whether or not involving action in his official capacity. A Georgia corporation
must indemnify a director or officer who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party because he
was a director or officer of the corporation against reasonable expenses
incurred by the director or officer in connection with the proceeding.
The Company Bylaws authorize indemnification as provided in the GBCC. In
addition, the Company Bylaws provide that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not
9
<PAGE> 795
indemnify a director or officer against liability or litigation expense that he
may incur on account of his activities which were, at the time taken, known or
believed by him to be clearly in conflict with the best interest of the Company.
The Company will likewise and to the same extent indemnify any person who, at
the request of the Company, is or was serving as a director or as an officer of
another corporation, joint venture, trust or other enterprise, as a partner of a
partnership or as a trustee or administrator under an employee benefit plan. The
Company will also indemnify a director or officer for reasonable costs, expenses
and attorneys' fees in connection with the enforcement of rights to
indemnification granted therein, if it is so determined in accordance with the
Company Articles that the director or officer is entitled to indemnification
thereunder. The Company Articles provide that to the fullest extent permitted by
the GBCC, a director will not be personally liable to the Company or any of its
Shareholders or otherwise for monetary damages for breach of duty of care or
other duty as a director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The GBCC concerning the approval of mergers and share exchanges is similar
in all material respects to the DGCL, except action by the shareholders of the
surviving corporation is not required if the number and kind of shares
outstanding immediately after the merger or share exchange, plus the number and
kind of shares issuable as a result of the merger or share exchange and by the
conversion of securities issued pursuant to the merger or share exchange or the
exercise of rights and warrants issued pursuant to the merger or share exchange
does not exceed the total number and kind of shares of the surviving or
acquiring corporation authorized by its articles of incorporation immediately
before the merger or share exchange. The GBCC and DGCL provisions concerning the
approval of the sale of all or substantially all of the assets of a corporation
are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the GBCC include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined in the DGCL and the
GBCC, "business combinations" generally encompass (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder, (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested shareholder of a substantial percentage of assets of the corporation,
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested shareholder,
except in certain circumstances, (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested shareholder, except
in certain circumstances or (v) any receipt by the interested shareholder of the
benefit of any loans, advances, guarantees, pledges or other financial benefits
(other than those expressly permitted in (i) through (iv) above) provided by or
through the corporation.
The DGCL defines an "interested stockholder" as any person who (i) is the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation and within three years of the date in
question was the direct
10
<PAGE> 796
or indirect owner of at least 15% of the voting power of any class or series of
the then outstanding stock of the corporation. Under the GBCC, an "interested
shareholder" is any person who owns 10% of the outstanding voting shares or is
an affiliate of the corporation owning 10% of the outstanding voting shares
within the prior two years, and a "continuing director" is a director not
associated or affiliated with any interested shareholder.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
According to the GBCC, if at least three continuing directors serve on the
board of directors, then those directors must unanimously approve the business
combination. If three continuing directors do not serve on the board of
directors, then 66 2/3% of the continuing directors must recommend the business
combination and a majority of shareholders entitled to cast a vote must approve
the business combination. Also, except under certain circumstances, no mergers
may occur between a corporation and an interested shareholder within five years
of the date the shareholder became an interested shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the GBCC provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The GBCC concerning preemptive rights is equivalent to the DGCL. The
Company Articles do not contain any provision with respect to preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other
11
<PAGE> 797
books and records and to make copies or extracts therefrom. A proper purpose
means a purpose reasonably related to such person's interest as a stockholder.
Pursuant to the GBCC, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) excerpts from minutes of any
meeting of the board of directors, records of any action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporations; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the GBCC ("Article 13") has
the right to receive in cash the fair value of such Shareholder's shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN
ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
To exercise appraisal rights under Article 13, a holder of Common Stock
must (i) deliver to the Company before the taking of the vote of Shareholders on
the Reorganization Agreement written notice of his intent to demand payment for
his shares if the Merger is effected and (ii) not vote his shares in favor of
the Reorganization Agreement. A Shareholder who does not satisfy these two
requirements is not entitled to payment for his shares under Article 13. In
addition, any Shareholder who returns a signed proxy but fails to provide
instructions as to the manner in which such shares are to be voted will be
deemed to have voted in favor of the Reorganization Agreement and will not be
entitled to assert dissenters' rights of appraisal.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial Shareholder and he notifies the Company
in writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of such a partial dissenter are determined as if
the shares as to which he dissents and his other shares are registered in the
names of different Shareholders.
If the Reorganization Agreement is approved at the Special Meeting, the
Company must deliver a written dissenters' notice (the "Dissenters' Notice") to
all Shareholders who satisfied the notice requirements of Article 13. The
Dissenters' Notice must be sent within 10 days after the Effective Time and must
(i) state where the demand for payment must be sent and where and when
certificates for shares must be deposited, (ii) inform holders of uncertificated
shares to what extent transfer of those shares will be restricted after the
demand for payment is received, (iii) set a date by which the Company must
receive the demand for payment (which date may not be fewer than 30 nor more
than 60 days after the Dissenters' Notice is delivered) and (iv) be accompanied
by a copy of Article 13.
A record Shareholder who receives the Dissenters' Notice must demand
payment and deposit his certificates in accordance with the Dissenters' Notice.
Such Shareholder will retain all other rights of a Shareholder until those
rights are canceled or modified by the consummation of the Merger. A record
Shareholder who does not demand payment or deposit his share certificates where
required, each by the date set in the Dissenters' Notice, is not entitled to
payment for his shares under Article 13.
12
<PAGE> 798
Within 10 days of the later of the Effective Time or receipt of a payment
demand, the Company must offer to pay each dissenting Shareholder who complied
with Article 13 the amount the Company estimates to be the fair value of his
shares, plus accrued interest from the Effective Time. Such offer of payment
must be accompanied by (i) certain recent Company financial statements, (ii) the
Company's estimate of the fair value of the shares and interest due, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Article 13 and (v) a copy of Article
13. If the Shareholder accepts the Company's offer by written notice to the
Company within 30 days after the Company's offer, the Company must make payment
within 60 days after the later of the making of the offer or the Effective Time.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing share certificates, the Company must return the
deposited certificates. If, after such return, the Merger is consummated, the
Company must send a new Dissenters' Notice and repeat the payment procedure
described above.
A dissenting Shareholder may notify the Company in writing of his own
estimate of the fair value of his shares and the interest due, and may demand
payment of his estimate, if (i) he believes that the amount offered by the
Company is less than the fair value of his shares or that the interest due has
been calculated incorrectly or (ii) the Company, having failed to consummate the
Merger, does not return the deposited certificates within 60 days after the date
set for demanding payment. A dissenting Shareholder waives his right to demand
payment unless he notifies the Company of his demand in writing within 30 days
after the Company makes or offers payment for his shares. If the Company does
not offer payment within 10 days of the later of the Effective Time or receipt
of a payment demand, then (i) the Shareholder may demand the financial
statements and other information of the Company, and the Company must provide
such information within 10 days after receipt of the written demand and (ii) the
Shareholder may notify the Company of his own estimate of the fair value of his
shares and the amount of interest due, and may demand payment of that estimate.
If a demand for payment by a Shareholder remains unsettled, the Company
must commence a nonjury equity valuation proceeding in the appropriate court, as
specified in Article 13, within 60 days after receiving the payment demand and
must petition the court to determine the fair value of the shares and accrued
interest. If the Company does not commence a valuation proceeding within 60
days, the Company is required to pay each dissenting Shareholder whose demand
remains unsettled, the amount demanded. The Company is required to make all
dissenting Shareholders whose demands remain unsettled parties to the proceeding
and to serve a copy of the petition upon each dissenting Shareholder. The court
may appoint appraisers to receive evidence and to recommend a decision on fair
value. Each dissenting Shareholder made a party to the proceeding is entitled to
judgment for the fair value of his shares plus interest to the date of judgment.
In an appraisal proceeding commenced under Article 13, the court must
determine the costs of the proceeding, excluding fees and expenses of attorneys
and experts for the respective parties, and must assess those costs against the
Company, except that the court may assess the costs against all or some of the
dissenting Shareholders to the extent the court finds they acted arbitrarily,
vexatiously or not in good faith in demanding payment under Article 13. The
court also may assess the fees and expenses of attorneys and experts for the
respective parties against the Company if the court finds the Company did not
substantially comply with the requirements of Article 13, or against either the
Company or a dissenting Shareholder if the court finds that such party acted
arbitrarily, vexatiously or not in good faith with respect to the rights
provided by Article 13.
If the court finds that the services of the attorneys for any dissenting
Shareholder were of substantial benefit to other dissenting Shareholders
similarly situated, and that the fees for those services should not be assessed
against the Company, the court may award those attorneys reasonable fees out of
the amounts awarded the dissenting Shareholders who were benefited. No action by
any dissenting Shareholder to enforce dissenters' rights may be brought more
than three years after the Effective Time, regardless of whether notice of the
Merger and of the right to dissent was given by the Company in compliance with
the provisions of Article 13.
13
<PAGE> 799
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $8,157,700 $8,157,700 0.6 $(1,130,204) $6,024,824
EBITDA............... 626,162 626,162 7 (1,130,204) 5,513,338
EBIT................. 407,109 407,109 10 (1,130,204) 5,201,294
Net Income........... 277,437 277,437 15 -- 4,161,555
Book Equity.......... 3,674,135 3,673,874 1 -- 3,673,874
</TABLE>
14
<PAGE> 800
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
N/A N/A% X $ N/A = $ N/A
----------
Total $ N/A
==========
Relative Operating Value of Company $6,024,824
Relative Operating Value of Other Companies Owned by Company + --
----------
Total Relative Value of Company = $6,024,824
==========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Gallant-Belk Company 11.5321% X $ 6,024,824 = $ 694,789
Belk of Athens, Ga.,
Inc. .5766 X 6,024,824 = 34,739
Belk Brothers Company 15.8155 X 6,024,824 = 952,856
Belk Enterprises,
Inc. 21.5815 X 6,024,824 = 1,300,248
Belk of Dalton, Ga.,
Inc. 4.1186 X 6,024,824 = 248,138
----------
Total $3,230,770
==========
Total Relative Value of Company $6,024,824
Total Relative Value of Company Owned by Other Belk Companies - 3,230,770
----------
Net Relative Value of Company = $2,794,055
==========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 2,794,055 / $1,156,226,577 = .2417%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.2417% X 59,998,834) / 4,504 = 32.1911
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
15
<PAGE> 801
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 28.57
Dividends(2).............................................. 5.00
Book value per share(3)................................... 378.31
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 30.90
Dividends(2).............................................. 8.37
Book value per share...................................... 403.03
</TABLE>
- ---------------
(1) Based on 9,712 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 9,712 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
16
<PAGE> 802
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 8,238 $ 8,020 $ 8,158
Net income.................................................. 132 125 277
Per common share
Net income (loss)(1)...................................... 13.57 12.83 28.57
Dividends................................................. -- 5.00 5.00
Book value(2)............................................. 346.91 354.74 378.31
Total assets................................................ 4,061 3,976 4,281
Shareholders' equity........................................ 3,369 3,445 3,674
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $5,542 $5,824
Income from operations...................................... 64 557
</TABLE>
- ---------------
(1) Based on 9,712 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 9,712 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
17
<PAGE> 803
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in River Exchange
Shopping Center in Lawrenceville, Georgia. The Company's store operates in a
manner consistent with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is managed out of the Kerr group office in
Norcross, Georgia.
Facilities. The Company leases its store building, which contains
approximately 63,000 square feet of floor area. The current term of the lease
expires in 2011. The Company believes the building is adequate to meet its
current needs.
Competition. Specific competitors in the Company's market include
Wal-Mart, Target and Goody's.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
18
<PAGE> 804
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d).............................................. 7,626 78.5%
Thomas M. Belk, Jr. (Director and Executive Officer)
(a)(c)(d)(e).............................................. 6,248 64.3%
H. W. McKay Belk (Director and Executive Officer)
(a)(c)(d)(f).............................................. 6,259 64.4%
John R. Belk (Director and Executive Officer)
(a)(c)(d)(g).............................................. 6,306 64.9%
Henderson Belk (Director) (b)............................... 56 *
Sarah Belk Gambrell (b)..................................... 1,618 16.7%
Leroy Robinson (Director) (a)............................... 954 9.8%
Katherine McKay Belk (a)(h)................................. 985 10.1%
Katherine Belk Morris (a)................................... 1,042 10.7%
Robert K. Kerr, Jr. (Director).............................. 26 *
Thomas M. Belk, Trustee U/A dated January 15, 1993.......... 954 9.8%
Gallant-Belk Company........................................ 1,120 11.5%
Belk Enterprises, Inc....................................... 2,096 21.6%
J.V. Properties............................................. 1,536 15.8%
All Directors and Executive Officers as a group (7
persons).................................................. 7,979 82.2%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson, Katherine McKay Belk and Katherine Belk
Morris -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk
Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207; Robert K. Kerr,
Jr. -- 1890-D Beaver Ridge Circle, Norcross, Ga. 30071; Thomas M. Belk, Trustee
U/A dated September 15, 1993, Gallant-Belk Company, Belk Enterprises, Inc. and
J.V. Properties -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 954 shares held Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(b) Includes 56 shares held in several Trusts established by the Will of Mary
I. Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(c) Includes 1,120 shares held by Gallant-Belk Company, 56 shares held by Belk
of Athens, Ga., Inc., 400 shares held by Belk of Dalton, Ga., Inc. and
2,096 shares held by Belk Enterprises, Inc., which shares are voted by the
members of the Executive Committee of the Board of Directors of each such
Corporation, under authority given by the directors of each such
Corporation at the annual meeting of
19
<PAGE> 805
directors held in March, 1997. The Executive Committee of each such
Corporation consists of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk.
(d) Includes 1,536 shares held by J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
(e) Includes 19 shares held by Thomas M. Belk, Jr., as custodian for his minor
children.
(f) Includes 9 shares held by H. W. McKay Belk as custodian for his minor
children.
(g) Includes 10 shares held by John R. Belk as custodian for his minor
children.
(h) Includes 31 shares held by Katherine M. Belk as custodian for her minor
grandchildren.
20
<PAGE> 806
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
</TABLE>
F-1
<PAGE> 807
BELK OF LAWRENCEVILLE, GA., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3 FEBRUARY 1
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 53,965 $ 82,947
Accounts receivable, net.................................. 1,085,625 1,309,279
Merchandise inventory..................................... 1,514,785 1,565,056
Receivable from affiliates, net........................... 762,163 977,256
Refundable income taxes................................... 3,433 --
Deferred income taxes..................................... 19,329 --
Other..................................................... 79,946 76,722
---------- ----------
Total current assets........................................ 3,519,246 4,011,260
Loans receivable from affiliates, net....................... 70,000 70,000
Investments................................................. 261 261
Property, plant and equipment, net.......................... 352,317 149,790
Deferred income taxes....................................... 2,923 24,079
Other noncurrent assets..................................... 30,875 25,771
---------- ----------
$3,975,622 $4,281,161
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 435,150 $ 462,458
Deferred income taxes..................................... -- 931
Accrued income taxes...................................... 49,387 97,549
---------- ----------
Total current liabilities................................... 484,537 560,938
Other noncurrent liabilities................................ 45,827 46,088
---------- ----------
Total liabilities........................................... 530,364 607,026
Shareholders' equity:
Common stock.............................................. 971,200 971,200
Additional paid in capital................................ 607 607
Retained earnings......................................... 2,473,451 2,702,328
---------- ----------
Total shareholders' equity.................................. 3,445,258 3,674,135
---------- ----------
$3,975,622 $4,281,161
========== ==========
</TABLE>
F-2
<PAGE> 808
BELK OF LAWRENCEVILLE, GA., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $8,238,018 $8,020,046 $8,157,701
Operating costs and expenses............................... 7,954,044 7,851,803 7,749,789
---------- ---------- ----------
Income from operations..................................... 283,974 168,243 407,912
---------- ---------- ----------
Other income (expense):
Interest, net............................................ (9,117) 24,651 26,772
Gain (loss) on disposal of property, plant and
equipment............................................. -- 3,200 --
Miscellaneous, net....................................... (9,793) 33 (802)
---------- ---------- ----------
Total other expense, net................................... (18,910) 27,884 25,970
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 265,064 196,127 433,882
Income tax expense (benefit)............................... 133,282 71,493 156,445
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 131,782 124,634 277,437
---------- ---------- ----------
Net earnings............................................... 131,782 124,634 277,437
Retained earnings at beginning of period................... 2,265,595 2,397,377 2,473,451
Dividends paid............................................. -- (48,560) (48,560)
---------- ---------- ----------
Retained earnings at end of period......................... $2,397,377 $2,473,451 $2,702,328
========== ========== ==========
</TABLE>
F-3
<PAGE> 809
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 810
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 811
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 14, CHAPTER 2
BUSINESS CORPORATIONS
STATE OF GEORGIA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
A-1
<PAGE> 812
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's right.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
A-2
<PAGE> 813
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
A-3
<PAGE> 814
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing
A-4
<PAGE> 815
under subsection (a) of this Code section within 30 days after the corporation
offered payment for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
A-5
<PAGE> 816
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
A-6
<PAGE> 817
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................... $ 8,157,700 $277,437 $407,109 $626,162 $ 3,674,135
Adjustments to eliminate less than
wholly-owned subsidiaries................... -- -- -- -- --
----------- -------- -------- -------- -----------
Adjusted Shareholders' Statement.............. $ 8,157,700 277,437 407,109 626,162 3,674,135
=========== -------- -------- -------- -----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............... -- -- --
Gain/loss on sale of securities............. -- -- --
Impairment loss............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries.............................. -- -- --
Gain/loss on discontinued operations........ -- -- --
Adjustment to tax expense................... -- -- -- --
-------- -------- --------
Total non-operating items..................... -- -- --
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities............................. -- -- --
Adjustment for ownership in other Belk
entities.................................. (261)
-------- -------- -------- -----------
Per Model..................................... $277,437 $407,109 $626,162 $ 3,673,874
======== ======== ======== ===========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................... $ (82,948)
Negative cash balances reclassified to
accounts payable........................ --
Receivables from affiliates, net.......... (977,256)
Loans receivable from affiliates, net..... (70,000)
Liabilities
Notes payable............................. --
Current installments of long-term debt.... --
Current portion of obligations under
capital leases.......................... --
Payables to affiliates, net............... --
Long-term debt, excluding current
installments............................ --
Obligations under capital leases,
excluding current portion............... --
Loans payable to affiliates, net.......... --
-----------
Net debt (cash)............................... (1,130,204)
Adjustments to eliminate less than
wholly-owned subsidiaries................... --
-----------
Per Model..................................... $(1,130,204)
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 818
SUPPLEMENT NO. 17
<PAGE> 819
BELK OF LAWRENCEVILLE, GA., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 9:30 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: 1998
--------------------------,
---------------------------------
Signature
---------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 17
<PAGE> 820
BELK-MATTHEWS COMPANY OF MACON, GEORGIA
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk-Matthews Company of Macon, Georgia (the
"Company"), to be held on April 15, 1998, at 1:30 p.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Georgia law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 100.2971 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 602,585 shares of New Belk Class A Common Stock which will
represent approximately 1.0043% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(18)
<PAGE> 821
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 822
BELK-MATTHEWS COMPANY OF MACON, GEORGIA
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK-MATTHEWS COMPANY OF MACON, GEORGIA:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk-Matthews Company of Macon, Georgia (the "Company") will be
held on April 15, 1998, at 1:30 p.m., local time, at the offices of Belk Stores
Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for
the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Georgia law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 100.2971 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 823
BELK-MATTHEWS COMPANY OF MACON, GEORGIA
SUPPLEMENT NO. 18
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 18 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK-MATTHEWS
COMPANY OF MACON, GEORGIA (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE
DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED
HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION.
IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE
INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 16
SELECTED HISTORICAL FINANCIAL INFORMATION................... 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 18
BUSINESS OF THE COMPANY..................................... 18
SECURITY OWNERSHIP OF THE COMPANY........................... 19
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION.................................. B-1
</TABLE>
<PAGE> 824
THE COMPANY
The Company was incorporated as a Georgia corporation in 1942. The mailing
address of the Company's principal executive offices is 2801 West Tyvola Road,
Charlotte, North Carolina 28217-4500, and its telephone number at that address
is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 1:30 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies, and shares of Common Stock owned by
a Shareholder who perfects his dissenters' rights of appraisal under Georgia
law), will be converted, without any action on the part of the Shareholder, into
the right to receive 100.2971 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk (the "New Belk Class A Common
Stock"). All of the shares of New Belk Class A Common Stock received by each
Existing Belk Shareholder in the Reorganization will be aggregated and the total
will be rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 7,500 shares of Common Stock
outstanding held of record by 38 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 61.5% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and other
prospective directors of New Belk vote in favor of the Merger, and if the family
members, controlled corporations and family trusts of Mr. Belk and such other
prospective directors who also own Common Stock vote in favor of the Merger, the
vote of such persons, corporations and trusts in favor of the Merger would be
sufficient to approve the Merger under the governing documents of the Company
and applicable state law.
2
<PAGE> 825
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. In addition, the Reorganization is expected to have
certain other benefits for the Company and the Shareholders, including the
ability to share with New Belk the risk associated with the increased
competition from other major retail department stores that have moved into the
Company's market in the past year. Even though the Company has recently
completed a major renovation of its store, the new competition has created a
highly competitive situation. The Merger would enable the Company to rely upon
New Belk to help finance the Company's business, including such renovation.
There can be no assurance, however, that any of these benefits will be
achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Georgia Business Corporation Code (the "GBCC"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 14,530 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted
3
<PAGE> 826
Holders. If a share of New Belk Class A Common Stock is transferred to any
person other than a Class A Permitted Holder, whether by sale, assignment, gift,
bequest, appointment or otherwise, such share will be converted automatically
into a share of New Belk Class B Common Stock. Shares of New Belk Class A Common
Stock are convertible into New Belk Class B Common Stock, in whole or in part,
at any time and from time to time at the option of the holder, on the basis of
one share of New Belk Class B Common Stock for each share of New Belk Class A
Common Stock converted. Shares of New Belk Class A Common Stock held by a New
Belk Stockholder who is a Class A Permitted Holder will also automatically
convert into New Belk Class B Common Stock in the event that such New Belk
Stockholder no longer meets the requirements of a Class A Permitted Holder. New
Belk Class B Common Stock has no conversion rights. The Company Articles provide
for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
4
<PAGE> 827
Pursuant to the GBCC, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as the
effect of such distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to be less than the sum of its total liabilities plus
(unless the articles of incorporation permit otherwise) the amount that would be
needed if the corporation dissolved at the time of the payment of the dividend
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The GBCC permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 25%, or such
greater or lesser percentages as may be provided in the articles of
incorporation or bylaws, of all votes entitled to be cast on the proposed
corporate action to call a special meeting. The Company Bylaws authorize the
Chairman, President, Secretary, the Company Board and any Shareholder pursuant
to the written request of the holders of not less than 10% of all the shares
entitled to vote at the meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the GBCC, unless the articles of incorporation, the bylaws or
the provisions regarding meetings in the GBCC specify a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the shareholders. The Company Articles specify that to liquidate and
discontinue the business of the Company requires a two-thirds vote.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or
5
<PAGE> 828
more series of any class so as to affect them adversely, but would not so affect
the entire class, then only the shares of the series so affected by the
amendment will be considered a separate class for purposes of voting by classes.
The New Belk Certificate is consistent with the foregoing provisions of the
DGCL.
Under the GBCC, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the GBCC
requires an amendment to the articles of incorporation to be recommended by the
board of directors to the shareholders and approved by a majority (unless the
articles of incorporation or the board of directors requires a greater vote or a
vote by voting groups) of the votes entitled to be cast on the amendment by any
voting group. As under the DGCL, the holders of the outstanding shares of a
class or series are entitled to vote as a separate voting group (if shareholder
voting is otherwise required by the GBCC) on a proposed amendment if the
amendment would change certain fundamental rights and preferences of that class
or series. The Company Articles do not specify a greater vote or a vote by
voting groups to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the GBCC, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or the
GBCC reserves this power exclusively to the shareholders in whole or part or
(ii) the shareholders in amending or repealing a particular bylaw provided
expressly that the board of directors may not amend or repeal that bylaw. The
shareholders of the corporation may amend or repeal the bylaws of the
corporation even though such bylaws may be amended or repealed by the board of
directors of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board, or by the affirmative vote of a majority of the shares
outstanding and entitled to vote at any regular or special meeting of the
Shareholders. Further, the Company Bylaws provide that the Company Board has no
power to adopt a bylaw: (i) requiring more than a majority of the voting shares
for a quorum at a meeting of the Shareholders, except where higher percentages
are required by law; (ii) providing for the management of the Company otherwise
than by the Company Board or its executive committees; (iii) increasing or
decreasing the number of directors; or (iv) classifying and staggering the
election of directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the GBCC, any action that may be taken by an annual or special
meeting of shareholders may be taken without a meeting and without prior notice,
if all holders of outstanding shares entitled to vote on such action or, if so
provided in the articles of incorporation, by persons entitled to vote at a
meeting shares having voting power to cast not less than the minimum number (or
numbers, in the case of voting groups) of votes that would be necessary to
authorize or take the action at which all shareholders entitled to vote were
present and voted sign the written consent(s) describing such action. The
Company Bylaws permit any action which may be taken at a meeting of the
Shareholders to be taken without a meeting if a consent in writing, setting
forth the action so taken, is signed by all of the persons who would be entitled
to vote upon such action at a meeting and filed with the Secretary of the
Company.
6
<PAGE> 829
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation or a bylaw
approved by the shareholders, the GBCC permits a vacancy in the board of
directors to be filled by the shareholders or by the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board and if
the vacancy is one that the directors are authorized to fill, then the directors
may fill the vacancy by the affirmative vote of a majority of all the directors
remaining in office.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director but a vacancy created by an increase
in the authorized number of directors may be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The GBCC requires a corporation to have at least one director. The articles
of incorporation or the bylaws may authorize the shareholders or the board of
directors to change the number of directors. If the articles of incorporation or
the bylaws establish a variable range for the size of directors, the number of
directors may be changed, within the prescribed range, by the shareholders or,
if the articles of incorporation so provide, by the board of directors. The
Company Bylaws require the Company Board to consist of at least three, but no
more than 15, directors.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
7
<PAGE> 830
Under the GBCC, a director must be a natural person and at least 18 years
of age, but does not have to be a resident of Georgia or a shareholder of the
corporation unless otherwise provided for in the articles of incorporation. The
Company articles do not require directors of the Company to be residents of
Georgia or shareholders of the Company. The GBCC also allows the articles of
incorporation or the bylaws to provide for additional qualifications of
directors.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each class expiring at the
annual meeting in successive years beginning with the first class and
progressing to the third class, if any. Thereafter, directors are chosen for a
full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
Under the GBCC, the articles of incorporation may allow for staggering the
terms of directors by dividing the total number of directors into two or three
groups, with each group containing one-half or one-third of the total. The term
of each group expires in each successive year beginning with the first group and
progressing to the third group, if any. Thereafter, directors are chosen for a
term of two or three years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
According to the GBCC, unless the articles of incorporation or bylaws
provide that directors may be removed only for cause, the shareholders may
remove one or more directors with or without cause. If a director is elected by
a voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove him. If cumulative voting is not authorized, a
director may be removed only by a majority of votes entitled to be cast.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under both the DGCL and the GBCC, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the GBCC generally permits transactions involving a
Georgia corporation and an interested director of that corporation if: (i) the
transaction received the affirmative vote of a majority (but not less than two)
of those qualified directors on the board of directors or on a duly empowered
committee
8
<PAGE> 831
thereof who voted on the transaction after required disclosure to them; (ii) if
a majority of the votes entitled to be cast by the holders of all qualified
shares were cast in favor of the transaction after (a) notice to shareholders
describing the director's conflicting interest transaction, (b) provision of the
information with regard to any unqualified shares and (c) required disclosure to
the shareholders who voted on the transaction (to the extent the information was
not known by them); or (iii) the transaction, judged in the circumstances at the
time of commitment, is established to have been fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the GBCC, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the GBCC (i) in connection with a
proceeding by or in the right of the corporation, except for reasonable expenses
incurred in connection with the proceeding if it is determined that the director
or officer has met the relevant standard of conduct under the GBCC or (ii) in
connection with any proceeding with respect to conduct for which he was adjudged
liable on the basis that personal benefit was improperly received by him,
whether or not involving action in his official capacity. A Georgia corporation
must indemnify a director or officer who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he or she was a party
because he was a director or officer of the corporation against reasonable
expenses incurred by the director or officer in connection with the proceeding.
9
<PAGE> 832
The Company Bylaws authorize indemnification as provided in the GBCC. In
addition, the Company Bylaws provide that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify a director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the GBCC, a director
will not be personally liable to the Company or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The GBCC concerning the approval of mergers and share exchanges is similar
in all material respects to the DGCL, except action by the shareholders of the
surviving corporation is not required if the number and kind of shares
outstanding immediately after the merger or share exchange, plus the number and
kind of shares issuable as a result of the merger or share exchange and by the
conversion of securities issued pursuant to the merger or share exchange or the
exercise of rights and warrants issued pursuant to the merger or share exchange
does not exceed the total number and kind of shares of the surviving or
acquiring corporation authorized by its articles of incorporation immediately
before the merger or share exchange. The GBCC and DGCL provisions concerning the
approval of the sale of all or substantially all of the assets of a corporation
are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the GBCC include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined in the DGCL and the
GBCC, "business combinations" generally encompass (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder, (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested shareholder of a substantial percentage of assets of the corporation,
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested shareholder,
except in certain circumstances, (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested shareholder, except
in certain circumstances or (v) any receipt by the interested shareholder of the
benefit of any loans, advances,
10
<PAGE> 833
guarantees, pledges or other financial benefits (other than those expressly
permitted in (i) through (iv) above) provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who (i) is the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation and within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation. Under the
GBCC, an "interested shareholder" is any person who owns 10% of the outstanding
voting shares or is an affiliate of the corporation owning 10% of the
outstanding voting shares within the prior two years, and a "continuing
director" is a director not associated or affiliated with any interested
shareholder.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (a) by persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
According to the GBCC, if at least three continuing directors serve on the
board of directors, then those directors must unanimously approve the business
combination. If three continuing directors do not serve on the board of
directors, then 66 2/3% of the continuing directors must recommend the business
combination and a majority of shareholders entitled to cast a vote must approve
the business combination. Also, except under certain circumstances, no mergers
may occur between a corporation and an interested shareholder within five years
of the date the shareholder became an interested shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the GBCC provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
11
<PAGE> 834
The GBCC concerning preemptive rights is equivalent to the DGCL. The
Company Articles do not contain any provision with respect to preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the GBCC, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) excerpts from minutes of any
meeting of the board of directors, records of any action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporations; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the GBCC ("Article 13") has
the right to receive in cash the fair value of such Shareholder's shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN
ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
To exercise appraisal rights under Article 13, a holder of Common Stock
must (i) deliver to the Company before the taking of the vote of Shareholders on
the Reorganization Agreement written notice of his intent to demand payment for
his shares if the Merger is effected and (ii) not vote his shares in favor of
the Reorganization Agreement. A Shareholder who does not satisfy these two
requirements is not entitled to payment for his shares under Article 13. In
addition, any Shareholder who returns a signed proxy but fails to provide
instructions as to the manner in which such shares are to be voted will be
deemed to have voted in favor of the Reorganization Agreement and will not be
entitled to assert dissenters' rights of appraisal.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial Shareholder and he notifies the Company
in writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of such a partial dissenter are determined as if
the shares as to which he dissents and his other shares are registered in the
names of different Shareholders.
If the Reorganization Agreement is approved at the Special Meeting, the
Company must deliver a written dissenters' notice (the "Dissenters' Notice") to
all Shareholders who satisfied the notice requirements of Article 13. The
Dissenters' Notice must be sent within 10 days after the Effective Time and must
(i) state where the demand for payment must be sent and where and when
certificates for shares must be deposited, (ii) inform holders of uncertificated
shares to what extent transfer of those shares will be restricted after the
demand for payment is received, (iii) set a date by which the Company must
receive the demand for payment (which date may not be fewer than 30 nor more
than 60 days after the Dissenters' Notice is delivered) and (iv) be accompanied
by a copy of Article 13.
12
<PAGE> 835
A record Shareholder who receives the Dissenters' Notice must demand
payment and deposit his certificates in accordance with the Dissenters' Notice.
Such Shareholder will retain all other rights of a Shareholder until those
rights are canceled or modified by the consummation of the Merger. A record
Shareholder who does not demand payment or deposit his share certificates where
required, each by the date set in the Dissenters' Notice, is not entitled to
payment for his shares under Article 13.
Within 10 days of the later of the Effective Time or receipt of a payment
demand, the Company must offer to pay each dissenting Shareholder who complied
with Article 13 the amount the Company estimates to be the fair value of his
shares, plus accrued interest from the Effective Time. Such offer of payment
must be accompanied by (i) certain recent Company financial statements, (ii) the
Company's estimate of the fair value of the shares and interest due, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Article 13 and (v) a copy of Article
13. If the Shareholder accepts the Company's offer by written notice to the
Company within 30 days after the Company's offer, the Company must make payment
within 60 days after the later of the making of the offer or the Effective Time.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing share certificates, the Company must return the
deposited certificates. If, after such return, the Merger is consummated, the
Company must send a new Dissenters' Notice and repeat the payment procedure
described above.
A dissenting Shareholder may notify the Company in writing of his own
estimate of the fair value of his shares and the interest due, and may demand
payment of his estimate, if (i) he believes that the amount offered by the
Company is less than the fair value of his shares or that the interest due has
been calculated incorrectly or (ii) the Company, having failed to consummate the
Merger, does not return the deposited certificates within 60 days after the date
set for demanding payment. A dissenting Shareholder waives his right to demand
payment unless he notifies the Company of his demand in writing within 30 days
after the Company makes or offers payment for his shares. If the Company does
not offer payment within 10 days of the later of the Effective Time or receipt
of a payment demand, then (i) the Shareholder may demand the financial
statements and other information of the Company, and the Company must provide
such information within 10 days after receipt of the written demand and (ii) the
Shareholder may notify the Company of his own estimate of the fair value of his
shares and the amount of interest due, and may demand payment of that estimate.
If a demand for payment by a Shareholder remains unsettled, the Company
must commence a nonjury equity valuation proceeding in the appropriate court, as
specified in Article 13, within 60 days after receiving the payment demand and
must petition the court to determine the fair value of the shares and accrued
interest. If the Company does not commence a valuation proceeding within 60
days, the Company is required to pay each dissenting Shareholder whose demand
remains unsettled, the amount demanded. The Company is required to make all
dissenting Shareholders whose demands remain unsettled parties to the proceeding
and to serve a copy of the petition upon each dissenting Shareholder. The court
may appoint appraisers to receive evidence and to recommend a decision on fair
value. Each dissenting Shareholder made a party to the proceeding is entitled to
judgment for the fair value of his shares plus interest to the date of judgment.
In an appraisal proceeding commenced under Article 13, the court must
determine the costs of the proceeding, excluding fees and expenses of attorneys
and experts for the respective parties, and must assess those costs against the
Company, except that the court may assess the costs against all or some of the
dissenting Shareholders to the extent the court finds they acted arbitrarily,
vexatiously or not in good faith in demanding payment under Article 13. The
court also may assess the fees and expenses of attorneys and experts for the
respective parties against the Company if the court finds the Company did not
substantially comply with the requirements of Article 13, or against either the
Company or a dissenting Shareholder if the court finds that such party acted
arbitrarily, vexatiously or not in good faith with respect to the rights
provided by Article 13.
If the court finds that the services of the attorneys for any dissenting
Shareholder were of substantial benefit to other dissenting Shareholders
similarly situated, and that the fees for those services should not be assessed
against the Company, the court may award those attorneys reasonable fees out of
the amounts
13
<PAGE> 836
awarded the dissenting Shareholders who were benefited. No action by any
dissenting Shareholder to enforce dissenters' rights may be brought more than
three years after the Effective Time, regardless of whether notice of the Merger
and of the right to dissent was given by the Company in compliance with the
provisions of Article 13.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period")multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ----------- ----------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales.................. $32,745,226 $32,745,226 0.6 $9,852,780 $ 9,794,355
EBITDA..................... 3,949,840 2,560,697 7 9,852,780 8,072,099
EBIT....................... 2,830,612 1,441,469 10 9,852,780 4,561,910
Net Income................. 1,577,982 708,585 15 -- 10,628,775
Book Equity................ 14,557,476 13,068,547 1 -- 13,068,547
</TABLE>
14
<PAGE> 837
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Tags Stores, LLC 9.4420% X $15,118,749 = $ 1,427,512
-----------
Total $ 1,427,512
===========
Relative Operating Value of Company $13,068,547
Relative Operating Value of Other Companies Owned by Company + 1,427,512
-----------
Total Relative Value of Company = $14,496,059
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Enterprises,
Inc. 2.400% X $14,496,059 = $ 347,905
Matthews-Belk Company .9467% X 14,496,059 = 137,234
Belk of LaGrange,
Ga., Inc. 15.0400% X 14,496,059 = 2,180,207
Belk of Monroe, NC,
Inc. .8667% X 14,496,059 = 125,637
Belk of Thomaston,
Ga., Inc. .6400% X 14,496,059 = 92,775
-----------
Total $ 2,883,759
===========
Total Relative Value of Company $14,496,059
Total Relative Value of Company Owned by Other Belk Companies - 2,883,759
-----------
Net Relative Value of Company = $11,612,300
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$11,612,300 / $1,156,226,577 = 1.0043%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(1.0043% X 59,998,834) / 6,008 = 100.2971
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
15
<PAGE> 838
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $210.40
Dividends(2).............................................. 7.50
Book value per share(3)................................... 1,941.00
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 96.29
Dividends(2).............................................. 26.08
Book value per share...................................... 1,255.72
</TABLE>
- ---------------
(1) Based on 7,500 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 7,500 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
16
<PAGE> 839
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 33,306 $ 32,711 $ 32,745
Net income.................................................. 1,028 613 1,578
Per common share
Net income (loss)(1)...................................... 137.03 81.67 210.40
Dividends................................................. 7.50 10.00 7.50
Book value(2)............................................. 1,712.98 1,823.24 1,941.00
Total assets................................................ 20,867 22,598 28,843
Shareholders' equity........................................ 12,847 13,674 14,557
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $20,540 $20,832
Income (loss) from operations............................... 500 (1,033)
</TABLE>
- ---------------
(1) Based on 7,500 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 7,500 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
17
<PAGE> 840
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
To the extent a discussion of the financial condition and results of
operations of the Company for any of the fiscal years ended January 31, 1995,
February 3, 1996 or February 1, 1997 or for either of the nine-month periods
ended November 2, 1996 or November 1, 1997 is necessary to identify certain
trends or conditions that differ from the combined Belk Companies and that are
material to Shareholders' understanding of the financial condition or results of
operations of the Company, such discussion is included below. The discussion
which follows is based upon and should be read in conjunction with the
historical financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus Supplement.
Other income (expense), net improved to income of 3.4% of sales in fiscal
year 1997 compared to an expense of 0.7% in fiscal year 1996 as a result of a
$1.4 million gain on the sale of securities.
In fiscal year 1997, the Macon Outlet Center was contributed to TAGS
Stores, LLC in exchange for a partnership interest. Comparable store sales
increased due to a strong sales performance at both the Macon, Georgia location
that was remodeled in the fall of fiscal year 1997 and the Warner Robins,
Georgia location that was relocated in the fall of fiscal year 1995.
BUSINESS OF THE COMPANY
General. The Company operates two retail department stores in the
following locations in Georgia: Galleria Mall in Centerville and Macon Mall in
Macon. The Company's stores operate in a manner consistent with the business of
the Belk Companies described in the Proxy Statement/Prospectus. The stores are
managed out of the Matthews group office in Macon, Georgia. The Company also
operates a marking and receiving center in the Galleria Mall location that
receives inventory, marks it for shipping to other Belk stores served by the
Matthews group and ships the inventory to such stores. Furthermore, the Matthews
group office operates out of the Macon Mall location. The Matthews group office
provides buying, advertising, accounting, personnel and other services to stores
in the Matthews group area.
Facilities. The Company owns the store property and building, which
contains approximately 160,000 square feet of floor area, at the Macon Mall
location, together with an adjacent parking area. The Company leases its store
building at Galleria Mall in Centerville, which contains approximately 80,000
square feet of floor area. The current term of the lease expires in 2014. The
Macon Mall store completed a major remodeling in 1996, and the Company believes
that its buildings are adequate to meet its current needs.
Competition. Specific competitors in the Company's markets include Penney,
Sears, Dillard, Macy's and Parisian.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
18
<PAGE> 841
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer) (a)(b)(c)..... 2,592 34.6%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(c).................................................... 2,079 27.7%
H. W. McKay Belk (Director and Executive Officer) (b)(c).... 2,079 27.7%
John R. Belk (Director and Executive Officer) (b)(c)........ 2,099 28.0%
Henderson Belk (Director)................................... 0 *
Sarah Belk Gambrell......................................... 957.0 12.8%
Leroy Robinson (Director) (b)............................... 532.0 7.1%
B. Frank Matthews, II (Director and Executive Officer)
(e)(f)(g)................................................. 825.0 11.0%
William M. Matthews, IV (Director and Executive Officer).... 1,015.5 13.5%
Katherine McKay Belk (b).................................... 628 8.4%
Katherine Belk Morris (b)................................... 587 7.8%
Elizabeth M. Welton (d)(e).................................. 384.0 5.1%
Larry Williams (Executive Officer).......................... 0 *
Thomas M. Belk, Trustee U/A date September 15, 1993......... 532 7.1%
Belk of LaGrange, Ga., Inc.................................. 1,128 15.0%
All Directors and Executive Officers as a group (8
persons).................................................. 4,617.5 61.5%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson, Katherine McKay Belk and Katherine Belk
Morris -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk
Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207; B. Frank Matthews, II and
Elizabeth Matthews Welton -- 2240 Remount Road, Gastonia, N.C. 28054; William M.
Matthews, V and Larry Williams -- 3661 Eisenhower Parkway, Macon, Ga. 31206;
Belk of LaGrange, Ga, Inc. and Thomas M. Belk, Trustee U/A dated September 15,
1993 -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 240 shares held by Montgomery Investment Company, of which John M.
Belk is the majority shareholder.
(b) Includes 532 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(c) Includes 65 shares held by Belk Brothers of Monroe, North Carolina,
Incorporated, 1,128 shares held by Belk of LaGrange, Ga., Inc., 180 shares
held by Belk Enterprises, Inc., 48 shares held by Belk of Thomaston, Ga.,
Inc. and 71 shares held by Matthews-Belk Company, which shares are voted by
the members of the Executive Committee of the Board of Directors of each
such Corporation, under authority given by the directors of each such
Corporation at the annual meeting of directors held in
19
<PAGE> 842
March, 1997. The Executive Committee of each such Corporation consists of
John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(d) Includes 347 shares held by Elizabeth Matthews Welton Family Limited
Partnership Phase II. Elizabeth M. Welton has voting and investment power
with respect to such shares.
(e) Includes 37 shares held by Robinson Investment Company. B. Frank Matthews,
II and Elizabeth M. Welton share the voting and investment power with
respect to such shares.
(f) Includes 360 shares held by First Union National Bank of N.C., B. Frank
Matthews, II and Annabelle Z. Royster, Co-Trustees under the will of J.H.
Matthews, Jr. The named Trustees have voting and investment power with
respect to such shares.
(g) Includes 53 shares held by B. Frank Matthew, II's wife, Betty Choate
Matthews.
20
<PAGE> 843
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 844
BELK-MATTHEWS COMPANY OF MACON, GEORGIA
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 3,245,514 $ 703,227
Accounts receivable, net.................................. 5,575,080 6,167,158
Merchandise inventory..................................... 6,709,129 7,439,620
Refundable income taxes................................... 74,869 68,120
Deferred income taxes..................................... 96,286 72,287
Other..................................................... 393,750 409,105
----------- -----------
Total current assets........................................ 16,094,628 14,859,517
Loans receivable from affiliates, net....................... 11,545 11,545
Investments................................................. 1,056,385 1,488,928
Property, plant and equipment, net.......................... 5,294,752 12,360,087
Other noncurrent assets..................................... 140,620 122,430
----------- -----------
$22,597,930 $28,842,507
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable............................................. $ -- $ 8,187,379
Current installments of long-term debt.................... 750,000 --
Accounts payable and accrued expenses..................... 1,756,834 2,174,743
Payables to affiliates, net............................... 2,105,060 2,380,175
Accrued income taxes...................................... -- 83,923
----------- -----------
Total current liabilities................................... 4,611,894 12,826,220
Deferred income taxes....................................... 553,139 352,703
Long-term debt, excluding current installments.............. 3,000,000 --
Other noncurrent liabilities................................ 335,446 364,840
----------- -----------
Total liabilities........................................... 8,500,479 13,543,763
Deferred income............................................. 423,121 741,269
Shareholders' equity:
Common stock.............................................. 750,000 750,000
Additional paid in capital................................ 3,802 3,802
Net unrealized gain (loss) on investments, net of income
taxes.................................................. 638,586 --
Retained earnings......................................... 12,281,942 13,803,673
----------- -----------
Total shareholders' equity.................................. 13,674,330 14,557,475
----------- -----------
$22,597,930 $28,842,507
=========== ===========
</TABLE>
F-2
<PAGE> 845
BELK-MATTHEWS COMPANY OF MACON, GEORGIA
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Total store sales....................................... $33,744,348 $33,122,857 $33,077,203
Less: Leased Sales...................................... 438,376 411,598 331,978
----------- ----------- -----------
Net sales............................................... 33,305,972 32,711,259 32,745,225
Operating costs and expenses............................ 31,331,880 31,550,086 31,323,288
----------- ----------- -----------
Income from operations.................................. 1,974,092 1,161,173 1,421,937
----------- ----------- -----------
Other income (expense):
Interest, net......................................... (295,380) (227,569) (309,278)
Dividend income....................................... 16,743 19,533 26,704
Gain (loss) on disposal of property, plant and
equipment.......................................... (104,413) (5,188) (13,912)
Gain (loss) on sale of securities..................... -- -- 1,403,055
Miscellaneous, net.................................... 13,217 (3,063) (7,172)
----------- ----------- -----------
Total other expense, net................................ (369,833) (216,287) 1,099,397
----------- ----------- -----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities..... 1,604,259 944,886 2,521,334
Income tax expense (benefit)............................ 576,520 332,330 943,353
----------- ----------- -----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities................... 1,027,739 612,556 1,577,981
----------- ----------- -----------
Net earnings............................................ 1,027,739 612,556 1,577,981
Retained earnings at beginning of period................ 10,772,897 11,744,386 12,281,942
Dividends paid.......................................... (56,250) (75,000) (56,250)
----------- ----------- -----------
Retained earnings at end of period...................... $11,744,386 $12,281,942 $13,803,673
=========== =========== ===========
</TABLE>
F-3
<PAGE> 846
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 847
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 848
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 14, CHAPTER 2
BUSINESS CORPORATIONS
STATE OF GEORGIA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
A-1
<PAGE> 849
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's right.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
A-2
<PAGE> 850
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
A-3
<PAGE> 851
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing
A-4
<PAGE> 852
under subsection (a) of this Code section within 30 days after the corporation
offered payment for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
A-5
<PAGE> 853
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
A-6
<PAGE> 854
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................ $32,745,226 $1,577,982 $ 2,830,612 $ 3,949,840 $14,557,476
Adjustments to eliminate less than
wholly-owned subsidiaries................ -- -- -- -- --
----------- ---------- ----------- ----------- -----------
Adjusted Shareholders' Statement........... $32,745,226 1,577,982 2,830,612 3,949,840 14,557,476
=========== ---------- ----------- ----------- -----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............ 8,707 13,912 13,912
Gain/loss on sale of securities.......... (878,104) (1,403,055) (1,403,055)
Impairment loss.......................... -- -- --
Equity in earnings of unconsolidated
subsidiaries........................... -- -- --
Gain/loss on discontinued operations..... -- -- --
Adjustment to tax expense................ -- -- -- --
---------- ----------- -----------
Total non-operating items.................. (869,397) (1,389,143) (1,389,143)
---------- ----------- -----------
Other Adjustments:
Adjustment for dividends received from
other Belk entities.................... -- -- --
Adjustment for ownership in other Belk
entities............................... (1,488,928)
---------- ----------- ----------- -----------
Per Model.................................. $ 708,585 $ 1,441,469 $ 2,560,697 $13,068,548
========== =========== =========== ===========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................ $ (703,229)
Negative cash balances reclassified to
accounts payable..................... --
Receivables from affiliates, net....... --
Loans receivable from affiliates,
net.................................. (11,545)
Liabilities
Notes payable.......................... 8,187,379
Current installments of long-term
debt................................. --
Current portion of obligations under
capital leases....................... --
Payables to affiliates, net............ 2,380,175
Long-term debt, excluding current
installments......................... --
Obligations under capital leases,
excluding current portion............ --
Loans payable to affiliates, net....... --
-----------
Net debt (cash)............................ 9,852,780
Adjustments to eliminate less than
wholly-owned subsidiaries................ --
-----------
Per Model.................................. $ 9,852,780
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 855
SUPPLEMENT NO. 18
<PAGE> 856
BELK-MATTHEWS COMPANY OF MACON, GEORGIA
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 1:30 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
-------------------
-------------------------------
Signature
-------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 18
<PAGE> 857
BELK-MATTHEWS COMPANY OF MILLEDGEVILLE, GA., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk-Matthews Company of Milledgeville, Ga.,
Inc. (the "Company"), to be held on April 15, 1998, at 1:40 p.m., local time, at
the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Georgia law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 37.1091 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 266,146 shares of New Belk Class A Common Stock which will
represent approximately 0.4436% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(19)
<PAGE> 858
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 859
BELK-MATTHEWS COMPANY OF MILLEDGEVILLE, GA., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK-MATTHEWS COMPANY OF MILLEDGEVILLE, GA., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk-Matthews Company of Milledgeville, Ga., Inc. (the "Company")
will be held on April 15, 1998, at 1:40 p.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Georgia law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 37.1091 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 860
BELK-MATTHEWS COMPANY OF MILLEDGEVILLE, GA., INC.
SUPPLEMENT NO. 19
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 19 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK-MATTHEWS
COMPANY OF MILLEDGEVILLE, GA., INC. (THE "COMPANY"), THE DISCUSSION HEREIN
SUPERSEDES THE DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE
INFORMATION CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE
IN THE REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN
THE REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY
AND THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT
BE ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL
CAPITALIZED TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE
MEANINGS SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 16
SELECTED HISTORICAL FINANCIAL INFORMATION................... 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 18
BUSINESS OF THE COMPANY..................................... 18
SECURITY OWNERSHIP OF THE COMPANY........................... 19
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION.................................. B-1
</TABLE>
<PAGE> 861
THE COMPANY
The Company was incorporated as a Georgia corporation in 1951. The mailing
address of the Company's principal executive offices is 2801 West Tyvola Road,
Charlotte, North Carolina 28217-4500, and its telephone number at that address
is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 1:40 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under Georgia law),
will be converted, without any action on the part of the Shareholder, into the
right to receive 37.1091 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk (the "New Belk Class A Common Stock"). All
of the shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 8,640 shares of Common Stock
outstanding held of record by 32 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 65.2% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 862
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' right of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Georgia Business Corporation Code (the "GBCC"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 17,280 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock held by a New Belk Stockholder who is a Class A Permitted
Holder will also automatically convert into New
3
<PAGE> 863
Belk Class B Common Stock in the event that such New Belk Stockholder no longer
meets the requirements of a Class A Permitted Holder. New Belk Class B Common
Stock has no conversion rights. The Company Articles provide for only one class
of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the GBCC, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as the
effect of such distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to be less than the sum of its total liabilities plus
(unless the articles of incorporation permit otherwise) the amount that would be
needed if the corporation dissolved at the time of the payment of the dividend
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
4
<PAGE> 864
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The GBCC permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 25%, or such
greater or lesser percentages as may be provided in the articles of
incorporation or bylaws, of all votes entitled to be cast on the proposed
corporate action to call a special meeting. The Company Bylaws authorize the
Chairman, President, Secretary, the Company Board and any Shareholder pursuant
to the written request of the holders of not less than 10% of all the shares
entitled to vote at the meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the GBCC, unless the articles of incorporation, the bylaws or
the provisions regarding meetings in the GBCC specify a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the shareholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
Under the GBCC, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the GBCC
requires an amendment to the articles of incorporation to be recommended by the
board of directors to the
5
<PAGE> 865
shareholders and approved by a majority (unless the articles of incorporation or
the board of directors requires a greater vote or a vote by voting groups) of
the votes entitled to be cast on the amendment by any voting group. As under the
DGCL, the holders of the outstanding shares of a class or series are entitled to
vote as a separate voting group (if shareholder voting is otherwise required by
the GBCC) on a proposed amendment if the amendment would change certain
fundamental rights and preferences of that class or series. The Company Articles
do not specify a greater vote or a vote by voting groups to amend the Company
Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the GBCC, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or the
GBCC reserves this power exclusively to the shareholders in whole or part or
(ii) the shareholders in amending or repealing a particular bylaw provided
expressly that the board of directors may not amend or repeal that bylaw. The
shareholders of the corporation may amend or repeal the bylaws of the
corporation even though such bylaws may be amended or repealed by the board of
directors of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board, or by the affirmative vote of a majority of the shares
outstanding and entitled to vote at any regular or special meeting of the
Shareholders. Further, the Company Bylaws provide that the Company Board has no
power to adopt a bylaw: (i) requiring more than a majority of the voting shares
for a quorum at a meeting of the Shareholders, except where higher percentages
are required by law; (ii) providing for the management of the Company otherwise
than by the Company Board or its executive committees; (iii) increasing or
decreasing the number of directors; or (iv) classifying and staggering the
election of directors. The Company Articles provide that the Company Board shall
have concurrent power, by vote of a majority of all of the directors, to make,
alter, amend and rescind the Company Bylaws. The bylaws enacted by the
Shareholders may be affected by action of the Company Board and vice versa;
provided, however, the Company Board may not re-enact a bylaw which the
Shareholders have repealed or altered, nor may it repeal a bylaw enacted by the
Shareholders which limits the powers of the Company Board or enhances or
protects the right of Shareholders, without the consent of the Shareholders.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the GBCC, any action that may be taken by an annual or special
meeting of shareholders may be taken without a meeting and without prior notice,
if all holders of outstanding shares entitled to vote on such action or, if so
provided in the articles of incorporation, by persons entitled to vote at a
meeting shares having voting power to cast not less than the minimum number (or
numbers, in the case of voting groups) of votes that would be necessary to
authorize or take the action at which all shareholders entitled to vote were
present and voted sign the written consent(s) describing such action. The
Company Bylaws permit any action which may be taken at a meeting of the
Shareholders to be taken without a meeting if a consent in writing, setting
forth the action so taken, is signed by all of the persons who would be entitled
to vote upon such action at a meeting and filed with the Secretary of the
Company.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be
6
<PAGE> 866
filled by a majority of the directors then in office, although less than a
quorum, or by a sole remaining director. If at the time of filling any vacancy
or newly created directorship, the directors then in office constitute less than
a majority of the whole board as constituted immediately prior to such increase,
the Delaware Court of Chancery may, upon application of stockholders holding at
least 10% of the total number of shares outstanding having the right to vote for
such directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation or a bylaw
approved by the shareholders, the GBCC permits a vacancy in the board of
directors to be filled by the shareholders or by the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board and if
the vacancy is one that the directors are authorized to fill, then the directors
may fill the vacancy by the affirmative vote of a majority of all the directors
remaining in office.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors may be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The GBCC requires a corporation to have at least one director. The articles
of incorporation or the bylaws may authorize the shareholders or the board of
directors to change the number of directors. If the articles of incorporation or
the bylaws establish a variable range for the size of directors, the number of
directors may be changed, within the prescribed range, by the shareholders or,
if the articles of incorporation so provide, by the board of directors. The
Company Bylaws require the Company Board to consist of at least three, but no
more than 15, directors.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
Under the GBCC, a director must be a natural person and at least 18 years
of age, but does not have to be a resident of Georgia or a shareholder of the
corporation unless otherwise provided for in the articles of incorporation. The
Company Articles do not require directors of the Company to be residents of
Georgia or
7
<PAGE> 867
shareholders of the Company. The GBCC also allows the articles of incorporation
or additional bylaws to provide for additional qualifications of directors.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each class expiring at the
annual meeting in successive years beginning with the first class and
progressing to the third class, if any. Thereafter, directors are chosen for a
full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
Under the GBCC, the articles of incorporation may allow for staggering the
terms of directors by dividing the total number of directors into two or three
groups, with each group containing one-half or one-third of the total. The term
of each group expires in each successive year beginning with the first group and
progressing to the third group, if any. Thereafter, directors are chosen for a
term of two or three years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
According to the GBCC, unless the articles of incorporation or bylaws
provide that directors may be removed only for cause, the shareholders may
remove one or more directors with or without cause. If a director is elected by
a voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove him. If cumulative voting is not authorized, a
director may be removed only by a majority of votes entitled to be cast.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under both the DGCL and the GBCC, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the GBCC generally permits transactions involving a
Georgia corporation and an interested director of that corporation if: (i) the
transaction received the affirmative vote of a majority (but not less than two)
of those qualified directors on the board of directors or on a duly empowered
committee thereof who voted on the transaction after required disclosure to
them; (ii) if a majority of the votes entitled to be cast by the holders of all
qualified shares were cast in favor of the transaction after (a) notice to
shareholders describing the director's conflicting interest transaction, (b)
provision of the information with
8
<PAGE> 868
regard to any unqualified shares and (c) required disclosure to the shareholders
who voted on the transaction (to the extent the information was not known by
them); or (iii) the transaction, judged in the circumstances at the time of
commitment, is established to have been fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the GBCC, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the GBCC (i) in connection with a
proceeding by or in the right of the corporation, except for reasonable expenses
incurred in connection with the proceeding if it is determined that the director
or officer has met the relevant standard of conduct under the GBCC or (ii) in
connection with any proceeding with respect to conduct for which he was adjudged
liable on the basis that personal benefit was improperly received by him,
whether or not involving action in his official capacity. A Georgia corporation
must indemnify a director or officer who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party because he
was a director or officer of the corporation against reasonable expenses
incurred by the director or officer in connection with the proceeding.
The Company Bylaws authorize indemnification as provided in the GBCC. In
addition, the Company Bylaws provide that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not
9
<PAGE> 869
indemnify a director or officer against liability or litigation expense that he
may incur on account of his activities which were, at the time taken, known or
believed by him to be clearly in conflict with the best interest of the Company.
The Company will likewise and to the same extent indemnify any person who, at
the request of the Company, is or was serving as a director or as an officer of
another corporation, joint venture, trust or other enterprise, as a partner of a
partnership or as a trustee or administrator under an employee benefit plan. The
Company will also indemnify a director or officer for reasonable costs, expenses
and attorneys' fees in connection with the enforcement of rights to
indemnification granted therein, if it is so determined in accordance with the
Company Articles that the director or officer is entitled to indemnification
thereunder. The Company Articles provide that to the fullest extent permitted by
the GBCC, a director will not be personally liable to the Company or any of its
Shareholders or otherwise for monetary damages for breach of duty of care or
other duty as a director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The GBCC concerning the approval of mergers and share exchanges is similar
in all material respects to the DGCL, except action by the shareholders of the
surviving corporation is not required if the number and kind of shares
outstanding immediately after the merger or share exchange, plus the number and
kind of shares issuable as a result of the merger or share exchange and by the
conversion of securities issued pursuant to the merger or share exchange or the
exercise of rights and warrants issued pursuant to the merger or share exchange
does not exceed the total number and kind of shares of the surviving or
acquiring corporation authorized by its articles of incorporation immediately
before the merger or share exchange. The GBCC and DGCL provisions concerning the
approval of the sale of all or substantially all of the assets of a corporation
are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the GBCC include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined in the DGCL and the
GBCC, "business combinations" generally encompass (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder, (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested Shareholder of a substantial percentage of assets of the corporation,
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested Shareholder,
except in certain circumstances, (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested Shareholder, except
in certain circumstances or (v) any receipt by the interested Shareholder of the
benefit of any loans, advances, guarantees, pledges or other financial benefits
(other than those expressly permitted in (i) through (iv) above) provided by or
through the corporation.
The DGCL defines an "interested stockholder" as any person who (i) is the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation and within three years of the date in
question was the direct
10
<PAGE> 870
or indirect owner of at least 15% of the voting power of any class or series of
the then outstanding stock of the corporation. Under the GBCC, an "interested
shareholder" is any person who owns 10% of the outstanding voting shares or is
an affiliate of the corporation owning 10% of the outstanding voting shares
within the prior two years, and a "continuing director" is a director not
associated or affiliated with any interested shareholder.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (a) by persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
According to the GBCC, if at least three continuing directors serve on the
board of directors, then those directors must unanimously approve the business
combination. If three continuing directors do not serve on the board of
directors, then 66 2/3% of the continuing directors must recommend the business
combination and a majority of shareholders entitled to cast a vote must approve
the business combination. Also, except under certain circumstances, no mergers
may occur between a corporation and an interested shareholder within five years
of the date the shareholder became an interested shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the GBCC provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The GBCC concerning preemptive rights is equivalent to the DGCL. The
Company Articles do not contain any provision with respect to preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other
11
<PAGE> 871
books and records and to make copies or extracts therefrom. A proper purpose
means a purpose reasonably related to such person's interest as a stockholder.
Pursuant to the GBCC, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) excerpts from minutes of any
meeting of the board of directors, records of any action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporations; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the GBCC ("Article 13") has
the right to receive in cash the fair value of such Shareholder's shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN
ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
To exercise appraisal rights under Article 13, a holder of Common Stock
must (i) deliver to the Company before the taking of the vote of Shareholders on
the Reorganization Agreement written notice of his intent to demand payment for
his shares if the Merger is effected and (ii) not vote his shares in favor of
the Reorganization Agreement. A Shareholder who does not satisfy these two
requirements is not entitled to payment for his shares under Article 13. In
addition, any Shareholder who returns a signed proxy but fails to provide
instructions as to the manner in which such shares are to be voted will be
deemed to have voted in favor of the Reorganization Agreement and will not be
entitled to assert dissenters' rights of appraisal.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial Shareholder and he notifies the Company
in writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of such a partial dissenter are determined as if
the shares as to which he dissents and his other shares are registered in the
names of different Shareholders.
If the Reorganization Agreement is approved at the Special Meeting, the
Company must deliver a written dissenters' notice (the "Dissenters' Notice") to
all Shareholders who satisfied the notice requirements of Article 13. The
Dissenters' Notice must be sent within 10 days after the Effective Time and must
(i) state where the demand for payment must be sent and where and when
certificates for shares must be deposited, (ii) inform holders of uncertificated
shares to what extent transfer of those shares will be restricted after the
demand for payment is received, (iii) set a date by which the Company must
receive the demand for payment (which date may not be fewer than 30 nor more
than 60 days after the Dissenters' Notice is delivered) and (iv) be accompanied
by a copy of Article 13.
A record Shareholder who receives the Dissenters' Notice must demand
payment and deposit his certificates in accordance with the Dissenters' Notice.
Such Shareholder will retain all other rights of a Shareholder until those
rights are canceled or modified by the consummation of the Merger. A record
Shareholder who does not demand payment or deposit his share certificates where
required, each by the date set in the Dissenters' Notice, is not entitled to
payment for his shares under Article 13.
12
<PAGE> 872
Within 10 days of the later of the Effective Time or receipt of a payment
demand, the Company must offer to pay each dissenting Shareholder who complied
with Article 13 the amount the Company estimates to be the fair value of his
shares, plus accrued interest from the Effective Time. Such offer of payment
must be accompanied by (i) certain recent Company financial statements, (ii) the
Company's estimate of the fair value of the shares and interest due, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Article 13 and (v) a copy of Article
13. If the Shareholder accepts the Company's offer by written notice to the
Company within 30 days after the Company's offer, the Company must make payment
within 60 days after the later of the making of the offer or the Effective Time.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing share certificates, the Company must return the
deposited certificates. If, after such return, the Merger is consummated, the
Company must send a new Dissenters' Notice and repeat the payment procedure
described above.
A dissenting Shareholder may notify the Company in writing of his own
estimate of the fair value of his shares and the interest due, and may demand
payment of his estimate, if (i) he believes that the amount offered by the
Company is less than the fair value of his shares or that the interest due has
been calculated incorrectly or (ii) the Company, having failed to consummate the
Merger, does not return the deposited certificates within 60 days after the date
set for demanding payment. A dissenting Shareholder waives his right to demand
payment unless he notifies the Company of his demand in writing within 30 days
after the Company makes or offers payment for his shares. If the Company does
not offer payment within 10 days of the later of the Effective Time or receipt
of a payment demand, then (i) the Shareholder may demand the financial
statements and other information of the Company, and the Company must provide
such information within 10 days after receipt of the written demand and (ii) the
Shareholder may notify the Company of his own estimate of the fair value of his
shares and the amount of interest due, and may demand payment of that estimate.
If a demand for payment by a Shareholder remains unsettled, the Company
must commence a nonjury equity valuation proceeding in the appropriate court, as
specified in Article 13, within 60 days after receiving the payment demand and
must petition the court to determine the fair value of the shares and accrued
interest. If the Company does not commence a valuation proceeding within 60
days, the Company is required to pay each dissenting Shareholder whose demand
remains unsettled, the amount demanded. The Company is required to make all
dissenting Shareholders whose demands remain unsettled parties to the proceeding
and to serve a copy of the petition upon each dissenting Shareholder. The court
may appoint appraisers to receive evidence and to recommend a decision on fair
value. Each dissenting Shareholder made a party to the proceeding is entitled to
judgment for the fair value of his shares plus interest to the date of judgment.
In an appraisal proceeding commenced under Article 13, the court must
determine the costs of the proceeding, excluding fees and expenses of attorneys
and experts for the respective parties, and must assess those costs against the
Company, except that the court may assess the costs against all or some of the
dissenting Shareholders to the extent the court finds they acted arbitrarily,
vexatiously or not in good faith in demanding payment under Article 13. The
court also may assess the fees and expenses of attorneys and experts for the
respective parties against the Company if the court finds the Company did not
substantially comply with the requirements of Article 13, or against either the
Company or a dissenting Shareholder if the court finds that such party acted
arbitrarily, vexatiously or not in good faith with respect to the rights
provided by Article 13.
If the court finds that the services of the attorneys for any dissenting
Shareholder were of substantial benefit to other dissenting Shareholders
similarly situated, and that the fees for those services should not be assessed
against the Company, the court may award those attorneys reasonable fees out of
the amounts awarded the dissenting Shareholders who were benefited. No action by
any dissenting Shareholder to enforce dissenters' rights may be brought more
than three years after the Effective Time, regardless of whether notice of the
Merger and of the right to dissent was given by the Company in compliance with
the provisions of Article 13.
13
<PAGE> 873
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period")multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales................... $5,289,804 $5,289,804 0.6 $(2,241,083) $5,414,966
EBITDA...................... 429,244 429,244 7 (2,241,083) 5,245,791
EBIT........................ 393,758 393,758 10 (2,241,083) 6,178,663
Net Income.................. 309,962 309,962 15 -- 4,649,430
Book Equity................. 3,976,932 3,976,526 1 -- 3,976,526
</TABLE>
14
<PAGE> 874
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
N/A N/A% X $ N/A = $ N/A
-----------
Total $ N/A
===========
Relative Operating Value of Company $ 6,178,663
Relative Operating Value of Other Companies Owned by Company + --
-----------
Total Relative Value of Company = $ 6,178,663
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Enterprises,
Inc. .5093% X $ 6,178,663 = $ 31,468
Belk of Dalton, Ga.,
Inc. 16.4815% X 6,178,663 = 1,018,336
-----------
Total $ 1,049,804
===========
Total Relative Value of Company $ 6,178,663
Total Relative Value of Company Owned by Other Belk Companies - 1,049,804
-----------
Net Relative Value of Company = $ 5,128,859
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 5,128,859 / $1,156,226,577 = .4436%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.4436% X 59,998,834) / 7,172 = 37.1091
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
15
<PAGE> 875
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 35.88
Dividends(2).............................................. 12.50
Book value per share(3)................................... 460.29
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 35.62
Dividends(2).............................................. 9.65
Book value per share...................................... 464.61
</TABLE>
- ---------------
(1) Based on 8,640 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 8,640 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
16
<PAGE> 876
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 5,599 $ 5,391 $ 5,290
Net income.................................................. 186 189 310
Per common share
Net income (loss)(1)...................................... 21.57 21.92 35.88
Dividends................................................. 7.50 10.00 12.50
Book value(2)............................................. 425.00 436.92 460.29
Total assets................................................ 3,986 4,162 4,430
Shareholders' equity........................................ 3,672 3,775 3,977
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $3,696 $3,440
Income from operations...................................... 207 106
</TABLE>
- ---------------
(1) Based on 8,640 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 8,640 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
17
<PAGE> 877
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Hatcher Square
in Milledgeville, Georgia. The Company's store operates in a manner consistent
with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is managed out of the Matthews group office in
Macon, Georgia.
Facilities. The Company leases its store building, which contains
approximately 48,000 square feet of floor area. The current term of the lease
expires in 2007. The store was expanded by 4,000 square feet and remodeled in
1997. The Company believes the building is adequate to meet its current needs.
Competition. Specific competitors in the Company's market include
Wal-Mart, Penney and Goody's.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
18
<PAGE> 878
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)........................................... 2,656 30.7%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(c)(e)................................................. 1,776 20.6%
H. W. McKay Belk (Director and Executive Officer)
(b)(c)(e)................................................. 1,776 20.6%
John R. Belk (Director and Executive Officer) (b)(c)(e)..... 1,776 20.6%
Henderson Belk (Director) (d)............................... 160 1.9%
Sarah Belk Gambrell (d)..................................... 1,552 18.0%
Leroy Robinson (Director) (b)(c)............................ 100 1.2%
B. Frank Matthews, II (Director and Executive Officer)
(f)(h)(i)................................................. 1,156 13.4%
William M. Matthews, IV (Director and Executive Officer).... 1,200 13.9%
Elizabeth M. Welton (g)(h).................................. 528 6.1%
Montgomery Investment Company............................... 696 8.1%
Belk of Dalton, Ga., Inc.................................... 1,424 16.5%
All Directors and Executive Officers as a group (8
persons).................................................. 5,636 65.2%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk and Leroy Robinson -- 2801 West Tyvola Road, Charlotte, N.C.
28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207; B.
Frank Matthews, II and Elizabeth Matthews Welton -- 2240 Remount Road, Gastonia,
N.C. 28054; William M. Matthews, V -- 3661 Eisenhower Parkway, Macon, Ga. 31206;
Montgomery Investment Company and Belk of Dalton, Ga., Inc. -- 2801 West Tyvola
Road, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 696 shares held by Montgomery Investment Company, of which John M.
Belk is the majority shareholder.
(b) Includes 44 shares held by Brothers Investment Company, which Corporation
is equally owned by John M. Belk and the Estate of Thomas M. Belk. Voting
and investment power is shared by John M. Belk, Katherine McKay Belk,
Katherine Belk Morris, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk
and Leroy Robinson.
(c) Includes 56 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(d) Includes 160 shares held in several Trusts established by the Will of W. H.
Belk for the benefit of his children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
19
<PAGE> 879
(e) Includes 1,424 shares held by Belk of Dalton, Ga., Inc. and 44 shares held
by Belk Enterprises, which shares are voted by the members of the Executive
Committee of the Board of Directors of each such Corporation, under
authority given by the directors of each such Corporation at the annual
meeting of directors held in March, 1997. The Executive Committee of each
such Corporation consists of John M. Belk, Thomas M. Belk, Jr., H. W. McKay
Belk and John R. Belk.
(f) Includes 188 shares held by B. Frank Matthews, II's wife, Betty Choate
Matthews.
(g) Includes 320 shares held by Elizabeth Matthews Welton Family Limited
Partnership Phase II. Elizabeth M. Welton has voting and investment power
with respect to such shares.
(h) Includes 208 shares held by Robinson Investment Company. B. Frank Matthews,
II and Elizabeth M. Welton share the voting and investment power with
respect to such shares.
(i) Includes 240 shares held by First Union National Bank of N.C., B. Frank
Matthews, II and Annabelle Z. Royster, Co-Trustees under the Will of J.H.
Matthews, Jr. The named Trustees have voting and investment power with
respect to such shares.
20
<PAGE> 880
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 881
BELK-MATTHEWS COMPANY OF MILLEDGEVILLE, GA., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 73,453 $ 115,863
Accounts receivable, net.................................. 808,555 938,912
Merchandise inventory..................................... 1,078,360 1,105,190
Receivable from affiliates, net........................... 2,021,921 2,121,103
Deferred income taxes..................................... 16,355 12,208
Other..................................................... 44,828 41,337
---------- ----------
Total current assets........................................ 4,043,472 4,334,613
Loans receivable from affiliates, net....................... 4,117 4,117
Investments................................................. 406 406
Property, plant and equipment, net.......................... 92,924 72,957
Other noncurrent assets..................................... 21,458 18,374
---------- ----------
$4,162,377 $4,430,467
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 333,874 $ 324,875
Accrued income taxes...................................... 3,897 87,330
---------- ----------
Total current liabilities................................... 337,771 412,205
Deferred income taxes....................................... 26,582 14,975
Other noncurrent liabilities................................ 23,054 26,355
---------- ----------
Total liabilities........................................... 387,407 453,535
Shareholders' equity:
Common stock.............................................. 864,000 864,000
Retained earnings......................................... 2,910,970 3,112,932
---------- ----------
Total shareholders' equity.................................. 3,774,970 3,976,932
---------- ----------
$4,162,377 $4,430,467
========== ==========
</TABLE>
F-2
<PAGE> 882
BELK-MATTHEWS COMPANY OF MILLEDGEVILLE, GA., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $5,599,363 $5,391,160 $5,289,804
Operating costs and expenses............................... 5,377,616 5,157,060 4,902,261
---------- ---------- ----------
Income from operations..................................... 221,747 234,100 387,543
---------- ---------- ----------
Other income (expense):
Interest, net............................................ 77,973 55,159 103,577
Gain (loss) on disposal of property, plant and
equipment............................................. -- (219) --
Miscellaneous, net....................................... (1,804) 6,710 6,215
---------- ---------- ----------
Total other expense, net................................... 76,169 61,650 109,792
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 297,916 295,750 497,335
Income tax expense (benefit)............................... 111,575 106,343 187,373
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 186,341 189,407 309,962
---------- ---------- ----------
Net earnings............................................... 186,341 189,407 309,962
Retained earnings at beginning of period................... 2,686,422 2,807,963 2,910,970
Dividends paid............................................. (64,800) (86,400) (108,000)
---------- ---------- ----------
Retained earnings at end of period......................... $2,807,963 $2,910,970 $3,112,932
========== ========== ==========
</TABLE>
F-3
<PAGE> 883
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 884
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 885
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 14, CHAPTER 2
BUSINESS CORPORATIONS
STATE OF GEORGIA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
A-1
<PAGE> 886
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's right.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
A-2
<PAGE> 887
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
A-3
<PAGE> 888
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing
A-4
<PAGE> 889
under subsection (a) of this Code section within 30 days after the corporation
offered payment for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
A-5
<PAGE> 890
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
A-6
<PAGE> 891
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................... $ 5,289,805 $309,962 $393,758 $429,244 $3,976,932
Adjustments to eliminate less than
wholly-owned subsidiaries................... -- -- -- -- --
----------- -------- -------- -------- ----------
Adjusted Shareholders' Statement.............. $ 5,289,805 309,962 393,758 429,244 3,976,932
=========== -------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............... -- -- --
Gain/loss on sale of securities............. -- -- --
Impairment loss............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries.............................. -- -- --
Gain/loss on discontinued operations........ -- -- --
Adjustment to tax expense................... -- -- -- --
-------- -------- --------
Total non-operating items..................... -- -- --
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities............................. -- -- --
Adjustment for ownership in other Belk
entities.................................. (406)
-------- -------- -------- ----------
Per Model..................................... $309,962 $393,758 $429,244 $3,976,526
======== ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................... $ (115,863)
Negative cash balances reclassified to
accounts payable........................ --
Receivables from affiliates, net.......... (2,121,103)
Loans receivable from affiliates, net..... (4,117)
Liabilities
Notes payable............................. --
Current installments of long-term debt.... --
Current portion of obligations under
capital leases.......................... --
Payables to affiliates, net............... --
Long-term debt, excluding current
installments............................ --
Obligations under capital leases,
excluding current portion............... --
Loans payable to affiliates, net.......... --
-----------
Net debt (cash)............................... (2,241,083)
Adjustments to eliminate less than
wholly-owned subsidiaries................... --
-----------
Per Model..................................... $(2,241,083)
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 892
SUPPLEMENT NO. 19
<PAGE> 893
BELK-MATTHEWS COMPANY OF MILLEDGEVILLE, GA., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 1:40 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 19
<PAGE> 894
BELK OF MONROE, GA., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk of Monroe, Ga., Inc. (the "Company"), to
be held on April 15, 1998, at 10:10 a.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Georgia law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 16.8755 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 47,825 shares of New Belk Class A Common Stock which will
represent approximately 0.0797% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage paid
(20)
<PAGE> 895
envelope. If you plan to attend the Special Meeting, you may vote in person if
you wish, even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 896
BELK OF MONROE, GA., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK OF MONROE, GA., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk of Monroe, Ga., Inc. (the "Company") will be held on April 15,
1998, at 10:10 a.m., local time, at the offices of Belk Stores Services, Inc.,
2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for the following
purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Georgia law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 16.8755 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 897
BELK OF MONROE, GA., INC.
SUPPLEMENT NO. 20
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 20 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK OF MONROE, GA.,
INC. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE DISCUSSION IN THE
PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED HEREIN ASSUMES THAT
ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION. IF ANY ONE OR MORE
BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE INFORMATION
CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 16
SELECTED HISTORICAL FINANCIAL INFORMATION................... 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 18
BUSINESS OF THE COMPANY..................................... 18
SECURITY OWNERSHIP OF THE COMPANY........................... 19
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION.................................. B-1
</TABLE>
<PAGE> 898
THE COMPANY
The Company was incorporated as a Georgia corporation in 1935 as
Gallant-Belk Company, Monroe, Georgia. The Company changed its name to Belk of
Monroe, Ga., Inc. on July 23, 1997. The mailing address of the Company's
principal executive offices is 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, and its telephone number at that address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 10:10 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under Georgia law),
will be converted, without any action on the part of the Shareholder, into the
right to receive 16.8755 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk (the "New Belk Class A Common Stock"). All
of the shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 6,032 shares of Common Stock
outstanding held of record by 27 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 76.2% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock
2
<PAGE> 899
vote in favor of the Merger, the vote of such persons, corporations and trusts
in favor of the Merger would be sufficient to approve the Merger under the
governing documents of the Company and applicable state law.
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
" -- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. In addition, the Reorganization is expected to have
certain other benefits for the Company and the Shareholders, including the
ability to share the risks of the Company's uncertain prospects in its market.
The Company's store is located in a smaller market that has recently experienced
relatively little growth. The management of the Company has considered from time
to time whether to recommend the relocation of the Company's store to another
market with better growth prospects. The Merger would enable the Company to rely
on New Belk to provide the capital necessary to relocate the Company's store. If
the Company does not participate in the Reorganization and is required to
finance the relocation of its store on its own, there can be no assurance that
the Company would be able to obtain the financing necessary to so relocate its
store.
There can be no assurance, however, that any of these benefits will be
achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Georgia Business Corporation Code (the "GBCC"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New
3
<PAGE> 900
Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 6,032 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock held by a New Belk Stockholder who is a Class A Permitted
Holder will also automatically convert into New Belk Class B Common Stock in the
event that such New Belk Stockholder no longer meets the requirements of a Class
A Permitted Holder. New Belk Class B Common Stock has no conversion rights. The
Company Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common
4
<PAGE> 901
Stock must be one-tenth of the voting rights of each security underlying the
convertible or exchangeable security paid to the holders of the New Belk Class A
Common Stock and (ii) such underlying securities paid to the holders of New Belk
Class A Common Stock must convert into the underlying securities paid to the
holders of New Belk Class B Common Stock upon the same terms and conditions
applicable to the conversion of New Belk Class A Common Stock into New Belk
Class B Common Stock and must have the same restrictions on transfer and
ownership applicable to the transfer and ownership of the New Belk Class A
Common Stock.
Pursuant to the GBCC, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as the
effect of such distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to be less than the sum of its total liabilities plus
(unless the articles of incorporation permit otherwise) the amount that would be
needed if the corporation dissolved at the time of the payment of the dividend
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The GBCC permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 25%, or such
greater or lesser percentages as may be provided in the articles of
incorporation or bylaws, of all votes entitled to be cast on the proposed
corporate action to call a special meeting. The Company Bylaws authorize the
Chairman, President, Secretary, the Company Board and any Shareholder pursuant
to the written request of the holders of not less than 10% of all the shares
entitled to vote at the meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the GBCC, unless the articles of incorporation, the bylaws or
the provisions regarding meetings in the GBCC specify a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the shareholders. The Company Articles specify that to liquidate and
discontinue the business of the Company requires a two-thirds vote.
5
<PAGE> 902
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
Under the GBCC, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the GBCC
requires an amendment to the articles of incorporation to be recommended by the
board of directors to the shareholders and approved by a majority (unless the
articles of incorporation or the board of directors requires a greater vote or a
vote by voting groups) of the votes entitled to be cast on the amendment by any
voting group. As under the DGCL, the holders of the outstanding shares of a
class or series are entitled to vote as a separate voting group (if shareholder
voting is otherwise required by the GBCC) on a proposed amendment if the
amendment would change certain fundamental rights and preferences of that class
or series. The Company Articles do not specify a greater vote or a vote by
voting groups to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the GBCC, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or the
GBCC reserves this power exclusively to the shareholders in whole or part or
(ii) the shareholders in amending or repealing a particular bylaw provided
expressly that the board of directors may not amend or repeal that bylaw. The
shareholders of the corporation may amend or repeal the bylaws of the
corporation even though such bylaws may be amended or repealed by the board of
directors of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board, or by the affirmative vote of a majority of the shares
outstanding and entitled to vote at any regular or special meeting of the
Shareholders. Further, the Company Bylaws provide that the Company Board has no
power to adopt a bylaw: (i) requiring more than a majority of the voting shares
for a quorum at a meeting of the Shareholders, except where higher percentages
are required by law; (ii) providing for the management of the Company otherwise
than by the Company Board or its executive committees; (iii) increasing or
decreasing the number of directors; or (iv) classifying and staggering the
election of directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the GBCC, any action that may be taken by an annual or special
meeting of shareholders may be taken without a meeting and without prior notice,
if all holders of outstanding shares entitled to vote
6
<PAGE> 903
on such action or, if so provided in the articles of incorporation, by persons
entitled to vote at a meeting shares having voting power to cast not less than
the minimum number (or numbers, in the case of voting groups) of votes that
would be necessary to authorize or take the action at which all shareholders
entitled to vote were present and voted sign the written consent(s) describing
such action. The Company Bylaws permit any action which may be taken at a
meeting of the Shareholders to be taken without a meeting if a consent in
writing, setting forth the action so taken, is signed by all of the persons who
would be entitled to vote upon such action at a meeting and filed with the
Secretary of the Company.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation or a bylaw
approved by the shareholders, the GBCC permits a vacancy in the board of
directors to be filled by the shareholders or by the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board and if
the vacancy is one that the directors are authorized to fill, then the directors
may fill the vacancy by the affirmative vote of a majority of all the directors
remaining in office.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors may be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The GBCC requires a corporation to have at least one director. The articles
of incorporation or the bylaws may authorize the shareholders or the board of
directors to change the number of directors. If the articles of incorporation or
the bylaws establish a variable range for the size of directors, the number of
directors may be changed, within the prescribed range, by the shareholders or,
if the articles of incorporation so provide, by the
7
<PAGE> 904
board of directors. The Company Bylaws require the Company Board to consist of
at least three, but no more than 15, directors.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
Under the GBCC, a director must be a natural person and at least 18 years
of age, but does not have to be a resident of Georgia or a shareholder of the
corporation unless otherwise provided for in the articles of incorporation. The
Company Articles do not require directors of the Company to be residents of
Georgia or shareholders of the Company. The GBCC also allows the articles of
incorporation or the bylaws to provide for additional qualifications of
directors.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each class expiring at the
annual meeting in successive years beginning with the first class and
progressing to the third class, if any. Thereafter, directors are chosen for a
full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
Under the GBCC, the articles of incorporation may allow for staggering the
terms of directors by dividing the total number of directors into two or three
groups, with each group containing one-half or one-third of the total. The term
of each group expires in each successive year beginning with the first group and
progressing to the third group, if any. Thereafter, directors are chosen for a
term of two or three years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
According to the GBCC, unless the articles of incorporation or bylaws
provide that directors may be removed only for cause, the shareholders may
remove one or more directors with or without cause. If a director is elected by
a voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove him. If cumulative voting is not authorized, a
director may be removed only by a majority of votes entitled to be cast.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under both the DGCL and the GBCC, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a
8
<PAGE> 905
majority of disinterested directors consents; (ii) the material facts are
disclosed and a majority of shares entitled to vote thereon consents; or (iii)
the transaction is fair to the corporation at the time it is authorized by the
board of directors, a committee of the board or the stockholders.
Similar to the DGCL, the GBCC generally permits transactions involving a
Georgia corporation and an interested director of that corporation if: (i) the
transaction received the affirmative vote of a majority (but not less than two)
of those qualified directors on the board of directors or on a duly empowered
committee thereof who voted on the transaction after required disclosure to
them; (ii) if a majority of the votes entitled to be cast by the holders of all
qualified shares were cast in favor of the transaction after (a) notice to
shareholders describing the director's conflicting interest transaction, (b)
provision of the information with regard to any unqualified shares and (c)
required disclosure to the shareholders who voted on the transaction (to the
extent the information was not known by them); or (iii) the transaction, judged
in the circumstances at the time of commitment, is established to have been fair
to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the GBCC, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the GBCC (i) in connection with a
proceeding by or in the right of the corporation, except for reasonable expenses
incurred in connection with the proceeding if it is determined that the director
or officer has met the relevant standard of conduct under the GBCC or (ii) in
connection with any proceeding with respect to conduct for which he was
9
<PAGE> 906
adjudged liable on the basis that personal benefit was improperly received by
him, whether or not involving action in his official capacity. A Georgia
corporation must indemnify a director or officer who was wholly successful, on
the merits or otherwise, in the defense of any proceeding to which he was a
party because he was a director or officer of the corporation against reasonable
expenses incurred by the director or officer in connection with the proceeding.
The Company Bylaws authorize indemnification as provided in the GBCC. In
addition, the Company Bylaws provide that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify a director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the GBCC, a director
will not be personally liable to the Company or any of its shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The GBCC concerning the approval of mergers and share exchanges is similar
in all material respects to the DGCL, except action by the shareholders of the
surviving corporation is not required if the number and kind of shares
outstanding immediately after the merger or share exchange, plus the number and
kind of shares issuable as a result of the merger or share exchange and by the
conversion of securities issued pursuant to the merger or share exchange or the
exercise of rights and warrants issued pursuant to the merger or share exchange
does not exceed the total number and kind of shares of the surviving or
acquiring corporation authorized by its articles of incorporation immediately
before the merger or share exchange. The GBCC and DGCL provisions concerning the
approval of the sale of all or substantially all of the assets of a corporation
are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the GBCC include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined in the DGCL and the
GBCC, "business combinations" generally encompass (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder, (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested shareholder of a substantial percentage of assets of the corporation,
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested
10
<PAGE> 907
shareholder, except in certain circumstances, (iv) any transaction involving the
corporation which has the effect of increasing the proportionate share of the
stock of any class or series, or securities convertible into the stock of any
class or series, of the corporation which is owned by the interested
shareholder, except in certain circumstances or (v) any receipt by the
interested shareholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits (other than those expressly permitted in (i)
through (iv) above) provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who (i) is the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation and within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation. Under the
GBCC, an "interested shareholder" is any person who owns 10% of the outstanding
voting shares or is an affiliate of the corporation owning 10% of the
outstanding voting shares within the prior two years, and a "continuing
director" is a director not associated or affiliated with any interested
shareholder.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
According to the GBCC, if at least three continuing directors serve on the
board of directors, then those directors must unanimously approve the business
combination. If three continuing directors do not serve on the board of
directors, then 66 2/3% of the continuing directors must recommend the business
combination and a majority of shareholders entitled to cast a vote must approve
the business combination. Also, except under certain circumstances, no mergers
may occur between a corporation and an interested shareholder within five years
of the date the shareholder became an interested shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the GBCC provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a
11
<PAGE> 908
preemptive right to purchase, subscribe for or otherwise acquire stock of any
class or series of New Belk or any security convertible into or exchangeable
for, or any warrant, option or right to purchase, subscribe for or otherwise
acquire, stock of any class or series of New Belk, whether now or hereafter
authorized.
The GBCC concerning preemptive rights is equivalent to the DGCL. The
Company Articles do not contain any provision with respect to preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the GBCC, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) excerpts from minutes of any
meeting of the board of directors, records of any action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporations; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the GBCC ("Article 13") has
the right to receive in cash the fair value of such Shareholder's shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN
ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
To exercise appraisal rights under Article 13, a holder of Common Stock
must (i) deliver to the Company before the taking of the vote of Shareholders on
the Reorganization Agreement written notice of his intent to demand payment for
his shares if the Merger is effected and (ii) not vote his shares in favor of
the Reorganization Agreement. A Shareholder who does not satisfy these two
requirements is not entitled to payment for his shares under Article 13. In
addition, any Shareholder who returns a signed proxy but fails to provide
instructions as to the manner in which such shares are to be voted will be
deemed to have voted in favor of the Reorganization Agreement and will not be
entitled to assert dissenters' rights of appraisal.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial Shareholder and he notifies the Company
in writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of such a partial dissenter are determined as if
the shares as to which he dissents and his other shares are registered in the
names of different Shareholders.
If the Reorganization Agreement is approved at the Special Meeting, the
Company must deliver a written dissenters' notice (the "Dissenters' Notice") to
all Shareholders who satisfied the notice requirements of Article 13. The
Dissenters' Notice must be sent within 10 days after the Effective Time and must
(i) state where the demand for payment must be sent and where and when
certificates for shares must be deposited, (ii) inform holders of uncertificated
shares to what extent transfer of those shares will be restricted after the
demand for payment is received, (iii) set a date by which the Company must
receive the demand for payment
12
<PAGE> 909
(which date may not be fewer than 30 nor more than 60 days after the Dissenters'
Notice is delivered) and (iv) be accompanied by a copy of Article 13.
A record Shareholder who receives the Dissenters' Notice must demand
payment and deposit his certificates in accordance with the Dissenters' Notice.
Such Shareholder will retain all other rights of a Shareholder until those
rights are canceled or modified by the consummation of the Merger. A record
Shareholder who does not demand payment or deposit his share certificates where
required, each by the date set in the Dissenters' Notice, is not entitled to
payment for his shares under Article 13.
Within 10 days of the later of the Effective Time or receipt of a payment
demand, the Company must offer to pay each dissenting Shareholder who complied
with Article 13 the amount the Company estimates to be the fair value of his
shares, plus accrued interest from the Effective Time. Such offer of payment
must be accompanied by (i) certain recent Company financial statements, (ii) the
Company's estimate of the fair value of the shares and interest due, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Article 13 and (v) a copy of Article
13. If the Shareholder accepts the Company's offer by written notice to the
Company within 30 days after the Company's offer, the Company must make payment
within 60 days after the later of the making of the offer or the Effective Time.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing share certificates, the Company must return the
deposited certificates. If, after such return, the Merger is consummated, the
Company must send a new Dissenters' Notice and repeat the payment procedure
described above.
A dissenting Shareholder may notify the Company in writing of his own
estimate of the fair value of his shares and the interest due, and may demand
payment of his estimate, if (i) he believes that the amount offered by the
Company is less than the fair value of his shares or that the interest due has
been calculated incorrectly or (ii) the Company, having failed to consummate the
Merger, does not return the deposited certificates within 60 days after the date
set for demanding payment. A dissenting Shareholder waives his right to demand
payment unless he notifies the Company of his demand in writing within 30 days
after the Company makes or offers payment for his shares. If the Company does
not offer payment within 10 days of the later of the Effective Time or receipt
of a payment demand, then (i) the Shareholder may demand the financial
statements and other information of the Company, and the Company must provide
such information within 10 days after receipt of the written demand and (ii) the
Shareholder may notify the Company of his own estimate of the fair value of his
shares and the amount of interest due, and may demand payment of that estimate.
If a demand for payment by a Shareholder remains unsettled, the Company
must commence a nonjury equity valuation proceeding in the appropriate court, as
specified in Article 13, within 60 days after receiving the payment demand and
must petition the court to determine the fair value of the shares and accrued
interest. If the Company does not commence a valuation proceeding within 60
days, the Company is required to pay each dissenting Shareholder whose demand
remains unsettled, the amount demanded. The Company is required to make all
dissenting Shareholders whose demands remain unsettled parties to the proceeding
and to serve a copy of the petition upon each dissenting Shareholder. The court
may appoint appraisers to receive evidence and to recommend a decision on fair
value. Each dissenting Shareholder made a party to the proceeding is entitled to
judgment for the fair value of his shares plus interest to the date of judgment.
In an appraisal proceeding commenced under Article 13, the court must
determine the costs of the proceeding, excluding fees and expenses of attorneys
and experts for the respective parties, and must assess those costs against the
Company, except that the court may assess the costs against all or some of the
dissenting Shareholders to the extent the court finds they acted arbitrarily,
vexatiously or not in good faith in demanding payment under Article 13. The
court also may assess the fees and expenses of attorneys and experts for the
respective parties against the Company if the court finds the Company did not
substantially comply with the requirements of Article 13, or against either the
Company or a dissenting Shareholder if the court finds that such party acted
arbitrarily, vexatiously or not in good faith with respect to the rights
provided by Article 13.
13
<PAGE> 910
If the court finds that the services of the attorneys for any dissenting
Shareholder were of substantial benefit to other dissenting Shareholders
similarly situated, and that the fees for those services should not be assessed
against the Company, the court may award those attorneys reasonable fees out of
the amounts awarded the dissenting Shareholders who were benefited. No action by
any dissenting Shareholder to enforce dissenters' rights may be brought more
than three years after the Effective Time, regardless of whether notice of the
Merger and of the right to dissent was given by the Company in compliance with
the provisions of Article 13.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $1,350,020 $1,350,020 0.6 $(1,151,626) $1,961,637
EBITDA............... 82,179 82,179 7 (1,151,626) 1,726,878
EBIT................. 75,841 75,841 10 (1,151,626) 1,910,035
Net Income........... 95,424 95,424 15 -- 1,431,360
Book Equity.......... 1,566,057 1,565,769 1 -- 1,565,769
</TABLE>
14
<PAGE> 911
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
N/A N/A% X $ N/A = $ N/A
-----------
Total $ N/A
===========
Relative Operating Value of Company $ 1,961,637
Relative Operating Value of Other Companies Owned by Company + --
-----------
Total Relative Value of Company = $ 1,961,637
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Gallant-Belk Company 9.2838% X $ 1,961,637 = $ 182,114
Belk Brothers Company 18.2361% X 1,961,637 = 357,726
Belk Enterprises,
Inc. 17.2414% X 1,961,637 = 338,214
Belk of Dalton, Ga.,
Inc. 7.4934 X 1,961,637 = 146,993
Belk of Thomaston,
Ga., Inc. .63% X 1,961,637 = 12,358
Belk of Athens, Ga.,
Inc. .1326% X 1,961,637 = 2,601
-----------
Total $ 1,040,007
===========
Total Relative Value of Company $ 1,961,637
Total Relative Value of Company Owned by Other Belk Companies - 1,040,007
-----------
Net Relative Value of Company = $ 921,630
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 921,630 / $1,156,226,577 = .0797%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.0797% X 59,998,834) / 2,834 = 16.8755
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
15
<PAGE> 912
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 15.82
Dividends(2).............................................. 7.50
Book value per share(3)................................... 259.62
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 16.20
Dividends(2).............................................. 4.39
Book value per share...................................... 211.28
</TABLE>
- ---------------
(1) Based on 6,032 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 6,032 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
16
<PAGE> 913
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $1,289 $1,295 $1,350
Net income.................................................. 87 82 95
Per common share
Net income (loss)(1)...................................... 14.48 13.56 15.82
Dividends................................................. 7.50 7.50 7.50
Book value(2)............................................. 245.24 251.31 259.62
Total assets................................................ 1,624 1,635 1,711
Shareholders' equity........................................ 1,479 1,516 1,566
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $934 $862
Income from operations...................................... 32 51
</TABLE>
- ---------------
(1) Based on 6,032 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 6,032 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
17
<PAGE> 914
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Monroe Plaza
Shopping Center in Monroe, Georgia. The Company's store operates in a manner
consistent with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is managed out of the Kerr group office in
Norcross, Georgia.
Facilities. The Company leases its store building on a month-to-month
basis. The building contains approximately 26,000 square feet of floor area. The
current term of the lease expires in 1998 and there are no options to renew the
lease. The Company is evaluating the long-term prospects for its business in
Monroe. Should the Company elect to continue operations, management believes
that options to renew the lease at market rates would be available.
Competition. The Company's principal competitor in the market is Wal-Mart.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
18
<PAGE> 915
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d).............................................. 4,166 69.1%
Thomas M. Belk, Jr. (Director and Executive Officer)
(a)(c)(d)................................................. 3,550 58.9%
H. W. McKay Belk (Director and Executive Officer)
(a)(c)(d)................................................. 3,550 58.9%
John R. Belk (Director and Executive Officer) (a)(c)(d)..... 3,550 58.9%
Henderson Belk (Director) (b)............................... 360 6.0%
Sarah Belk Gambrell (b)..................................... 488 8.1%
Sarah Gambrell Knight....................................... 544 9.0%
Leroy Robinson (Director) (a)............................... 208 3.4%
Katherine Belk Morris (a)................................... 360 6.0%
Robert K. Kerr, Jr. (Director and Executive Officer)........ 0 *
Gallant-Belk Company........................................ 560 9.3%
Belk of Dalton, Ga., Inc. .................................. 452 7.5%
Belk Enterprises, Inc. ..................................... 1,040 17.2%
J.V. Properties............................................. 1,100 18.2%
All Directors and Executive Officers as a group (7
persons).................................................. 4,598 76.2%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson and Katherine Belk Morris -- 2801 West Tyvola
Road, Charlotte, N.C. 28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road,
Charlotte, N.C. 28207; Sarah Gambrell Knight- 810 Colville Road, Charlotte, N.C.
28207; Robert K. Kerr, Jr. -- 1890-D Beaver Ridge Circle, Norcross, Ga. 30071;
Gallant-Belk Company, Belk of Dalton, Ga., Inc., Belk Enterprises, Inc. and J.V.
Properties -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 208 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(b) Includes 360 shares held in several Trusts established by the Will of W. H.
Belk for the benefit of his children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(c) Includes 560 shares held by Gallant-Belk Company, 8 shares held by Belk of
Athens, Ga., Inc., 452 shares held by Belk of Dalton, Ga., Inc., 1,040
shares held by Belk Enterprises, Inc. and 38 shares held by Belk of
Thomaston, Ga., Inc., which shares are voted by the members of the
Executive Committee of the Board of Directors of each such corporation,
under authority given by the directors of each such
19
<PAGE> 916
corporation at the annual meeting of directors held in March, 1997. The
Executive Committee of each such corporation consists of John M. Belk,
Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(d) Includes 1,100 shares held by J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
20
<PAGE> 917
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 918
BELK OF MONROE, GA., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 8,762 $ 13,072
Accounts receivable, net.................................. 151,792 190,042
Merchandise inventory..................................... 324,283 318,488
Receivable from affiliates, net........................... 151,587 138,553
Refundable income taxes................................... 4,319 11,609
Deferred income taxes..................................... 1,281 --
Other..................................................... 13,258 10,234
---------- ----------
Total current assets........................................ 655,282 681,998
Loans receivable from affiliates, net....................... 950,000 1,000,000
Investments................................................. 289 289
Property, plant and equipment, net.......................... 20,178 19,976
Other noncurrent assets..................................... 9,598 8,710
---------- ----------
$1,635,347 $1,710,973
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 103,281 $ 97,940
Deferred income taxes..................................... -- 4,716
Accrued income taxes...................................... -- 27,535
---------- ----------
Total current liabilities................................... 103,281 130,191
Deferred income taxes....................................... 2,522 1,158
Other noncurrent liabilities................................ 13,671 13,567
---------- ----------
Total liabilities........................................... 119,474 144,916
Shareholders' equity:
Common stock.............................................. 603,200 603,200
Additional paid in capital................................ 550 550
Retained earnings......................................... 912,123 962,307
---------- ----------
Total shareholders' equity.................................. 1,515,873 1,566,057
---------- ----------
$1,635,347 $1,710,973
========== ==========
</TABLE>
F-2
<PAGE> 919
BELK OF MONROE, GA., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $1,289,373 $1,295,209 $1,350,018
Operating costs and expenses............................... 1,214,939 1,244,360 1,274,722
---------- ---------- ----------
Income from operations..................................... 74,434 50,849 75,296
---------- ---------- ----------
Other income (expense):
Interest, net............................................ 53,301 62,787 57,465
Miscellaneous, net....................................... (979) 881 545
---------- ---------- ----------
Total other expense, net................................... 52,322 63,668 58,010
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 126,756 114,517 133,306
Income tax expense (benefit)............................... 39,414 32,693 37,882
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 87,342 81,824 95,424
---------- ---------- ----------
Net earnings............................................... 87,342 81,824 95,424
Retained earnings at beginning of period................... 833,437 875,539 912,123
Dividends paid............................................. (45,240) (45,240) (45,240)
---------- ---------- ----------
Retained earnings at end of period......................... $ 875,539 $ 912,123 $ 962,307
========== ========== ==========
</TABLE>
F-3
<PAGE> 920
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 921
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 922
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 14, CHAPTER 2
BUSINESS CORPORATIONS
STATE OF GEORGIA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially
A-1
<PAGE> 923
all of the net proceeds of the sale will be distributed to the shareholders
within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's right.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
A-2
<PAGE> 924
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
A-3
<PAGE> 925
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing
A-4
<PAGE> 926
under subsection (a) of this Code section within 30 days after the corporation
offered payment for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
A-5
<PAGE> 927
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
A-6
<PAGE> 928
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement............... $ 1,350,019 $ 95,424 $ 75,841 $ 82,179 $1,566,058
Adjustments to eliminate less than wholly-
owned subsidiaries...................... -- -- -- -- --
----------- -------- -------- -------- ----------
Adjusted Shareholders' Statement.......... $ 1,350,019 95,424 75,842 82,179 1,566,058
=========== -------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E........... -- -- --
Gain/loss on sale of securities......... -- -- --
Impairment loss......................... -- -- --
Equity in earnings of unconsolidated
subsidiaries.......................... -- -- --
Gain/loss on discontinued operations.... -- -- --
Adjustment to tax expense............... -- -- -- --
-------- -------- --------
Total non-operating items................. -- -- --
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from
other Belk entities................... -- -- --
Adjustment for ownership in other Belk
entities.............................. (289)
-------- -------- -------- ----------
Per Model................................. $ 95,424 $ 75,841 $ 82,179 $1,565,769
======== ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents............... $ (13,072)
Negative cash balances reclassified to
accounts payable................... --
Receivables from affiliates, net...... (138,553)
Loans receivable from affiliates,
net................................ (1,000,000)
Liabilities
Notes payable......................... --
Current installments of long-term
debt............................... --
Current portion of obligations under
capital leases..................... --
Payables to affiliates, net........... --
Long-term debt, excluding current
installments....................... --
Obligations under capital leases,
excluding current portion.......... --
Loans payable to affiliates, net...... --
-----------
Net debt (cash)........................... (1,151,626)
Adjustments to eliminate less than wholly-
owned subsidiaries...................... --
-----------
Per Model................................. $(1,151,626)
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 929
SUPPLEMENT NO. 20
<PAGE> 930
BELK OF MONROE, GA., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 10:10 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
-------------------
-------------------------------
Signature
-------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 20
<PAGE> 931
BELK OF NEWNAN, GA., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk of Newnan, Ga., Inc. (the "Company"), to
be held on April 15, 1998, at 10:00 a.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Georgia law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 18.5978 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 49,210 shares of New Belk Class A Common Stock which will
represent approximately 0.0820% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage paid
(21)
<PAGE> 932
envelope. If you plan to attend the Special Meeting, you may vote in person if
you wish, even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 933
BELK OF NEWNAN, GA., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK OF NEWNAN, GA., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk of Newnan, Ga., Inc. (the "Company") will be held on April 15,
1998, at 10:00 a.m., local time, at the offices of Belk Stores Services, Inc.,
2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for the following
purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Georgia law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 18.5978 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 934
BELK OF NEWNAN, GA., INC.
SUPPLEMENT NO. 21
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 21 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK OF NEWNAN, GA.,
INC. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE DISCUSSION IN THE
PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED HEREIN ASSUMES THAT
ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION. IF ANY ONE OR MORE
BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE INFORMATION
CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 16
SELECTED HISTORICAL FINANCIAL INFORMATION................... 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 18
BUSINESS OF THE COMPANY..................................... 18
SECURITY OWNERSHIP OF THE COMPANY........................... 19
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 935
THE COMPANY
The Company was incorporated as a Georgia corporation in 1941 as
Belk-Gallant Company of Newnan, Georgia., Inc. The Company changed its name to
Belk of Newnan, Ga., Inc., on July 23, 1997. The mailing address of the
Company's principal executive offices is 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500, and its telephone number at that address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 10:00 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under Georgia law),
will be converted, without any action on the part of the Shareholder, into the
right to receive 18.5978 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk (the "New Belk Class A Common Stock"). All
of the shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 3,684 shares of Common Stock
outstanding held of record by 18 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 76.4% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock
2
<PAGE> 936
vote in favor of the Merger, the vote of such persons, corporations and trusts
in favor of the Merger would be sufficient to approve the Merger under the
governing documents of the Company and applicable state law.
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. In addition, the Reorganization is expected to have
certain other benefits for the Company and the Shareholders, including the
ability to continue to rely on New Belk to finance the Company's business. The
Company has historically relied on loans and on guarantees of its borrowings
from other Belk Companies to finance its business. If the Company does not
participate in the Reorganization, there is no assurance that New Belk would
continue to provide financial support to the Company. Without such loans and
guarantees, the Company may not be able to continue to conduct its business as
it is currently being conducted.
There can be no assurance, however, that any of these benefits will be
achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Georgia Business Corporate Code (the "GBCC"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 3,684 shares of
Common Stock.
3
<PAGE> 937
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock held by a New Belk Stockholder who is a Class A Permitted
Holder will also automatically convert into New Belk Class B Common Stock in the
event that such New Belk Stockholder no longer meets the requirements of a Class
A Permitted Holder. New Belk Class B Common Stock has no conversion rights. The
Company Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the
4
<PAGE> 938
holders of New Belk Class B Common Stock upon the same terms and conditions
applicable to the conversion of New Belk Class A Common Stock into New Belk
Class B Common Stock and must have the same restrictions on transfer and
ownership applicable to the transfer and ownership of the New Belk Class A
Common Stock.
Pursuant to the GBCC, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as the
effect of such distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to be less than the sum of its total liabilities plus
(unless the articles of incorporation permit otherwise) the amount that would be
needed if the corporation dissolved at the time of the payment of the dividend
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The GBCC permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 25%, or such
greater or lesser percentages as may be provided in the articles of
incorporation or bylaws, of all votes entitled to be cast on the proposed
corporate action to call a special meeting. The Company Bylaws authorize the
Chairman, President, Secretary, the Company Board and any Shareholder pursuant
to the written request of the holders of not less than 10% of all the shares
entitled to vote at the meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the GBCC, unless the articles of incorporation, the bylaws or
the provisions regarding meetings in the GBCC specify a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the shareholders. The Company Articles specify that to liquidate and
discontinue the business of the Company requires a two-thirds vote.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are
5
<PAGE> 939
entitled to vote as a separate class on a proposed amendment that would increase
or decrease the aggregate number of authorized shares of such class, increase or
decrease the par value of the shares of such class or alter or change the
powers, preferences or special rights of the shares of such class so as to
affect them adversely. If any proposed amendment would alter or change the
powers, preferences or special rights of one or more series of any class so as
to affect them adversely, but would not so affect the entire class, then only
the shares of the series so affected by the amendment will be considered a
separate class for purposes of voting by classes. The New Belk Certificate is
consistent with the foregoing provisions of the DGCL.
Under the GBCC, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the GBCC
requires an amendment to the articles of incorporation to be recommended by the
board of directors to the shareholders and approved by a majority (unless the
articles of incorporation or the board of directors requires a greater vote or a
vote by voting groups) of the votes entitled to be cast on the amendment by any
voting group. As under the DGCL, the holders of the outstanding shares of a
class or series are entitled to vote as a separate voting group (if shareholder
voting is otherwise required by the GBCC) on a proposed amendment if the
amendment would change certain fundamental rights and preferences of that class
or series. The Company Articles do not specify a greater vote or a vote by
voting groups to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the GBCC, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or the
GBCC reserves this power exclusively to the shareholders in whole or part or
(ii) the shareholders in amending or repealing a particular bylaw provided
expressly that the board of directors may not amend or repeal that bylaw. The
shareholders of the corporation may amend or repeal the bylaws of the
corporation even though such bylaws may be amended or repealed by the board of
directors of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board, or by the affirmative vote of a majority of the shares
outstanding and entitled to vote at any regular or special meeting of the
Shareholders. Further, the Company Bylaws provide that the Company Board has no
power to adopt a bylaw: (i) requiring more than a majority of the voting shares
for a quorum at a meeting of the Shareholders, except where higher percentages
are required by law; (ii) providing for the management of the Company otherwise
than by the Company Board or its executive committees; (iii) increasing or
decreasing the number of directors; or (iv) classifying and staggering the
election of directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the GBCC, any action that may be taken by an annual or special
meeting of shareholders may be taken without a meeting and without prior notice,
if all holders of outstanding shares entitled to vote on such action or, if so
provided in the articles of incorporation, by persons entitled to vote at a
meeting shares having voting power to cast not less than the minimum number (or
numbers, in the case of voting groups) of votes that would be necessary to
authorize or take the action at which all shareholders entitled to vote were
6
<PAGE> 940
present and voted sign the written consent(s) describing such action. The
Company Bylaws permit any action which may be taken at a meeting of the
Shareholders to be taken without a meeting if a consent in writing, setting
forth the action so taken, is signed by all of the persons who would be entitled
to vote upon such action at a meeting and filed with the Secretary of the
Company.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation or a bylaw
approved by the shareholders, the GBCC permits a vacancy in the board of
directors to be filled by the shareholders or by the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board and if
the vacancy is one that the directors are authorized to fill, then the directors
may fill the vacancy by the affirmative vote of a majority of all the directors
remaining in office.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors may be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The GBCC requires a corporation to have at least one director. The articles
of incorporation or the bylaws may authorize the shareholders or the board of
directors to change the number of directors. If the articles of incorporation or
the bylaws establish a variable range for the size of directors, the number of
directors may be changed, within the prescribed range, by the shareholders or,
if the articles of incorporation so provide, by the board of directors. The
Company Bylaws require the Company Board to consist of at least three, but no
more than 15, directors.
7
<PAGE> 941
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
Under the GBCC, a director must be a natural person and at least 18 years
of age, but does not have to be a resident of Georgia or a shareholder of the
corporation unless otherwise provided for in the articles of incorporation. The
Company Articles do not require directors of the Company to be residents of
Georgia or shareholders of the Company. The GBCC also allows the articles of
incorporation or the bylaws to provide for additional qualifications of
directors.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each class expiring at the
annual meeting in successive years beginning with the first class and
progressing to the third class, if any. Thereafter, directors are chosen for a
full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
Under the GBCC, the articles of incorporation may allow for staggering the
terms of directors by dividing the total number of directors into two or three
groups, with each group containing one-half or one-third of the total. The term
of each group expires in each successive year beginning with the first group and
progressing to the third group, if any. Thereafter, directors are chosen for a
term of two or three years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
According to the GBCC, unless the articles of incorporation or bylaws
provide that directors may be removed only for cause, the shareholders may
remove one or more directors with or without cause. If a director is elected by
a voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove him. If cumulative voting is not authorized, a
director may be removed only by a majority of votes entitled to be cast.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under both the DGCL and the GBCC, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares
8
<PAGE> 942
entitled to vote thereon consents; or (iii) the transaction is fair to the
corporation at the time it is authorized by the board of directors, a committee
of the board or the stockholders.
Similar to the DGCL, the GBCC generally permits transactions involving a
Georgia corporation and an interested director of that corporation if: (i) the
transaction received the affirmative vote of a majority (but not less than two)
of those qualified directors on the board of directors or on a duly empowered
committee thereof who voted on the transaction after required disclosure to
them; (ii) if a majority of the votes entitled to be cast by the holders of all
qualified shares were cast in favor of the transaction after (a) notice to
shareholders describing the director's conflicting interest transaction, (b)
provision of the information with regard to any unqualified shares and (c)
required disclosure to the shareholders who voted on the transaction (to the
extent the information was not known by them); or (iii) the transaction, judged
in the circumstances at the time of commitment, is established to have been fair
to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the GBCC, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the GBCC (i) in connection with a
proceeding by or in the right of the corporation, except for reasonable expenses
incurred in connection with the proceeding if it is determined that the director
or officer has met the relevant standard of conduct under the GBCC or (ii) in
connection with any proceeding with respect to conduct for which he was adjudged
liable on the basis that personal benefit was improperly received by him,
whether or not involving
9
<PAGE> 943
action in his official capacity. A Georgia corporation must indemnify a director
or officer who was wholly successful, on the merits or otherwise, in the defense
of any proceeding to which he was a party because he was a director or officer
of the corporation against reasonable expenses incurred by the director or
officer in connection with the proceeding.
The Company Bylaws authorize indemnification as provided in the GBCC. In
addition, the Company Bylaws provide that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify a director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the GBCC, a director
will not be personally liable to the Company or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The GBCC concerning the approval of mergers and share exchanges is similar
in all material respects to the DGCL, except action by the shareholders of the
surviving corporation is not required if the number and kind of shares
outstanding immediately after the merger or share exchange, plus the number and
kind of shares issuable as a result of the merger or share exchange and by the
conversion of securities issued pursuant to the merger or share exchange or the
exercise of rights and warrants issued pursuant to the merger or share exchange
does not exceed the total number and kind of shares of the surviving or
acquiring corporation authorized by its articles of incorporation immediately
before the merger or share exchange. The GBCC and DGCL provisions concerning the
approval of the sale of all or substantially all of the assets of a corporation
are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the GBCC include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined in the DGCL and the
GBCC, "business combinations" generally encompass (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder, (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested shareholder of a substantial percentage of assets of the corporation,
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested shareholder,
except in certain circumstances, (iv) any transaction involving the corporation
which has the
10
<PAGE> 944
effect of increasing the proportionate share of the stock of any class or
series, or securities convertible into the stock of any class or series, of the
corporation which is owned by the interested shareholder, except in certain
circumstances or (v) any receipt by the interested shareholder of the benefit of
any loans, advances, guarantees, pledges or other financial benefits (other than
those expressly permitted in (i) through (iv) above) provided by or through the
corporation.
The DGCL defines an "interested stockholder" as any person who (i) is the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation and within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation. Under the
GBCC, an "interested shareholder" is any person who owns 10% of the outstanding
voting shares or is an affiliate of the corporation owning 10% of the
outstanding voting shares within the prior two years, and a "continuing
director" is a director not associated or affiliated with any interested
shareholder.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
According to the GBCC, if at least three continuing directors serve on the
board of directors, then those directors must unanimously approve the business
combination. If three continuing directors do not serve on the board of
directors, then 66 2/3% of the continuing directors must recommend the business
combination and a majority of shareholders entitled to cast a vote must approve
the business combination. Also, except under certain circumstances, no mergers
may occur between a corporation and an interested shareholder within five years
of the date the shareholder became an interested shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the GBCC provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any
11
<PAGE> 945
security convertible into or exchangeable for, or any warrant, option or right
to purchase, subscribe for or otherwise acquire, stock of any class or series of
New Belk, whether now or hereafter authorized.
The GBCC concerning preemptive rights is equivalent to the DGCL. The
Company Articles do not contain any provision with respect to preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the GBCC, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) excerpts from minutes of any
meeting of the board of directors, records of any action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporations; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the GBCC ("Article 13") has
the right to receive in cash the fair value of such Shareholder's shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN
ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
To exercise appraisal rights under Article 13, a holder of Common Stock
must (i) deliver to the Company before the taking of the vote of Shareholders on
the Reorganization Agreement written notice of his intent to demand payment for
his shares if the Merger is effected and (ii) not vote his shares in favor of
the Reorganization Agreement. A Shareholder who does not satisfy these two
requirements is not entitled to payment for his shares under Article 13. In
addition, any Shareholder who returns a signed proxy but fails to provide
instructions as to the manner in which such shares are to be voted will be
deemed to have voted in favor of the Reorganization Agreement and will not be
entitled to assert dissenters' rights of appraisal.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial Shareholder and he notifies the Company
in writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of such a partial dissenter are determined as if
the shares as to which he dissents and his other shares are registered in the
names of different Shareholders.
If the Reorganization Agreement is approved at the Special Meeting, the
Company must deliver a written dissenters' notice (the "Dissenters' Notice") to
all Shareholders who satisfied the notice requirements of Article 13. The
Dissenters' Notice must be sent within 10 days after the Effective Time and must
(i) state where the demand for payment must be sent and where and when
certificates for shares must be deposited, (ii) inform holders of uncertificated
shares to what extent transfer of those shares will be restricted after the
demand for payment is received, (iii) set a date by which the Company must
receive the demand for payment
12
<PAGE> 946
(which date may not be fewer than 30 nor more than 60 days after the Dissenters'
Notice is delivered) and (iv) be accompanied by a copy of Article 13.
A record Shareholder who receives the Dissenters' Notice must demand
payment and deposit his certificates in accordance with the Dissenters' Notice.
Such Shareholder will retain all other rights of a Shareholder until those
rights are canceled or modified by the consummation of the Merger. A record
Shareholder who does not demand payment or deposit his share certificates where
required, each by the date set in the Dissenters' Notice, is not entitled to
payment for his shares under Article 13.
Within 10 days of the later of the Effective Time or receipt of a payment
demand, the Company must offer to pay each dissenting Shareholder who complied
with Article 13 the amount the Company estimates to be the fair value of his
shares, plus accrued interest from the Effective Time. Such offer of payment
must be accompanied by (i) certain recent Company financial statements, (ii) the
Company's estimate of the fair value of the shares and interest due, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Article 13 and (v) a copy of Article
13. If the Shareholder accepts the Company's offer by written notice to the
Company within 30 days after the Company's offer, the Company must make payment
within 60 days after the later of the making of the offer or the Effective Time.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing share certificates, the Company must return the
deposited certificates. If, after such return, the Merger is consummated, the
Company must send a new Dissenters' Notice and repeat the payment procedure
described above.
A dissenting Shareholder may notify the Company in writing of his own
estimate of the fair value of his shares and the interest due, and may demand
payment of his estimate, if (i) he believes that the amount offered by the
Company is less than the fair value of his shares or that the interest due has
been calculated incorrectly or (ii) the Company, having failed to consummate the
Merger, does not return the deposited certificates within 60 days after the date
set for demanding payment. A dissenting Shareholder waives his right to demand
payment unless he notifies the Company of his demand in writing within 30 days
after the Company makes or offers payment for his shares. If the Company does
not offer payment within 10 days of the later of the Effective Time or receipt
of a payment demand, then (i) the Shareholder may demand the financial
statements and other information of the Company, and the Company must provide
such information within 10 days after receipt of the written demand and (ii) the
Shareholder may notify the Company of his own estimate of the fair value of his
shares and the amount of interest due, and may demand payment of that estimate.
If a demand for payment by a Shareholder remains unsettled, the Company
must commence a nonjury equity valuation proceeding in the appropriate court, as
specified in Article 13, within 60 days after receiving the payment demand and
must petition the court to determine the fair value of the shares and accrued
interest. If the Company does not commence proceeding within 60 days, the
Company is required to pay each dissenting Shareholder whose demand remains
unsettled, the amount demanded. The Company is required to make all dissenting
Shareholders whose demands remain unsettled parties to the proceeding and to
serve a copy of the petition upon each dissenting Shareholder. The court may
appoint appraisers to receive evidence and to recommend a decision on fair
value. Each dissenting Shareholder made a party to the proceeding is entitled to
judgment for the fair value of his shares plus interest to the date of judgment.
In an appraisal proceeding commenced under Article 13, the court must
determine the costs of the proceeding, excluding fees and expenses of attorneys
and experts for the respective parties, and must assess those costs against the
Company, except that the court may assess the costs against all or some of the
dissenting Shareholders to the extent the court finds they acted arbitrarily,
vexatiously or not in good faith in demanding payment under Article 13. The
court also may assess the fees and expenses of attorneys and experts for the
respective parties against the Company if the court finds the Company did not
substantially comply with the requirements of Article 13, or against either the
Company or a dissenting Shareholder if the court finds that such party acted
arbitrarily, vexatiously or not in good faith with respect to the rights
provided by Article 13.
13
<PAGE> 947
If the court finds that the services of the attorneys for any dissenting
Shareholder were of substantial benefit to other dissenting Shareholders
similarly situated, and that the fees for those services should not be assessed
against the Company, the court may award those attorneys reasonable fees out of
the amounts awarded the dissenting Shareholders who were benefited. No action by
any dissenting Shareholder to enforce dissenters' rights may be brought more
than three years after the Effective Time, regardless of whether notice of the
Merger and of the right to dissent was given by the Company in compliance with
the provisions of Article 13.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Net sales............ $5,884,778 $5,884,778 0.6 $2,210,536 $1,320,331
EBITDA............... 452,269 447,794 7 2,210,536 924,022
EBIT................. 291,274 286,799 10 2,210,536 657,454
Net Income........... 77,179 74,121 15 -- 1,111,815
Book Equity.......... 506,273 505,935 1 -- 505,935
</TABLE>
14
<PAGE> 948
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
N/A N/A% X $ N/A = $ N/A
-----------
Total $ N/A
===========
Relative Operating Value of Company $ 1,320,331
Relative Operating Value of Other Companies Owned by Company + --
-----------
Total Relative Value of Company = $ 1,320,331
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Gallant-Belk Company 6.5147% X $ 1,320,331 = $ 86,016
Belk Brothers Company 17.6439% X 1,320,331 = 232,958
Belk of Dalton, Ga.,
Inc. 3.9631% X 1,320,331 = 52,326
Belk of Thomaston,
Ga., Inc. .0543% X 1,320,331 = 717
-----------
Total $ 372,016
===========
Total Relative Value of Company $ 1,320,331
Total Relative Value of Company Owned by Other Belk Companies - 372,016
-----------
Net Relative Value of Company = $ 948,314
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 948,314 / $1,156,226,577 = .0820%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.0820% X 59,998,834) / 2,646 = 18.5978
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
15
<PAGE> 949
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 20.95
Dividends(2).............................................. 0.00
Book value per share(3)................................... 137.42
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 17.85
Dividends(2).............................................. 4.84
Book value per share...................................... 232.84
</TABLE>
- ---------------
(1) Based on 3,684 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 3,684 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
16
<PAGE> 950
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 5,930 $ 5,757 $ 5,885
Net income.................................................. 172 46 77
Per common share
Net income (loss)(1)...................................... 46.56 12.40 20.95
Dividends................................................. -- -- --
Book value(2)............................................. 104.07 116.48 137.42
Total assets................................................ 3,289 3,235 3,323
Shareholders' equity........................................ 383 429 506
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $4,153 $3,875
Income from operations...................................... 129 123
</TABLE>
- ---------------
(1) Based on 3,684 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 3,684 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
17
<PAGE> 951
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
To the extent a discussion of the financial condition and results of
operations of the Company for any of the fiscal years ended January 31, 1995,
February 3, 1996 or February 1, 1997 or for either of the nine-month periods
ended November 2, 1996 or November 1, 1997 is necessary to identify certain
trends or conditions that differ from the combined Belk Companies and that are
material to Shareholders' understanding of the financial condition or results of
operations of the Company, such discussion is included below. The discussion
which follows is based upon and should be read in conjunction with the
historical financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus Supplement.
Net income decreased in fiscal year 1996 due to an increase in advertising,
administrative and rent expense.
Comparable store sales decreased for the nine months ended November 1, 1997
due to new competition entering the market.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Eastgate
Shopping Center in Newnan, Georgia. The Company's store operates in a manner
consistent with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is managed out of the Kerr group office in
Norcross, Georgia.
Facilities. The Company leases its store building, which contains
approximately 51,000 square feet of floor area. The current term of the lease
expires in 2005. The Company believes the building is adequate to meet its
current needs.
Competition. Specific competitors in the Company's market include
Wal-Mart, Upton's and Goody's.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
18
<PAGE> 952
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d).............................................. 2,622 71.2%
Thomas M. Belk, Jr. (Director and Executive Officer)
(a)(c)(d)................................................. 1,758 47.7%
H. W. McKay Belk (Director and Executive Officer)
(a)(c)(d)................................................. 1,758 47.7%
John R. Belk (Director and Executive Officer) (a)(c)(d)..... 1,758 47.7%
Henderson Belk (Director) (b)............................... 24 *
Sarah Belk Gambrell (b)..................................... 420 11.4%
Sarah Gambrell Knight....................................... 400 10.9%
Leroy Robinson (Director) (a)............................... 656 17.8%
Katherine McKay Belk (a).................................... 656 17.8%
Katherine Belk Morris (a)................................... 720 19.5%
Gallant-Belk Company........................................ 240 6.5%
J.V. Properties............................................. 650 17.6%
Robert K. Kerr, Jr. (Director and Executive Officer)........ 0 *
Thomas M. Belk, Trustee U/A dated September 15, 1993........ 656 17.8%
All Directors and Executive Officers as a group (7
persons).................................................. 2,814 76.4%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson, Katherine McKay Belk and Katherine Belk
Morris -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk
Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207; Sarah Gambrell
Knight -- 801 Colville Road, Charlotte, N.C. 28207; Robert K. Kerr,
Jr. -- 1890-D Beaver Ridge Circle, Norcross, Ga. 30071; Thomas M. Belk, Trustee
U/A dated September 15, 1993, Gallant-Belk Company and J.V. Properties -- 2801
West Tyvola Road, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 656 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr. , H. W.
McKay, John R. Belk, John M. Belk and Leroy Robinson.
(b) Includes 24 shares held in several Trusts established by the Will of Mary
I. Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(c) Includes 240 shares held by Gallant-Belk Company, 146 shares held by Belk
of Dalton, Ga., Inc. and 2 shares held by Belk of Thomaston, Ga., Inc.,
which shares are voted by the members of the Executive Committee of the
Board of Directors of each such Corporation, under authority given by the
directors of
19
<PAGE> 953
each such Corporation at the annual meeting of directors held in March,
1997. The Executive Committee of each such Corporation consists of John M.
Belk, Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(d) Includes 650 shares held by J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
20
<PAGE> 954
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 955
BELK OF NEWNAN, GA., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 55,484 $ 62,530
Accounts receivable, net.................................. 675,702 827,876
Merchandise inventory..................................... 1,153,571 1,222,416
Receivable from affiliates, net........................... 197,347 226,934
Refundable income taxes................................... 1,620 1,620
Deferred income taxes..................................... 16,491 --
Other..................................................... 59,737 58,207
---------- ----------
Total current assets........................................ 2,159,952 2,399,583
Investments................................................. 1,438 1,438
Property, plant and equipment, net.......................... 1,002,538 869,194
Deferred income taxes....................................... 70,707 52,276
Other noncurrent assets..................................... 637 668
---------- ----------
$3,235,272 $3,323,159
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 278,802 $ 283,962
Deferred income taxes..................................... -- 823
---------- ----------
Total current liabilities................................... 278,802 284,785
Loans payable to affiliates, net............................ 2,500,000 2,500,000
Other noncurrent liabilities................................ 27,376 32,101
---------- ----------
Total liabilities........................................... 2,806,178 2,816,886
Shareholders' equity:
Common stock.............................................. 368,400 368,400
Retained earnings......................................... 60,694 137,873
---------- ----------
Total shareholders' equity.................................. 429,094 506,273
---------- ----------
$3,235,272 $3,323,159
========== ==========
</TABLE>
F-2
<PAGE> 956
BELK OF NEWNAN, GA., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $5,929,871 $5,757,105 $5,884,778
Operating costs and expenses............................... 5,580,621 5,496,560 5,598,414
---------- ---------- ----------
Income from operations..................................... 349,250 260,545 286,364
---------- ---------- ----------
Other income (expense):
Interest, net............................................ (184,484) (190,381) (178,350)
Dividend income.......................................... 200 -- --
Gain (loss) on disposal of property, plant and
equipment............................................. (527) -- 4,475
Miscellaneous, net....................................... (5,777) (264) 435
---------- ---------- ----------
Total other expense, net................................... (190,588) (190,645) (173,440)
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 158,662 69,900 112,924
Income tax expense (benefit)............................... (12,866) 24,204 35,745
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 171,528 45,696 77,179
---------- ---------- ----------
Net earnings............................................... 171,528 45,696 77,179
Retained earnings at beginning of period................... (156,530) 14,998 60,694
---------- ---------- ----------
Retained earnings at end of period......................... $ 14,998 $ 60,694 $ 137,873
========== ========== ==========
</TABLE>
F-3
<PAGE> 957
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 958
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 959
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 14, CHAPTER 2
BUSINESS CORPORATIONS
STATE OF GEORGIA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not
A-1
<PAGE> 960
including a sale pursuant to court order or a sale for cash pursuant to a
plan by which all or substantially all of the net proceeds of the sale will
be distributed to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's right.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
A-2
<PAGE> 961
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
A-3
<PAGE> 962
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing
A-4
<PAGE> 963
under subsection (a) of this Code section within 30 days after the corporation
offered payment for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
A-5
<PAGE> 964
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
A-6
<PAGE> 965
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
---------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement.................... $5,884,778 $ 77,179 $291,274 $452,269 $506,273
Adjustments to eliminate less than wholly-owned
subsidiaries................................. -- -- -- -- --
---------- -------- -------- -------- --------
Adjusted Shareholders' Statement............... $5,884,778 77,179 291,274 452,269 506,273
========== -------- -------- -------- --------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E................ (3,058) (4,475) (4,475)
Gain/loss on sale of securities.............. -- -- --
Impairment loss.............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries............................... -- -- --
Gain/loss on discontinued operations......... -- -- --
Adjustment to tax expense.................... -- -- -- --
-------- -------- --------
Total non-operating items...................... (3,058) (4,475) (4,475)
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities.............................. -- -- --
Adjustment for ownership in other Belk
entities................................... (338)
-------- -------- -------- --------
Per Model...................................... $ 74,121 $286,799 $447,794 $505,935
======== ======== ======== ========
COMPONENTS OF NET DEBT (CASH) PER SHAREHOLDERS'
STATEMENT
Assets
Cash & cash equivalents.................... $ (62,530)
Negative cash balances reclassified to
accounts payable......................... --
Receivables from affiliates, net........... (226,934)
Loans receivable from affiliates, net...... --
Liabilities
Notes payable.............................. --
Current installments of long-term debt..... --
Current portion of obligations under
capital leases........................... --
Payables to affiliates, net................ --
Long-term debt, excluding current
installments............................. --
Obligations under capital leases, excluding
current portion.......................... --
Loans payable to affiliates, net........... 2,500,000
----------
Net debt (cash)................................ 2,210,536
Adjustments to eliminate less than wholly-owned
subsidiaries................................. --
----------
Per Model...................................... $2,210,536
==========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 966
SUPPLEMENT NO. 21
<PAGE> 967
BELK OF NEWNAN, GA., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 10:00 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 21
<PAGE> 968
BELK-RHODES COMPANY, (ROME, GEORGIA)
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk-Rhodes Company, (Rome, Georgia) (the
"Company"), to be held on April 15, 1998, at 10:20 a.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Georgia law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 27.9775 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 279,104 shares of New Belk Class A Common Stock which will
represent approximately 0.4652% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(22)
<PAGE> 969
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 970
BELK-RHODES COMPANY, (ROME, GEORGIA)
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK-RHODES COMPANY, (ROME, GEORGIA):
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk-Rhodes Company, (Rome, Georgia) (the "Company") will be held
on April 15, 1998, at 10:20 a.m., local time, at the offices of Belk Stores
Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for
the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Georgia law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 27.9775 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 971
BELK-RHODES COMPANY, (ROME, GEORGIA)
SUPPLEMENT NO. 22
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 22 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK-RHODES COMPANY,
(ROME, GEORGIA) (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE DISCUSSION
IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED HEREIN
ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION. IF ANY
ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE
INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 16
SELECTED HISTORICAL FINANCIAL INFORMATION................... 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 18
BUSINESS OF THE COMPANY..................................... 18
SECURITY OWNERSHIP OF THE COMPANY........................... 19
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 972
THE COMPANY
The Company was incorporated as a Georgia corporation in 1936. The mailing
address of the Company's principal executive offices is 2801 West Tyvola Road,
Charlotte, North Carolina 28217-4500, and its telephone number at that address
is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 10:20 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under Georgia law)
will be converted, without any action on the part of the Shareholder, into the
right to receive 27.9775 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk (the "New Belk Class A Common Stock"). All
of the shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 12,240 shares of Common Stock
outstanding held of record by 38 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 65.2% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 973
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Georgia Business Corporation Code (the "GBCC"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 24,480 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A
3
<PAGE> 974
Common Stock are convertible into New Belk Class B Common Stock, in whole or in
part, at any time and from time to time at the option of the holder, on the
basis of one share of New Belk Class B Common Stock for each share of New Belk
Class A Common Stock converted. Shares of New Belk Class A Common Stock held by
a New Belk Stockholder who is a Class A Permitted Holder will also automatically
convert into New Belk Class B Common Stock in the event that such New Belk
Stockholder no longer meets the requirements of a Class A Permitted Holder. New
Belk Class B Common Stock has no conversion rights. The Company Articles provide
for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the GBCC, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as the
effect of such distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to
4
<PAGE> 975
be less than the sum of its total liabilities plus (unless the articles of
incorporation permit otherwise) the amount that would be needed if the
corporation dissolved at the time of the payment of the dividend to satisfy the
preferential rights upon dissolution of shareholders whose preferential rights
are superior to those receiving the distribution. The Company Bylaws provide
that the Board of Directors of the Company (the "Company Board") may from time
to time declare dividends on the Company's outstanding shares in the manner and
upon the terms and conditions provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The GBCC permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 25%, or such
greater or lesser percentages as may be provided in the articles of
incorporation or bylaws, of all votes entitled to be cast on the proposed
corporate action to call a special meeting. The Company Bylaws authorize the
Chairman, President, Secretary, the Company Board and any Shareholder pursuant
to the written request of the holders of not less than 10% of all the shares
entitled to vote at the meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the GBCC, unless the articles of incorporation, the bylaws or
the provisions regarding meetings in the GBCC specify a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the shareholders. The Company Articles specify that to liquidate and
discontinue the business of the Company requires a two-thirds vote.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
5
<PAGE> 976
Under the GBCC, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the GBCC
requires an amendment to the articles of incorporation to be recommended by the
board of directors to the shareholders and approved by a majority (unless the
articles of incorporation or the board of directors requires a greater vote or a
vote by voting groups) of the votes entitled to be cast on the amendment by any
voting group. As under the DGCL, the holders of the outstanding shares of a
class or series are entitled to vote as a separate voting group (if shareholder
voting is otherwise required by the GBCC) on a proposed amendment if the
amendment would change certain fundamental rights and preferences of that class
or series. The Company Articles do not specify a greater vote or a vote by
voting groups to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the GBCC, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or the
GBCC reserves this power exclusively to the shareholders in whole or part or
(ii) the shareholders in amending or repealing a particular bylaw provided
expressly that the board of directors may not amend or repeal that bylaw. The
shareholders of the corporation may amend or repeal the bylaws of the
corporation even though such bylaws may be amended or repealed by the board of
directors of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board, or by the affirmative vote of a majority of the shares
outstanding and entitled to vote at any regular or special meeting of the
Shareholders. Further, the Company Bylaws provide that the Company Board has no
power to adopt a bylaw: (i) requiring more than a majority of the voting shares
for a quorum at a meeting of the Shareholders, except where higher percentages
are required by law; (ii) providing for the management of the Company otherwise
than by the Company Board or its executive committees; (iii) increasing or
decreasing the number of directors; or (iv) classifying and staggering the
election of directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the GBCC, any action that may be taken by an annual or special
meeting of shareholders may be taken without a meeting and without prior notice,
if all holders of outstanding shares entitled to vote on such action or, if so
provided in the articles of incorporation, by persons entitled to vote at a
meeting shares having voting power to cast not less than the minimum number (or
numbers, in the case of voting groups) of votes that would be necessary to
authorize or take the action at which all shareholders entitled to vote were
present and voted sign the written consent(s) describing such action. The
Company Bylaws permit any action which may be taken at a meeting of the
Shareholders to be taken without a meeting if a consent in writing, setting
forth the action so taken, is signed by all of the persons who would be entitled
to vote upon such action at a meeting and filed with the Secretary of the
Company.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be
6
<PAGE> 977
filled by a majority of the directors then in office, although less than a
quorum, or by a sole remaining director. If at the time of filling any vacancy
or newly created directorship, the directors then in office constitute less than
a majority of the whole board as constituted immediately prior to such increase,
the Delaware Court of Chancery may, upon application of stockholders holding at
least 10% of the total number of shares outstanding having the right to vote for
such directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation or a bylaw
approved by the shareholders, the GBCC permits a vacancy in the board of
directors to be filled by the shareholders or by the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board and if
the vacancy is one that the directors are authorized to fill, then the directors
may fill the vacancy by the affirmative vote of a majority of all the directors
remaining in office.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors may be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The GBCC requires a corporation to have at least one director. The
articles of incorporation or the bylaws may authorize the shareholders or the
board of directors to change the number of directors. If the articles of
incorporation or the bylaws establish a variable range for the size of
directors, the number of directors may be changed, within the prescribed range,
by the shareholders or, if the articles of incorporation so provide, by the
board of directors. The Company Bylaws require the Company Board to consist of
at least three, but no more than 15, directors.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
Under the GBCC, a director must be a natural person and at least 18 years
of age, but does not have to be a resident of Georgia or a shareholder of the
corporation unless otherwise provided for in the articles of incorporation. The
Company Articles do not require directors of the Company to be residents of
Georgia or
7
<PAGE> 978
shareholders of the Company. The GBCC also allows the articles of incorporation
or the bylaws to provide for additional qualifications of directors.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each class expiring at the
annual meeting in successive years beginning with the first class and
progressing to the third class, if any. Thereafter, directors are chosen for a
full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
Under the GBCC, the articles of incorporation may allow for staggering the
terms of directors by dividing the total number of directors into two or three
groups, with each group containing one-half or one-third of the total. The term
of each group expires in each successive year beginning with the first group and
progressing to the third group, if any. Thereafter, directors are chosen for a
term of two or three years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
According to the GBCC, unless the articles of incorporation or bylaws
provide that directors may be removed only for cause, the shareholders may
remove one or more directors with or without cause. If a director is elected by
a voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove him. If cumulative voting is not authorized, a
director may be removed only by a majority of votes entitled to be cast.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under both the DGCL and the GBCC, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the GBCC generally permits transactions involving a
Georgia corporation and an interested director of that corporation if: (i) the
transaction received the affirmative vote of a majority (but not less than two)
of those qualified directors on the board of directors or on a duly empowered
committee thereof who voted on the transaction after required disclosure to
them; (ii) if a majority of the votes entitled to be cast by the holders of all
qualified shares were cast in favor of the transaction after (a) notice to
shareholders describing the director's conflicting interest transaction, (b)
provision of the information with
8
<PAGE> 979
regard to any unqualified shares and (c) required disclosure to the shareholders
who voted on the transaction (to the extent the information was not known by
them); or (iii) the transaction, judged in the circumstances at the time of
commitment, is established to have been fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the GBCC, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the GBCC (i) in connection with a
proceeding by or in the right of the corporation, except for reasonable expenses
incurred in connection with the proceeding if it is determined that the director
or officer has met the relevant standard of conduct under the GBCC or (ii) in
connection with any proceeding with respect to conduct for which he was adjudged
liable on the basis that personal benefit was improperly received by him,
whether or not involving action in his official capacity. A Georgia corporation
must indemnify a director or officer who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party because he
was a director or officer of the corporation against reasonable expenses
incurred by the director or officer in connection with the proceeding.
The Company Bylaws authorize indemnification as provided in the GBCC. In
addition, the Company Bylaws provide that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not
9
<PAGE> 980
indemnify a director or officer against liability or litigation expense that he
may incur on account of his activities which were, at the time taken, known or
believed by him to be clearly in conflict with the best interest of the Company.
The Company will likewise and to the same extent indemnify any person who, at
the request of the Company, is or was serving as a director or as an officer of
another corporation, joint venture, trust or other enterprise, as a partner of a
partnership or as a trustee or administrator under an employee benefit plan. The
Company will also indemnify a director or officer for reasonable costs, expenses
and attorneys' fees in connection with the enforcement of rights to
indemnification granted therein, if it is so determined in accordance with the
Company Articles that the director or officer is entitled to indemnification
thereunder. The Company Articles provide that to the fullest extent permitted by
the GBCC, a director will not be personally liable to the Company or any of its
Shareholders or otherwise for monetary damages for breach of duty of care or
other duty as a director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The GBCC concerning the approval of mergers and share exchanges is similar
in all material respects to the DGCL, except action by the shareholders of the
surviving corporation is not required if the number and kind of shares
outstanding immediately after the merger or share exchange, plus the number and
kind of shares issuable as a result of the merger or share exchange and by the
conversion of securities issued pursuant to the merger or share exchange or the
exercise of rights and warrants issued pursuant to the merger or share exchange
does not exceed the total number and kind of shares of the surviving or
acquiring corporation authorized by its articles of incorporation immediately
before the merger or share exchange. The GBCC and DGCL provisions concerning the
approval of the sale of all or substantially all of the assets of a corporation
are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the GBCC include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined in the DGCL and the
GBCC, "business combinations" generally encompass (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder, (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested shareholder of a substantial percentage of assets of the corporation,
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested shareholder,
except in certain circumstances, (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested shareholder, except
in certain circumstances or (v) any receipt by the interested shareholder of the
benefit of any loans, advances, guarantees, pledges or other financial benefits
(other than those expressly permitted in (i) through (iv) above) provided by or
through the corporation.
The DGCL defines an "interested stockholder" as any person who (i) is the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation and within three years of the date in
question was the direct
10
<PAGE> 981
or indirect owner of at least 15% of the voting power of any class or series of
the then outstanding stock of the corporation. Under the GBCC, an "interested
shareholder" is any person who owns 10% of the outstanding voting shares or is
an affiliate of the corporation owning 10% of the outstanding voting shares
within the prior two years, and a "continuing director" is a director not
associated or affiliated with any interested shareholder.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (a) by persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
According to the GBCC, if at least three continuing directors serve on the
board of directors, then those directors must unanimously approve the business
combination. If three continuing directors do not serve on the board of
directors, then 66 2/3% of the continuing directors must recommend the business
combination and a majority of shareholders entitled to cast a vote must approve
the business combination. Also, except under certain circumstances, no mergers
may occur between a corporation and an interested shareholder within five years
of the date the shareholder became an interested shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the GBCC provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The GBCC concerning preemptive rights is equivalent to the DGCL. The
Company Articles do not contain any provision with respect to preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other
11
<PAGE> 982
books and records and to make copies or extracts therefrom. A proper purpose
means a purpose reasonably related to such person's interest as a stockholder.
Pursuant to the GBCC, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) excerpts from minutes of any
meeting of the board of directors, records of any action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporations; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the GBCC ("Article 13") has
the right to receive in cash the fair value of such Shareholder's shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN
ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
To exercise appraisal rights under Article 13, a holder of Common Stock
must (i) deliver to the Company before the taking of the vote of Shareholders on
the Reorganization Agreement written notice of his intent to demand payment for
his shares if the Merger is effected and (ii) not vote his shares in favor of
the Reorganization Agreement. A Shareholder who does not satisfy these two
requirements is not entitled to payment for his shares under Article 13. In
addition, any Shareholder who returns a signed proxy but fails to provide
instructions as to the manner in which such shares are to be voted will be
deemed to have voted in favor of the Reorganization Agreement and will not be
entitled to assert dissenters' rights of appraisal.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial Shareholder and he notifies the Company
in writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of such a partial dissenter are determined as if
the shares as to which he dissents and his other shares are registered in the
names of different Shareholders.
If the Reorganization Agreement is approved at the Special Meeting, the
Company must deliver a written dissenters' notice (the "Dissenters' Notice") to
all Shareholders who satisfied the notice requirements of Article 13. The
Dissenters' Notice must be sent within 10 days after the Effective Time and must
(i) state where the demand for payment must be sent and where and when
certificates for shares must be deposited, (ii) inform holders of uncertificated
shares to what extent transfer of those shares will be restricted after the
demand for payment is received, (iii) set a date by which the Company must
receive the demand for payment (which date may not be fewer than 30 nor more
than 60 days after the Dissenters' Notice is delivered) and (iv) be accompanied
by a copy of Article 13.
A record Shareholder who receives the Dissenters' Notice must demand
payment and deposit his certificates in accordance with the Dissenters' Notice.
Such Shareholder will retain all other rights of a Shareholder until those
rights are canceled or modified by the consummation of the Merger. A record
Shareholder who does not demand payment or deposit his share certificates where
required, each by the date set in the Dissenters' Notice, is not entitled to
payment for his shares under Article 13.
12
<PAGE> 983
Within 10 days of the later of the Effective Time or receipt of a payment
demand, the Company must offer to pay each dissenting Shareholder who complied
with Article 13 the amount the Company estimates to be the fair value of his
shares, plus accrued interest from the Effective Time. Such offer of payment
must be accompanied by (i) certain recent Company financial statements, (ii) the
Company's estimate of the fair value of the shares and interest due, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Article 13 and (v) a copy of Article
13. If the Shareholder accepts the Company's offer by written notice to the
Company within 30 days after the Company's offer, the Company must make payment
within 60 days after the later of the making of the offer or the Effective Time.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing share certificates, the Company must return the
deposited certificates. If, after such return, the Merger is consummated, the
Company must send a new Dissenters' Notice and repeat the payment procedure
described above.
A dissenting Shareholder may notify the Company in writing of his own
estimate of the fair value of his shares and the interest due, and may demand
payment of his estimate, if (i) he believes that the amount offered by the
Company is less than the fair value of his shares or that the interest due has
been calculated incorrectly or (ii) the Company, having failed to consummate the
Merger, does not return the deposited certificates within 60 days after the date
set for demanding payment. A dissenting Shareholder waives his right to demand
payment unless he notifies the Company of his demand in writing within 30 days
after the Company makes or offers payment for his shares. If the Company does
not offer payment within 10 days of the later of the Effective Time or receipt
of a payment demand, then (i) the Shareholder may demand the financial
statements and other information of the Company, and the Company must provide
such information within 10 days after receipt of the written demand and (ii) the
Shareholder may notify the Company of his own estimate of the fair value of his
shares and the amount of interest due, and may demand payment of that estimate.
If a demand for payment by a Shareholder remains unsettled, the Company
must commence a nonjury equity valuation proceeding in the appropriate court, as
specified in Article 13, within 60 days after receiving the payment demand and
must petition the court to determine the fair value of the shares and accrued
interest. If the Company does not commence a valuation proceeding within 60
days, the Company is required to pay each dissenting Shareholder whose demand
remains unsettled, the amount demanded. The Company is required to make all
dissenting Shareholders whose demands remain unsettled parties to the proceeding
and to serve a copy of the petition upon each dissenting Shareholder. The court
may appoint appraisers to receive evidence and to recommend a decision on fair
value. Each dissenting Shareholder made a party to the proceeding is entitled to
judgment for the fair value of his shares plus interest to the date of judgment.
In an appraisal proceeding commenced under Article 13, the court must
determine the costs of the proceeding, excluding fees and expenses of attorneys
and experts for the respective parties, and must assess those costs against the
Company, except that the court may assess the costs against all or some of the
dissenting Shareholders to the extent the court finds they acted arbitrarily,
vexatiously or not in good faith in demanding payment under Article 13. The
court also may assess the fees and expenses of attorneys and experts for the
respective parties against the Company if the court finds the Company did not
substantially comply with the requirements of Article 13, or against either the
Company or a dissenting Shareholder if the court finds that such party acted
arbitrarily, vexatiously or not in good faith with respect to the rights
provided by Article 13.
If the court finds that the services of the attorneys for any dissenting
Shareholder were of substantial benefit to other dissenting Shareholders
similarly situated, and that the fees for those services should not be assessed
against the Company, the court may award those attorneys reasonable fees out of
the amounts awarded the dissenting Shareholders who were benefited. No action by
any dissenting Shareholder to enforce dissenters' rights may be brought more
than three years after the Effective Time, regardless of whether notice of the
Merger and of the right to dissent was given by the Company in compliance with
the provisions of Article 13.
13
<PAGE> 984
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period")multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
from the Total Relative Value of the Company product of (i) the percentage of
New Belk Class A Common Stock expected to be owned by the Shareholders (other
than Belk Companies) upon consummation of the Merger and (ii) 59,998,834 (the
number of shares of New Belk Class A Common Stock expected to be issued to
Existing Belk Shareholders (other than Belk Companies) in the Reorganization),
by the number of shares of Common Stock outstanding on November 25, 1997 (other
than shares of Common Stock held by other Belk Companies). See "Determination of
Applicable Exchange Ratios" in the Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $8,479,043 $8,479,043 0.6 $(331,307) $5,418,733
EBITDA............... 543,419 515,719 7 (331,307) 3,941,340
EBIT................. 449,317 421,617 10 (331,307) 4,547,477
Net Income........... 257,985 238,957 15 -- 3,584,355
Book Equity.......... 3,292,977 3,249,439 1 -- 3,249,439
</TABLE>
14
<PAGE> 985
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk-Rhodes Company,
of Carrollton, Ga. 11.2037% X $10,536,260 = $ 1,180,451
-----------
Total $ 1,180,451
===========
Relative Operating Value of Company $ 5,418,733
Relative Operating Value of Other Companies Owned by Company + 1,180,451
-----------
Total Relative Value of Company = $ 6,599,184
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Enterprises,
Inc. .4902% X $ 6,599,184 = $ 32,349
Belk of Dalton, Ga.,
Inc. 15.6373% X 6,599,184 = 1,031,934
Belk of Thomaston,
Ga., Inc. 2.3693% X 6,599,184 = 156,355
-----------
Total $ 1,220,638
===========
Total Relative Value of Company $ 6,599,184
Total Relative Value of Company Owned by Other Belk Companies - 1,220,638
-----------
Net Relative Value of Company = $ 5,378,546
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 5,378,546 / $1,156,226,577 = .4652%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.4652% X 59,998,834) / 9,976 = 27.9775
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
15
<PAGE> 986
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 21.08
Dividends(2).............................................. 10.00
Book value per share(3)................................... 269.03
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 26.86
Dividends(2).............................................. 7.27
Book value per share...................................... 350.28
</TABLE>
- ---------------
(1) Based on 12,240 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 12,240 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
16
<PAGE> 987
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $11,308 $ 9.572 $ 8,479
Net income (loss)........................................... 36 (233) 258
Per common share
Net income (loss)(1)...................................... 2.98 (19.00) 21.08
Dividends................................................. 15.00 15.00 10.00
Book value(2)............................................. 291.96 257.96 269.03
Total assets................................................ 6,019 5,345 5,439
Shareholders' equity........................................ 3,574 3,157 3,293
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $5,643 $5,273
Income from operations...................................... 104 219
</TABLE>
- ---------------
(1) Based on 12,240 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding for the years ended January 31, 1995,
February 3, 1996 and February 1, 1997.
(2) Based on 12,240 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
17
<PAGE> 988
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
To the extent a discussion of the financial condition and results of
operations of the Company for any of the fiscal years ended January 31, 1995,
February 3, 1996 or February 1, 1997 or for either of the nine-month periods
ended November 2, 1996 or November 1, 1997 is necessary to identify certain
trends or conditions that differ from the combined Belk Companies and that are
material to Shareholders' understanding of the financial condition or results of
operations of the Company, such discussion is included below. The information
which follows is based upon and should be read in conjunction with the
historical financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus Supplement.
Comparable store sales decreased for the nine months ended November 1, 1997
due to increased competition in the market.
Income from operations decreased in fiscal year 1996 due to an increase in
cost of merchandise resulting from higher mark downs accompanied by increases in
selling, general, and administrative expense, as a percent of sales, resulting
from the closing of the Rome Outlet Center in fiscal year 1996.
Other income, net decreased in fiscal year 1996 partly as a result of a
loss on abandonment and sale of fixed assets related to the store closing.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Mt. Berry
Square in Rome, Georgia. The Company's store operates in a manner consistent
with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is managed out of the Kerr group office in
Norcross, Georgia.
Facilities. The Company leases its building, which contains approximately
86,000 square feet of floor area. The current term of the lease expires in 2011.
The Company believes the building is adequate to meet its current needs.
Competition. Specific competitors in the Company's market include Sears,
Penney and Proffitt's.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a materially adverse effect on the Company's business, financial
condition or results of operations.
18
<PAGE> 989
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d).............................................. 4,432 36.2%
Thomas M. Belk, Jr. (Director and Executive Officer)
(a)(b)(d)................................................. 2,792 22.8%
H. W. McKay Belk (Executive Officer) (a)(b)(d).............. 2,792 22.8%
John R. Belk (Executive Officer) (a)(b)(d).................. 2,792 22.8%
Henderson Belk (Director) (c)............................... 960 7.8%
Sarah Belk Gambrell (Director) (c).......................... 2,336 19.1%
Cecil David Rhodes, Jr. (Director).......................... 880 7.2%
C. D. Rhodes, III (Director)................................ 30 *
Robert Earl Rhodes (Director) (e)........................... 448 3.7%
Cecil D. Rhodes Trust....................................... 1,600 13.1%
Ralph A. Pitts (Director)................................... 0 *
Robert K. Kerr, Jr. (Executive Officer)..................... 20 *
Belk of Dalton, Ga., Inc.................................... 1,914 15.6%
All Directors and Executive Officers as a group (11
persons).................................................. 7,978 65.2%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson and Ralph A. Pitts -- 2801 West Tyvola Road,
Charlotte, N.C. 28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road, Charlotte,
N.C. 28207; Robert K. Kerr, Jr. -- 1890-D Beaver Ridge Circle, Norcross, Ga.
30071; Cecil David Rhodes, Jr. -- 209 Brentwood Drive, Wilson, N.C. 27893; C. D.
Rhodes, III -- Darlington School, 1014 Cave Spring Road, Rome, Ga. 30161; Robert
Earl Rhodes -- 245 Jackson Street, Denver, Co. 80206-5524; Cecil D. Rhodes
Trust -- Ernest J. Rudert & Company, Box 1744, Rome, Ga. 30161; Belk of Dalton,
Ga., Inc. -- 2801 West Tyrola Road, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below
(a) Includes 120 shares held by Brothers Investment Company, which Corporation
is equally owned by John M. Belk and the Estate of Thomas M. Belk. Voting
and investment power is shared by John M. Belk, Katherine McKay Belk,
Katherine Belk Morris, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk
and Leroy Robinson.
(b) Includes 144 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(c) Includes 960 shares held in several Trusts established by the Will of Mary
I. Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
19
<PAGE> 990
(d) Includes 1,914 shares held by Belk of Dalton, Ga., Inc., 60 shares held by
Belk Enterprises, Inc. and 290 shares held by Belk of Thomaston, Ga., Inc.,
which shares are voted by the members of the Executive Committee of the
Board of Directors of each such Corporation, under authority given by the
directors of each such Corporation at the annual meeting of directors held
in March, 1997. The Executive Committee of each such Corporation consists
of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(e) Includes 184 shares held by Robert Earl Rhodes' wife, Sandra Jeanne Rhodes.
20
<PAGE> 991
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 992
BELK-RHODES COMPANY, (ROME, GEORGIA)
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 82,988 $ 130,276
Accounts receivable, net.................................. 1,347,014 1,526,499
Merchandise inventory..................................... 1,894,990 1,914,669
Receivable from affiliates, net........................... 1,134,160 1,001,031
Refundable income taxes................................... 81,477 120,105
Deferred income taxes..................................... 14,623 --
Other..................................................... 130,713 150,122
---------- ----------
Total current assets........................................ 4,685,965 4,842,702
Investments................................................. 43,538 43,538
Property, plant and equipment, net.......................... 326,992 269,861
Deferred income taxes....................................... 246,204 244,146
Other noncurrent assets..................................... 42,778 39,003
---------- ----------
$5,345,477 $5,439,250
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 447,472 $ 421,484
Deferred income taxes..................................... -- 3,471
Accrued income taxes...................................... -- 14,039
---------- ----------
Total current liabilities................................... 447,472 438,994
Loans payable to affiliates, net............................ 800,000 800,000
Other noncurrent liabilities................................ 337,448 344,325
---------- ----------
Total liabilities........................................... 1,584,920 1,583,319
Deferred income............................................. 603,165 562,954
Shareholders' equity:
Common stock.............................................. 1,224,000 1,224,000
Additional paid in capital................................ 18,557 18,557
Retained earnings......................................... 1,914,835 2,050,420
---------- ----------
Total shareholders' equity.................................. 3,157,392 3,292,977
---------- ----------
$5,345,477 $5,439,250
========== ==========
</TABLE>
F-2
<PAGE> 993
BELK-RHODES COMPANY, (ROME, GEORGIA)
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales................................................. $11,307,883 $9,571,859 $8,479,043
Operating costs and expenses.............................. 11,235,562 9,730,410 8,058,684
----------- ---------- ----------
Income from operations.................................... 72,321 (158,551) 420,359
----------- ---------- ----------
Other income (expense):
Interest, net........................................... (132,919) (80,597) (73,755)
Dividend income......................................... 22,000 24,200 24,200
Gain (loss) on disposal of property, plant and
equipment............................................ -- (103,766) 3,500
Gain (loss) on sale of securities....................... 66,114 -- --
Miscellaneous, net...................................... (14,194) (783) 1,258
----------- ---------- ----------
Total other expense, net.................................. (58,999) (160,946) (44,797)
----------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities....... 13,322 (319,497) 375,562
Income tax expense (benefit).............................. (23,156) (86,941) 117,577
----------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities..................... 36,478 (232,556) 257,985
----------- ---------- ----------
Net earnings.............................................. 36,478 (232,556) 257,985
Retained earnings at beginning of period.................. 2,478,113 2,330,991 1,914,835
Dividends paid............................................ (183,600) (183,600) (122,400)
----------- ---------- ----------
Retained earnings at end of period........................ $ 2,330,991 $1,914,835 $2,050,420
=========== ========== ==========
</TABLE>
F-3
<PAGE> 994
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 995
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 996
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 14, CHAPTER 2
BUSINESS CORPORATIONS
STATE OF GEORGIA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
A-1
<PAGE> 997
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's right.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
A-2
<PAGE> 998
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
A-3
<PAGE> 999
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing
A-4
<PAGE> 1000
under subsection (a) of this Code section within 30 days after the corporation
offered payment for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
A-5
<PAGE> 1001
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
A-6
<PAGE> 1002
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................... $ 8,479,043 $257,985 $449,317 $543,419 $3,292,977
Adjustments to eliminate less than
wholly-owned subsidiaries................... -- -- -- -- --
----------- -------- -------- -------- ----------
Adjusted Shareholders' Statement.............. $ 8,479,043 257,985 449,317 543,419 3,292,977
=========== -------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............... (2,404) (3,500) (3,500)
Gain/loss on sale of securities............. -- -- --
Impairment loss............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries.............................. -- -- --
Gain/loss on discontinued operations........ -- -- --
Adjustment to tax expense................... -- -- -- --
-------- -------- --------
Total non-operating items..................... (2,404) (3,500) (3,500)
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities............................. (16,624) (24,200) (24,200)
Adjustment for ownership in other Belk
entities.................................. (43,538)
-------- -------- -------- ----------
Per Model..................................... $238,957 $421,617 $515,719 $3,249,439
======== ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................... $ (130,276)
Negative cash balances reclassified to
accounts payable........................ --
Receivables from affiliates, net.......... (1,001,031)
Loans receivable from affiliates, net..... --
Liabilities
Notes payable............................. --
Current installments of long-term debt.... --
Current portion of obligations under
capital leases.......................... --
Payables to affiliates, net............... --
Long-term debt, excluding current
installments............................ --
Obligations under capital leases,
excluding current portion............... --
Loans payable to affiliates, net.......... 800,000
-----------
Net debt (cash)............................... (331,307)
Adjustments to eliminate less than
wholly-owned subsidiaries................... --
-----------
Per Model..................................... $ (331,307)
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 1003
SUPPLEMENT NO. 22
<PAGE> 1004
BELK-RHODES COMPANY, (ROME, GEORGIA)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 10:20 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
-------------------
-------------------------------
Signature
-------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 22
<PAGE> 1005
BELK OF STATESBORO, GA., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk of Statesboro, Ga., Inc. (the "Company"),
to be held on April 15, 1998, at 3:50 p.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Georgia law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 24.9140 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 324 shares of New Belk Class A Common Stock which will represent
approximately 0.0005% of the New Belk Class A Common Stock outstanding after the
Reorganization. All of the shares of New Belk Class A Common Stock to be
received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage paid
(23)
<PAGE> 1006
envelope. If you plan to attend the Special Meeting, you may vote in person if
you wish, even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 1007
BELK OF STATESBORO, GA., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK OF STATESBORO, GA., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk of Statesboro, Ga., Inc. (the "Company") will be held on April
15, 1998, at 3:50 p.m., local time, at the offices of Belk Stores Services,
Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for the
following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Georgia law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 24.9140 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 1008
BELK OF STATESBORO, GA., INC.
SUPPLEMENT NO. 23
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 23 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK OF STATESBORO,
GA., INC. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE DISCUSSION IN
THE PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED HEREIN ASSUMES
THAT ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION. IF ANY ONE OR
MORE BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE INFORMATION
CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 13
COMPARATIVE PER SHARE DATA.................................. 16
SELECTED HISTORICAL FINANCIAL INFORMATION................... 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 18
BUSINESS OF THE COMPANY..................................... 18
SECURITY OWNERSHIP OF THE COMPANY........................... 19
INDEX TO UNAUDITED CONSOLIDATED HISTORICAL FINANCIAL
STATEMENTS................................................ F-1
Unaudited Consolidated Balance Sheets..................... F-2
Unaudited Consolidated Statements of Earnings and Retained
Earnings............................................... F-3
Condensed Notes to Unaudited Consolidated Historical
Financial Statements................................... F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 1009
THE COMPANY
The Company was incorporated as a Georgia corporation in 1934. The Company
changed its name from Belk's Department Store of Augusta, Georgia, Inc. to Belk
of Statesboro, Ga., Inc. on July 23, 1997. The mailing address of the Company's
principal executive offices is 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, and its telephone number at that address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 3:50 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under Georgia law),
will be converted, without any action on the part of the Shareholder, into the
right to receive 24.9140 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk (the "New Belk Class A Common Stock"). All
of the shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 29,008 shares of Common Stock
outstanding held of record by 7 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 99.96% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 1010
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Georgia Business Corporation Code (the "GBCC"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 30,000 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock held by a New Belk Stockholder who is a Class A Permitted
Holder will also automatically convert into New
3
<PAGE> 1011
Belk Class B Common Stock in the event that such New Belk Stockholder no longer
meets the requirements of a Class A Permitted Holder. New Belk Class B Common
Stock has no conversion rights. The Company Articles provide for only one class
of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the GBCC, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as the
effect of such distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to be less than the sum of its total liabilities plus
(unless the articles of incorporation permit otherwise) the amount that would be
needed if the corporation dissolved at the time of the payment of the dividend
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
4
<PAGE> 1012
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The GBCC permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 25%, or such
greater or lesser percentages as may be provided in the articles of
incorporation or bylaws, of all votes entitled to be cast on the proposed
corporate action to call a special meeting. The Company Bylaws authorize the
Chairman, President, Secretary, the Company Board and any Shareholder pursuant
to the written request of the holders of not less than 10% of all the shares
entitled to vote at the meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the GBCC, unless the articles of incorporation, the bylaws or
the provisions regarding meetings in the GBCC specify a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the shareholders. The Company Articles specify that to liquidate and
discontinue the business of the Company requires a two-thirds vote.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
Under the GBCC, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the GBCC
requires an amendment to the articles of incorporation to be recommended by the
board of directors to the
5
<PAGE> 1013
shareholders and approved by a majority (unless the articles of incorporation or
the board of directors requires a greater vote or a vote by voting groups) of
the votes entitled to be cast on the amendment by any voting group. As under the
DGCL, the holders of the outstanding shares of a class or series are entitled to
vote as a separate voting group (if shareholder voting is otherwise required by
the GBCC) on a proposed amendment if the amendment would change certain
fundamental rights and preferences of that class or series. The Company Articles
do not specify a greater vote or a vote by voting groups to amend the Company
Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the GBCC, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or the
GBCC reserves this power exclusively to the shareholders in whole or part or
(ii) the shareholders in amending or repealing a particular bylaw provided
expressly that the board of directors may not amend or repeal that bylaw. The
shareholders of the corporation may amend or repeal the bylaws of the
corporation even though such bylaws may be amended or repealed by the board of
directors of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board, or by the affirmative vote of a majority of the shares
outstanding and entitled to vote at any regular or special meeting of the
Shareholders. Further, the Company Bylaws provide that the Company Board has no
power to adopt a bylaw: (i) requiring more than a majority of the voting shares
for a quorum at a meeting of the Shareholders, except where higher percentages
are required by law; (ii) providing for the management of the Company otherwise
than by the Company Board or its executive committees; (iii) increasing or
decreasing the number of directors; or (iv) classifying and staggering the
election of directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the GBCC, any action that may be taken by an annual or special
meeting of shareholders may be taken without a meeting and without prior notice,
if all holders of outstanding shares entitled to vote on such action or, if so
provided in the articles of incorporation, by persons entitled to vote at a
meeting shares having voting power to cast not less than the minimum number (or
numbers, in the case of voting groups) of votes that would be necessary to
authorize or take the action at which all shareholders entitled to vote were
present and voted sign the written consent(s) describing such action. The
Company Bylaws permit any action which may be taken at a meeting of the
Shareholders to be taken without a meeting if a consent in writing, setting
forth the action so taken, is signed by all of the persons who would be entitled
to vote upon such action at a meeting and filed with the Secretary of the
Company.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding
6
<PAGE> 1014
having the right to vote for such directors, order an election to be held to
fill any such vacancies or newly created directorships or to replace the
directors chosen by the directors then in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation or a bylaw
approved by the shareholders, the GBCC permits a vacancy in the board of
directors to be filled by the shareholders or by the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board and if
the vacancy is one that the directors are authorized to fill, then the directors
may fill the vacancy by the affirmative vote of a majority of all the directors
remaining in office.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors may be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The GBCC requires a corporation to have at least one director. The articles
of incorporation or the bylaws may authorize the shareholders or the board of
directors to change the number of directors. If the articles of incorporation or
the bylaws establish a variable range for the size of directors, the number of
directors may be changed, within the prescribed range, by the shareholders or,
if the articles of incorporation so provide, by the board of directors. The
Company Bylaws require the Company Board to consist of at least three, but no
more than 15, directors.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
Under the GBCC, a director must be a natural person and at least 18 years
of age, but does not have to be a resident of Georgia or a shareholder of the
corporation unless otherwise provided for in the articles of incorporation. The
Company Articles do not require directors of the Company to be residents of
Georgia or shareholders of the Company. The GBCC also allows the articles of
incorporation or the bylaws to provide for additional qualifications of
directors.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each
7
<PAGE> 1015
class expiring at the annual meeting in successive years beginning with the
first class and progressing to the third class, if any. Thereafter, directors
are chosen for a full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
Under the GBCC, the articles of incorporation may allow for staggering the
terms of directors by dividing the total number of directors into two or three
groups, with each group containing one-half or one-third of the total. The term
of each group expires in each successive year beginning with the first group and
progressing to the third group, if any. Thereafter, directors are chosen for a
term of two or three years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
According to the GBCC, unless the articles of incorporation or bylaws
provide that directors may be removed only for cause, the shareholders may
remove one or more directors with or without cause. If a director is elected by
a voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove him. If cumulative voting is not authorized, a
director may be removed only by a majority of votes entitled to be cast.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under both the DGCL and the GBCC, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the GBCC generally permits transactions involving a
Georgia corporation and an interested director of that corporation if: (i) the
transaction received the affirmative vote of a majority (but not less than two)
of those qualified directors on the board of directors or on a duly empowered
committee thereof who voted on the transaction after required disclosure to
them; (ii) if a majority of the votes entitled to be cast by the holders of all
qualified shares were cast in favor of the transaction after (a) notice to
shareholders describing the director's conflicting interest transaction, (b)
provision of the information with regard to any unqualified shares and (c)
required disclosure to the shareholders who voted on the transaction (to the
extent the information was not known by them); or (iii) the transaction, judged
in the circumstances at the time of commitment, is established to have been fair
to the corporation.
8
<PAGE> 1016
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the GBCC, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the GBCC (i) in connection with a
proceeding by or in the right of the corporation, except for reasonable expenses
incurred in connection with the proceeding if it is determined that the director
or officer has met the relevant standard of conduct under the GBCC or (ii) in
connection with any proceeding with respect to conduct for which he was adjudged
liable on the basis that personal benefit was improperly received by him,
whether or not involving action in his official capacity. A Georgia corporation
must indemnify a director or officer who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party because he
was a director or officer of the corporation against reasonable expenses
incurred by the director or officer in connection with the proceeding.
The Company Bylaws authorize indemnification as provided in the GBCC. In
addition, the Company Bylaws provide that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture,
9
<PAGE> 1017
trust or other enterprise, as a partner of a partnership or as a trustee or
administrator under an employee benefit plan. The Company will also indemnify a
director or officer for reasonable costs, expenses and attorneys' fees in
connection with the enforcement of rights to indemnification granted therein, if
it is so determined in accordance with the Company Articles that the director or
officer is entitled to indemnification thereunder. The Company Articles provide
that to the fullest extent permitted by the GBCC, a director will not be
personally liable to the Company or any of its Shareholders or otherwise for
monetary damages for breach of duty of care or other duty as a director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The GBCC concerning the approval of mergers and share exchanges is similar
in all material respects to the DGCL, except action by the shareholders of the
surviving corporation is not required if the number and kind of shares
outstanding immediately after the merger or share exchange, plus the number and
kind of shares issuable as a result of the merger or share exchange and by the
conversion of securities issued pursuant to the merger or share exchange or the
exercise of rights and warrants issued pursuant to the merger or share exchange
does not exceed the total number and kind of shares of the surviving or
acquiring corporation authorized by its articles of incorporation immediately
before the merger or share exchange. The GBCC and DGCL provisions concerning the
approval of the sale of all or substantially all of the assets of a corporation
are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the GBCC include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined in the DGCL and the
GBCC, "business combinations" generally encompass (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder, (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested shareholder of a substantial percentage of assets of the corporation,
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested shareholder,
except in certain circumstances, (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested shareholder, except
in certain circumstances or (v) any receipt by the interested shareholder of the
benefit of any loans, advances, guarantees, pledges or other financial benefits
(other than those expressly permitted in (i) through (iv) above) provided by or
through the corporation.
The DGCL defines an "interested stockholder" as any person who (i) is the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation and within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation. Under the
GBCC, an "interested shareholder" is any person who owns 10% of the outstanding
voting shares or is an affiliate of the corporation owning 10% of the
outstanding voting shares within the prior two years, and a "continuing
director" is a director not associated or affiliated with any interested
shareholder.
10
<PAGE> 1018
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
According to the GBCC, if at least three continuing directors serve on the
board of directors, then those directors must unanimously approve the business
combination. If three continuing directors do not serve on the board of
directors, then 66 2/3% of the continuing directors must recommend the business
combination and a majority of shareholders entitled to cast a vote must approve
the business combination. Also, except under certain circumstances, no mergers
may occur between a corporation and an interested shareholder within five years
of the date the shareholder became an interested shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the GBCC provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The GBCC concerning preemptive rights is equivalent to the DGCL. The
Company Articles do not contain any provision with respect to preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the GBCC, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the
11
<PAGE> 1019
purpose and the records the shareholder desires to inspect, (iii) the records
are directly connected with the purpose and (iv) the shareholder gives the
corporation written notice of the demand at least five business days before the
date on which the shareholder wishes to inspect and copy such records. Such
documents include: (i) excerpts from minutes of any meeting of the board of
directors, records of any action of a committee of the board of directors while
acting in place of the board of directors on behalf of the corporation, minutes
of any meeting of the shareholders and records of action taken by the
shareholders or board of directors without a meeting; (ii) accounting records of
the corporations; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the GBCC ("Article 13") has
the right to receive in cash the fair value of such Shareholder's shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN
ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
To exercise appraisal rights under Article 13, a holder of Common Stock
must (i) deliver to the Company before the taking of the vote of Shareholders on
the Reorganization Agreement written notice of his intent to demand payment for
his shares if the Merger is effected and (ii) not vote his shares in favor of
the Reorganization Agreement. A Shareholder who does not satisfy these two
requirements is not entitled to payment for his shares under Article 13. In
addition, any Shareholder who returns a signed proxy but fails to provide
instructions as to the manner in which such shares are to be voted will be
deemed to have voted in favor of the Reorganization Agreement and will not be
entitled to assert dissenters' rights of appraisal.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial Shareholder and he notifies the Company
in writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of such a partial dissenter are determined as if
the shares as to which he dissents and his other shares are registered in the
names of different Shareholders.
If the Reorganization Agreement is approved at the Special Meeting, the
Company must deliver a written dissenters' notice (the "Dissenters' Notice") to
all Shareholders who satisfied the notice requirements of Article 13. The
Dissenters' Notice must be sent within 10 days after the Effective Time and must
(i) state where the demand for payment must be sent and where and when
certificates for shares must be deposited, (ii) inform holders of uncertificated
shares to what extent transfer of those shares will be restricted after the
demand for payment is received, (iii) set a date by which the Company must
receive the demand for payment (which date may not be fewer than 30 nor more
than 60 days after the Dissenters' Notice is delivered) and (iv) be accompanied
by a copy of Article 13.
A record Shareholder who receives the Dissenters' Notice must demand
payment and deposit his certificates in accordance with the Dissenters' Notice.
Such Shareholder will retain all other rights of a Shareholder until those
rights are canceled or modified by the consummation of the Merger. A record
Shareholder who does not demand payment or deposit his share certificates where
required, each by the date set in the Dissenters' Notice, is not entitled to
payment for his shares under Article 13.
Within 10 days of the later of the Effective Time or receipt of a payment
demand, the Company must offer to pay each dissenting Shareholder who complied
with Article 13 the amount the Company estimates to be the fair value of his
shares, plus accrued interest from the Effective Time. Such offer of payment
must be accompanied by (i) certain recent Company financial statements, (ii) the
Company's estimate of the fair value of the shares and interest due, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Article 13 and (v) a copy of Article
13. If the Shareholder
12
<PAGE> 1020
accepts the Company's offer by written notice to the Company within 30 days
after the Company's offer, the Company must make payment within 60 days after
the later of the making of the offer or the Effective Time.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing share certificates, the Company must return the
deposited certificates. If, after such return, the Merger is consummated, the
Company must send a new Dissenters' Notice and repeat the payment procedure
described above.
A dissenting Shareholder may notify the Company in writing of his own
estimate of the fair value of his shares and the interest due, and may demand
payment of his estimate, if (i) he believes that the amount offered by the
Company is less than the fair value of his shares or that the interest due has
been calculated incorrectly or (ii) the Company, having failed to consummate the
Merger, does not return the deposited certificates within 60 days after the date
set for demanding payment. A dissenting Shareholder waives his right to demand
payment unless he notifies the Company of his demand in writing within 30 days
after the Company makes or offers payment for his shares. If the Company does
not offer payment within 10 days of the later of the Effective Time or receipt
of a payment demand, then (i) the Shareholder may demand the financial
statements and other information of the Company, and the Company must provide
such information within 10 days after receipt of the written demand and (ii) the
Shareholder may notify the Company of his own estimate of the fair value of his
shares and the amount of interest due, and may demand payment of that estimate.
If a demand for payment by a Shareholder remains unsettled, the Company
must commence a nonjury equity valuation proceeding in the appropriate court, as
specified in Article 13, within 60 days after receiving the payment demand and
must petition the court to determine the fair value of the shares and accrued
interest. If the Company does not commence a valuation proceeding within 60
days, the Company is required to pay each dissenting Shareholder whose demand
remains unsettled, the amount demanded. The Company is required to make all
dissenting Shareholders whose demands remain unsettled parties to the proceeding
and to serve a copy of the petition upon each dissenting Shareholder. The court
may appoint appraisers to receive evidence and to recommend a decision on fair
value. Each dissenting Shareholder made a party to the proceeding is entitled to
judgment for the fair value of his shares plus interest to the date of judgment.
In an appraisal proceeding commenced under Article 13, the court must
determine the costs of the proceeding, excluding fees and expenses of attorneys
and experts for the respective parties, and must assess those costs against the
Company, except that the court may assess the costs against all or some of the
dissenting Shareholders to the extent the court finds they acted arbitrarily,
vexatiously or not in good faith in demanding payment under Article 13. The
court also may assess the fees and expenses of attorneys and experts for the
respective parties against the Company if the court finds the Company did not
substantially comply with the requirements of Article 13, or against either the
Company or a dissenting Shareholder if the court finds that such party acted
arbitrarily, vexatiously or not in good faith with respect to the rights
provided by Article 13.
If the court finds that the services of the attorneys for any dissenting
Shareholder were of substantial benefit to other dissenting Shareholders
similarly situated, and that the fees for those services should not be assessed
against the Company, the court may award those attorneys reasonable fees out of
the amounts awarded the dissenting Shareholders who were benefited. No action by
any dissenting Shareholder to enforce dissenters' rights may be brought more
than three years after the Effective Time, regardless of whether notice of the
Merger and of the right to dissent was given by the Company in compliance with
the provisions of Article 13.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996
13
<PAGE> 1021
to February 1, 1997 (the "Measurement Period") multiplied by six-tenths, less
Net Debt (calculated in accordance with Annex B of this Prospectus Supplement
under "Components of Net Debt (Cash) per Shareholders' Statement") at the end of
the Measurement Period; (ii) the Company's adjusted earnings before interest,
taxes, depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ------ -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $15,951,470 $15,951,470 0.6 $(4,031,050) $13,601,932
EBITDA............... (927,332) 251,932 7 (4,031,050) 5,794,574
EBIT................. (1,344,399) (165,135) 10 (4,031,050) 2,379,700
Net Income (loss).... (1,059,507) (246,803) 15 -- (3,702,045)
Book Equity.......... 10,646,618 10,641,637 1 -- 10,641,637
</TABLE>
14
<PAGE> 1022
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk-Lindsey Stores,
Inc. .4269% X $77,285,261 = $ 329,931
-----------
Total $ 329,931
===========
Relative Operating Value of Company $13,601,932
Relative Operating Value of Other Companies Owned by Company + 329,931
-----------
Total Relative Value of Company = $13,931,862
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Enterprises,
Inc. 99.9552% X $13,931,862 = $13,925,621
-----------
Total $13,925,621
===========
Total Relative Value of Company $13,931,862
Total Relative Value of Company Owned by Other Belk Companies - $13,925,621
-----------
Net Relative Value of Company = $ 6,241
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 6,241 / $1,156,226,577 = .0005%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.0005% X 59,998,834) / 13 = 24.9140
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
15
<PAGE> 1023
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $(36.52)
Dividends(2).............................................. 0.00
Book value per share(3)................................... 367.02
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 23.92
Dividends(2).............................................. 6.48
Book value per share...................................... 311.92
</TABLE>
- ---------------
(1) Based on 29,008 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 29,008 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
16
<PAGE> 1024
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $19,320 $17,860 $15,951
Net income (loss)........................................... (752) (622) (1,060)
Per common share
Net income (loss)(1)...................................... (25.94) (21.46) (36.52)
Dividends................................................. -- -- --
Book value(2)............................................. 218.16 196.71 367.02
Total assets................................................ 12,804 11,897 11,908
Shareholders' equity........................................ 6,329 5,706 10,647
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $11,576 $9,767
Income (loss) from operations............................... (794) 523
</TABLE>
- ---------------
(1) Based on 29,008 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding for the years ended January 31, 1995,
February 3, 1996 and February 1, 1997.
(2) Based on 29,008 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
17
<PAGE> 1025
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
To the extent a discussion of the financial condition and results of
operations of the Company for any of the fiscal years ended January 31, 1995,
February 3, 1996 or February 1, 1997 or for either of the nine-month periods
ended November 2, 1996 or November 1, 1997 is necessary to identify certain
trends or conditions that differ from the combined Belk Companies and that are
material to Shareholders' understanding of the financial condition or results of
operations of the Company, such discussion is included below. The discussion
which follows is based upon and should be read in conjunction with the
historical financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus Supplement.
During fiscal year 1997, income from operations decreased due to a
$1,180,544 impairment loss on fixed assets related to the closing of the
Augusta, Georgia store.
For the nine months ended November 1, 1997, the Company's income from
operations increased compared to the same period in 1996 as a result of closing
the underperforming Augusta, Georgia location in the prior year.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Statesboro Mall
in Statesboro, Georgia. The Company's store operates in a manner consistent with
the business of the Belk Companies described in the Proxy Statement/Prospectus.
Specific competitors in the Company's market include Penney, Goody's and
Wal-Mart.
In addition, the Company owns 100% of the capital stock of Belk Department
Store of North Augusta, South Carolina, Inc., a South Carolina Corporation
("Belk North Augusta"). Belk-North Augusta operates a retail department store in
Martintown Plaza in North Augusta, South Carolina. The department store operated
by Belk-North Augusta generally operates in a manner consistent with the
operations of the Belk Companies' retail department store business. Specific
competitors within Belk-North Augusta's market include Hamrick's, Goody's and
Wal-Mart.
Both stores are managed out of the Kerr group office in Norcross, Georgia.
Facilities. The Company leases its store building, which contains
approximately 67,000 square feet of floor area. The current term of the lease
expires in 2004. The Company believes the building is adequate to meet its
current needs.
Belk-North Augusta leases its store building, which contains approximately
46,000 square feet of floor area. The current term of the lease expires in 2004.
The Company believes the building is adequate to meet its current needs.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
18
<PAGE> 1026
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer) (a)........... 28,995 99.96%
Thomas M. Belk, Jr. (Director and Executive Officer) (a).... 28,995 99.96%
H. W. McKay Belk (Director and Executive Officer) (a)....... 28,995 99.96%
John R. Belk (Director and Executive Officer) (a)........... 28,995 99.96%
Henderson Belk (Director)................................... 0 *
Leroy Robinson (Director)................................... 0 *
Robert K. Kerr, Jr. (Director and Executive Officer)........ 0 *
Belk Enterprises, Inc. ..................................... 28,995 99.96%
All Directors and Executive Officers as a group (7
persons).................................................. 28,995 99.96%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk and Leroy Robinson -- 2801 West Tyvola Road, Charlotte, N.C.
28217-4500; Robert K. Kerr, Jr. -- 1890-D Beaver Ridge Circle, Norcross, Ga.
30071; Belk Enterprises, Inc. -- 2801 West Tyvola Road, Charlotte, N.C.
28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 28,995 shares held by Belk Enterprises, Inc., which shares are
voted by the members of the Executive Committee of the Board of Directors
of such Corporation, under authority given by the directors of such
Corporation at the annual meeting of directors held in March, 1997. The
Executive Committee of such Corporation consists of John M. Belk, Thomas M.
Belk, Jr., H. W. McKay Belk and John R. Belk.
19
<PAGE> 1027
INDEX TO UNAUDITED CONSOLIDATED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Consolidated Balance Sheets....................... F-2
Unaudited Consolidated Statements of Earnings and Retained
Earnings.................................................. F-3
Condensed Notes to Unaudited Consolidated Historical
Financial Statements...................................... F-4
</TABLE>
F-1
<PAGE> 1028
BELK OF STATESBORO, GA., INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 266,840 $ 308,596
Accounts receivable, net.................................. 2,994,886 2,979,977
Merchandise inventory..................................... 3,626,199 2,816,194
Receivable from affiliates, net........................... 2,261,156 2,258,198
Refundable income taxes................................... 4,243 2,365
Other..................................................... 178,951 131,597
----------- -----------
Total current assets........................................ 9,332,275 8,496,927
Loans receivable from affiliates, net....................... -- 1,464,256
Investments................................................. 4,981 4,981
Property, plant and equipment, net.......................... 2,403,214 1,885,535
Other noncurrent assets..................................... 156,455 56,633
----------- -----------
$11,896,925 $11,908,332
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 1,083,295 $ 812,658
Deferred income taxes..................................... 159,806 116,223
----------- -----------
Total current liabilities................................... 1,243,101 928,881
Loans payable to affiliates, net............................ 4,569,162 --
Other noncurrent liabilities................................ 124,287 112,483
----------- -----------
Total liabilities........................................... 5,936,550 1,041,364
Deferred income............................................. 254,250 220,350
Shareholders' equity:
Common stock.............................................. 2,900,800 2,900,800
Additional paid in capital................................ -- 6,000,000
Retained earnings......................................... 2,805,325 1,745,818
----------- -----------
Total shareholders' equity.................................. 5,706,125 10,646,618
----------- -----------
$11,896,925 $11,908,332
=========== ===========
</TABLE>
F-2
<PAGE> 1029
BELK OF STATESBORO, GA., INC.
UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Total store sales....................................... $19,342,589 $17,859,618 $15,951,470
Less: Leased Sales...................................... 22,992 -- --
----------- ----------- -----------
Net sales............................................... 19,319,597 17,859,618 15,951,470
Operating costs and expenses............................ 20,085,978 18,488,177 16,119,353
Impairment loss......................................... -- -- 1,180,544
----------- ----------- -----------
Income from operations.................................. (766,381) (628,559) (1,348,427)
----------- ----------- -----------
Other income (expense):
Interest, net......................................... (336,043) (273,094) (192,984)
Dividend income....................................... -- -- 780
Gain (loss) on disposal of property, plant and
equipment.......................................... (4,686) 845 500
Miscellaneous, net.................................... (18,264) 5,648 2,748
----------- ----------- -----------
Total other expense, net................................ (358,993) (266,601) (188,956)
----------- ----------- -----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities..... (1,125,374) (895,160) (1,537,383)
Income tax expense (benefit)............................ (373,007) (272,768) (477,876)
----------- ----------- -----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities................... (752,367) (622,392) (1,059,507)
----------- ----------- -----------
Net earnings............................................ (752,367) (622,392) (1,059,507)
Retained earnings at beginning of period................ 4,180,084 3,427,717 2,805,325
----------- ----------- -----------
Retained earnings at end of period...................... $ 3,427,717 $ 2,805,325 $ 1,745,818
=========== =========== ===========
</TABLE>
F-3
<PAGE> 1030
CONDENSED NOTES TO UNAUDITED CONSOLIDATED
HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 1031
CONDENSED NOTES TO UNAUDITED CONSOLIDATED
HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 1032
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 14, CHAPTER 2
BUSINESS CORPORATIONS
STATE OF GEORGIA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
A-1
<PAGE> 1033
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's right.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
A-2
<PAGE> 1034
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
A-3
<PAGE> 1035
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing
A-4
<PAGE> 1036
under subsection (a) of this Code section within 30 days after the corporation
offered payment for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
A-5
<PAGE> 1037
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
A-6
<PAGE> 1038
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement............. $15,951,470 $(1,059,507) $(1,344,399) $ (927,332) $ 10,646,618
Adjustments to eliminate less than
wholly-owned subsidiaries............. -- -- -- -- --
----------- ----------- ----------- ----------- ------------
Adjusted Shareholders' Statement........ $15,951,470 (1,059,507) (1,344,399) (927,332) 10,646,618
=========== ----------- ----------- ----------- ------------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E......... (345) (500) (500)
Gain/loss on sale of securities....... -- -- --
Impairment loss....................... 813,587 1,180,544 1,180,544
Equity in earnings of unconsolidated
subsidiaries........................ -- -- --
Gain/loss on discontinued
operations.......................... -- -- --
Adjustment to tax expense............. -- -- -- --
----------- ----------- -----------
Total non-operating items............... 813,242 1,180,044 1,180,044
----------- ----------- -----------
Other Adjustments:
Adjustment for dividends received from
other Belk entities................. (538) (780) (780)
Adjustment for ownership in other Belk
entities............................ (4,981)
----------- ----------- ----------- ------------
Per Model............................... $ (246,803) $ (165,135) $ 251,932 $ 10,641,637
=========== =========== =========== ============
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents............. $ (308,596)
Negative cash balances reclassified
to accounts payable............... --
Receivables from affiliates, net.... (2,258,198)
Loans receivable from affiliates,
net............................... (1,464,256)
Liabilities
Notes payable....................... --
Current installments of long-term
debt.............................. --
Current portion of obligations under
capital leases.................... --
Payables to affiliates, net......... --
Long-term debt, excluding current
installments...................... --
Obligations under capital leases,
excluding current portion......... --
Loans payable to affiliates, net.... --
-----------
Net debt (cash)......................... (4,031,050)
Adjustments to eliminate less than
wholly-owned subsidiaries............. --
-----------
Per Model............................... $(4,031,050)
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 1039
SUPPLEMENT NO. 23
<PAGE> 1040
BELK OF STATESBORO, GA., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 3:50 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: ,1998
------------------
-----------------------------
Signature
-----------------------------
Signature
Name(s) should be signed
exactly as shown to the left
hereof. Title should be added
if signing as executor,
administrator, trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 23
<PAGE> 1041
BELK OF THOMASTON, GA., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk of Thomaston, Ga., Inc. (the "Company"),
to be held on April 15, 1998, at 3:10 p.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $1.00 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Georgia law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 0.4196 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 527,826 shares of New Belk Class A Common Stock which will
represent approximately 0.8797% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage paid
(24)
<PAGE> 1042
envelope. If you plan to attend the Special Meeting, you may vote in person if
you wish, even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 1043
BELK OF THOMASTON, GA., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK OF THOMASTON, GA., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk of Thomaston, Ga., Inc. (the "Company") will be held on April
15, 1998, at 3:10 p.m., local time, at the offices of Belk Stores Services,
Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for the
following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $1.00 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Georgia law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 0.4196 shares of Class A Common Stock, par value $.01 per share, of
New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 1044
BELK OF THOMASTON, GA., INC.
SUPPLEMENT NO. 24
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 24 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK OF THOMASTON,
GA., INC. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE DISCUSSION IN
THE PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED HEREIN ASSUMES
THAT ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION. IF ANY ONE OR
MORE BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE INFORMATION
CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 18
SELECTED HISTORICAL FINANCIAL INFORMATION................... 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 20
BUSINESS OF THE COMPANY..................................... 20
SECURITY OWNERSHIP OF THE COMPANY........................... 21
INDEX TO UNAUDITED CONSOLIDATED HISTORICAL FINANCIAL
STATEMENTS................................................ F-1
Unaudited Consolidated Balance Sheets..................... F-2
Unaudited Consolidated Statements of Earnings and Retained
Earnings............................................... F-3
Condensed Notes to Unaudited Consolidated Historical
Financial Statements................................... F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION.................................. B-1
</TABLE>
<PAGE> 1045
THE COMPANY
The Company was incorporated as a Georgia corporation in 1960 as
Belk-Gallant Company of Thomaston, Ga., Inc. The Company changed its name to
Belk of Thomaston, Ga., Inc. on July 23, 1997. The mailing address of the
Company's principal executive offices is 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500, and its telephone number at that address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 3:10 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $1.00 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his or her dissenters' rights of appraisal under
Georgia law), will be converted, without any action on the part of the
Shareholder, into the right to receive 0.4196 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 3,748,276 shares of Common Stock
outstanding held of record by 84 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 80.1% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock
2
<PAGE> 1046
vote in favor of the Merger, the vote of such persons, corporations and trusts
in favor of the Merger would be sufficient to approve the Merger under the
governing documents of the Company and applicable state law.
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. In addition, the Reorganization is expected to have
certain other benefits for the Company and the Shareholders, including the
ability to rely on New Belk to finance renovations needed at some of its stores.
For example, the Company owns 100% of the capital stock of Belk Chattanooga,
which operates the Belk store in Chattanooga, Tennessee. The Chattanooga market
has become increasingly competitive, which will likely require that the
Chattanooga store be expanded in order to compete effectively in the market. The
Company may not have adequate resources of its own to finance the expansion of
the Chattanooga store. The Merger will enable the Company to rely on New Belk to
finance any such expansion of the Chattanooga store.
There can be no assurance, however, that any of these benefits will be
achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Georgia Business Corporation Code (the "GBCC"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 4,000,000 shares
of Common Stock.
3
<PAGE> 1047
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Belk Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock held by a New Belk Stockholder who is a Class A Permitted
Holder will also automatically convert into New Belk Class B Common Stock in the
event that such New Belk Stockholder no longer meets the requirements of a Class
A Permitted Holder. New Belk Class B Common Stock has no conversion rights. The
Company Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the
4
<PAGE> 1048
holders of New Belk Class B Common Stock upon the same terms and conditions
applicable to the conversion of New Belk Class A Common Stock into New Belk
Class B Common Stock and must have the same restrictions on transfer and
ownership applicable to the transfer and ownership of the New Belk Class A
Common Stock.
Pursuant to the GBCC, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as the
effect of such distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to be less than the sum of its total liabilities plus
(unless the articles of incorporation permit otherwise) the amount that would be
needed if the corporation dissolved at the time of the payment of the dividend
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The GBCC permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 25%, or such
greater or lesser percentages as may be provided in the articles of
incorporation or bylaws, of all votes entitled to be cast on the proposed
corporate action to call a special meeting. The Company Bylaws authorize the
Chairman, President, Secretary, the Company Board and any Shareholder pursuant
to the written request of the holders of not less than 10% of all the shares
entitled to vote at the meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the GBCC, unless the articles of incorporation, the bylaws or
the provisions regarding meetings in the GBCC specify a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the shareholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are
5
<PAGE> 1049
entitled to vote as a separate class on a proposed amendment that would increase
or decrease the aggregate number of authorized shares of such class, increase or
decrease the par value of the shares of such class, or alter or change the
powers, preferences or special rights of the shares of such class so as to
affect them adversely. If any proposed amendment would alter or change the
powers, preferences or special rights of one or more series of any class so as
to affect them adversely, but would not so affect the entire class then only the
shares of the series so affected by the amendment will be considered a separate
class for purposes of voting by classes. The New Belk Certificate is consistent
with the foregoing provisions of the DGCL.
Under the GBCC, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the GBCC
requires an amendment to the articles of incorporation to be recommended by the
board of directors to the shareholders and approved by a majority (unless the
articles of incorporation or the board of directors requires a greater vote or a
vote by voting groups) of the votes entitled to be cast on the amendment by any
voting group. As under the DGCL, the holders of the outstanding shares of a
class or series are entitled to vote as a separate voting group (if shareholder
voting is otherwise required by the GBCC) on a proposed amendment if the
amendment would change certain fundamental rights and preferences of that class
or series. The Company Articles do not specify a greater vote or a vote by
voting groups to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the GBCC, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or the
GBCC reserves this power exclusively to the shareholders in whole or part or
(ii) the shareholders in amending or repealing a particular bylaw provided
expressly that the board of directors may not amend or repeal that bylaw. The
shareholders of the corporation may amend or repeal the bylaws of the
corporation even though such bylaws may be amended or repealed by the board of
directors of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board, or by the affirmative vote of a majority of the shares
outstanding and entitled to vote at any regular or special meeting of the
Shareholders. Further, the Company Bylaws provide that the Company Board has no
power to adopt a bylaw: (i) requiring more than a majority of the voting shares
for a quorum at a meeting of the Shareholders, except where higher percentages
are required by law; (ii) providing for the management of the Company otherwise
than by the Company Board or its executive committees; (iii) increasing or
decreasing the number of directors; or (iv) classifying and staggering the
election of directors. The Company Articles provide that the Company Board shall
have concurrent power, by vote of a majority of all of the directors, to make,
alter, amend and rescind the Company Bylaws. The bylaws enacted by the
Shareholders may be affected by action of the Company Board and vice versa;
provided, however, the Company Board may not re-enact a bylaw which the
Shareholders have repealed or altered, nor may it repeal a bylaw enacted by the
Shareholders which limits the power of the Company Board or enhances or protects
the right of Shareholders, without the consent of the Shareholders.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
6
<PAGE> 1050
Pursuant to the GBCC, any action that may be taken by an annual or special
meeting of shareholders may be taken without a meeting and without prior notice,
if all holders of outstanding shares entitled to vote on such action or, if so
provided in the articles of incorporation, by persons entitled to vote at a
meeting shares having voting power to cast not less than the minimum number (or
numbers, in the case of voting groups) of votes that would be necessary to
authorize or take the action at which all shareholders entitled to vote were
present and voted sign the written consent(s) describing such action. The
Company Bylaws permit any action which may be taken at a meeting of the
Shareholders to be taken without a meeting if a consent in writing, setting
forth the action so taken, is signed by all of the persons who would be entitled
to vote upon such action at a meeting and filed with the Secretary of the
Company.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation or a bylaw
approved by the shareholders, the GBCC permits a vacancy in the board of
directors to be filled by the shareholders or by the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board and if
the vacancy is one that the directors are authorized to fill, then the directors
may fill the vacancy by the affirmative vote of a majority of all the directors
remaining in office.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors may be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The GBCC requires a corporation to have at least one director. The articles
of incorporation or the bylaws may authorize the shareholders or the board of
directors to change the number of directors. If the articles of incorporation or
the bylaws establish a variable range for the size of directors, the number of
directors may be
7
<PAGE> 1051
changed, within the prescribed range, by the shareholders or, if the articles of
incorporation so provide, by the board of directors. The Company Bylaws require
the Company Board to consist of at least three, but no more than 15, directors.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
Under the GBCC, a director must be a natural person and at least 18 years
of age, but does not have to be a resident of Georgia or a shareholder of the
corporation unless otherwise provided for in the articles of incorporation. The
Company Articles do not require directors of the Company to be residents of
Georgia or shareholders of the Company. The GBCC also allows the articles of
incorporation or the bylaws to provide for additional qualifications of
directors.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each class expiring at the
annual meeting in successive years beginning with the first class and
progressing to the third class, if any. Thereafter, directors are chosen for a
full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
Under the GBCC, the articles of incorporation may allow for staggering the
terms of directors by dividing the total number of directors into two or three
groups, with each group containing one-half or one-third of the total. The term
of each group expires in each successive year beginning with the first group and
progressing to the third group, if any. Thereafter, directors are chosen for a
term of two or three years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
According to the GBCC, unless the articles of incorporation or bylaws
provide that directors may be removed only for cause, the shareholders may
remove one or more directors with or without cause. If a director is elected by
a voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove him. If cumulative voting is not authorized, a
director may be removed only by a majority of votes entitled to be cast.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under both the DGCL and the GBCC, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
8
<PAGE> 1052
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the GBCC generally permits transactions involving a
Georgia corporation and an interested director of that corporation if: (i) the
transaction received the affirmative vote of a majority (but not less than two)
of those qualified directors on the board of directors or on a duly empowered
committee thereof who voted on the transaction after required disclosure to
them; (ii) if a majority of the votes entitled to be cast by the holders of all
qualified shares were cast in favor of the transaction after (a) notice to
shareholders describing the director's conflicting interest transaction, (b)
provision of the information with regard to any unqualified shares and (c)
required disclosure to the shareholders who voted on the transaction (to the
extent the information was not known by them); or (iii) the transaction, judged
in the circumstances at the time of commitment, is established to have been fair
to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the GBCC, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the GBCC (i) in connection with a
proceeding by or in the right of the corporation, except for reasonable expenses
incurred in
9
<PAGE> 1053
connection with the proceeding if it is determined that the director or officer
has met the relevant standard of conduct under the GBCC or (ii) in connection
with any proceeding with respect to conduct for which he was adjudged liable on
the basis that personal benefit was improperly received by him, whether or not
involving action in his official capacity. A Georgia corporation must indemnify
a director or officer who was wholly successful, on the merits or otherwise, in
the defense of any proceeding to which he was a party because he was a director
or officer of the corporation against reasonable expenses incurred by the
director or officer in connection with the proceeding.
The Company Bylaws authorize indemnification as provided in the GBCC. In
addition, the Company Bylaws provide that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify a director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the GBCC, a director
will not be personally liable to the Company or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The GBCC concerning the approval of mergers and share exchanges is similar
in all material respects to the DGCL, except action by the shareholders of the
surviving corporation is not required if the number and kind of shares
outstanding immediately after the merger or share exchange, plus the number and
kind of shares issuable as a result of the merger or share exchange and by the
conversion of securities issued pursuant to the merger or share exchange or the
exercise of rights and warrants issued pursuant to the merger or share exchange
does not exceed the total number and kind of shares of the surviving or
acquiring corporation authorized by its articles of incorporation immediately
before the merger or share exchange. The GBCC and DGCL provisions concerning the
approval of the sale of all or substantially all of the assets of a corporation
are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the GBCC include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined in the DGCL and the
GBCC, "business combinations" generally encompass (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder, (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
10
<PAGE> 1054
interested shareholder of a substantial percentage of assets of the corporation,
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested shareholder,
except in certain circumstances, (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested Shareholder, except
in certain circumstances or (v) any receipt by the interested Shareholder of the
benefit of any loans, advances, guarantees, pledges or other financial benefits
(other than those expressly permitted in (i) through (iv) above) provided by or
through the corporation.
The DGCL defines an "interested stockholder" as any person who (i) is the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation and within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation. Under the
GBCC, an "interested shareholder" is any person who owns 10% of the outstanding
voting shares or is an affiliate of the corporation owning 10% of the
outstanding voting shares within the prior two years, and a "continuing
director" is a director not associated or affiliated with any interested
shareholder.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
According to the GBCC, if at least three continuing directors serve on the
board of directors, then those directors must unanimously approve the business
combination. If three continuing directors do not serve on the board of
directors, then 66 2/3% of the continuing directors must recommend the business
combination and a majority of shareholders entitled to cast a vote must approve
the business combination. Also, except under certain circumstances, no mergers
may occur between a corporation and an interested shareholder within five years
of the date the shareholder became an interested shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the GBCC provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk
11
<PAGE> 1055
Common Stock other than to any class of New Belk Common Stock the holders of
which, voting as a separate class, determine that such offering need not be made
to such class. Further, New Belk may grant by contract a preemptive right to
purchase, subscribe for or otherwise acquire stock of any class or series of New
Belk or any security convertible into or exchangeable for, or any warrant,
option or right to purchase, subscribe for or otherwise acquire, stock of any
class or series of New Belk, whether now or hereafter authorized.
The GBCC concerning preemptive rights is equivalent to the DGCL. The
Company Articles do not contain any provision with respect to preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the GBCC, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) excerpts from minutes of any
meeting of the board of directors, records of any action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporations; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the GBCC ("Article 13") has
the right to receive in cash the fair value of such Shareholder's shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN
ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
To exercise appraisal rights under Article 13, a holder of Common Stock
must (i) deliver to the Company before the taking of the vote of Shareholders on
the Reorganization Agreement written notice of his intent to demand payment for
his shares if the Merger is effected and (ii) not vote his shares in favor of
the Reorganization Agreement. A Shareholder who does not satisfy these two
requirements is not entitled to payment for his shares under Article 13. In
addition, any Shareholder who returns a signed proxy but fails to provide
instructions as to the manner in which such shares are to be voted will be
deemed to have voted in favor of the Reorganization Agreement and will not be
entitled to assert dissenters' rights of appraisal.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial Shareholder and he notifies the Company
in writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of such a partial dissenter are determined as if
the shares as to which he dissents and his other shares are registered in the
names of different Shareholders.
If the Reorganization Agreement is approved at the Special Meeting, the
Company must deliver a written dissenters' notice (the "Dissenters' Notice") to
all Shareholders who satisfied the notice requirements of Article 13. The
Dissenters' Notice must be sent within 10 days after the Effective Time and must
(i) state
12
<PAGE> 1056
where the demand for payment must be sent and where and when certificates for
shares must be deposited, (ii) inform holders of uncertificated shares to what
extent transfer of those shares will be restricted after the demand for payment
is received, (iii) set a date by which the Company must receive the demand for
payment (which date may not be fewer than 30 nor more than 60 days after the
Dissenters' Notice is delivered) and (iv) be accompanied by a copy of Article
13.
A record Shareholder who receives the Dissenters' Notice must demand
payment and deposit his certificates in accordance with the Dissenters' Notice.
Such Shareholder will retain all other rights of a Shareholder until those
rights are canceled or modified by the consummation of the Merger. A record
Shareholder who does not demand payment or deposit his share certificates where
required, each by the date set in the Dissenters' Notice, is not entitled to
payment for his shares under Article 13.
Within 10 days of the later of the Effective Time or receipt of a payment
demand, the Company must offer to pay each dissenting Shareholder who complied
with Article 13 the amount the Company estimates to be the fair value of his
shares, plus accrued interest from the Effective Time. Such offer of payment
must be accompanied by (i) certain recent Company financial statements, (ii) the
Company's estimate of the fair value of the shares and interest due, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Article 13 and (v) a copy of Article
13. If the Shareholder accepts the Company's offer by written notice to the
Company within 30 days after the Company's offer, the Company must make payment
within 60 days after the later of the making of the offer or the Effective Time.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing share certificates, the Company must return the
deposited certificates. If, after such return, the Merger is consummated, the
Company must send a new Dissenters' Notice and repeat the payment procedure
described above.
A dissenting Shareholder may notify the Company in writing of his own
estimate of the fair value of his shares and the interest due, and may demand
payment of his estimate, if (i) he believes that the amount offered by the
Company is less than the fair value of his shares or that the interest due has
been calculated incorrectly or (ii) the Company, having failed to consummate the
Merger, does not return the deposited certificates within 60 days after the date
set for demanding payment. A dissenting Shareholder waives his right to demand
payment unless he notifies the Company of his demand in writing within 30 days
after the Company makes or offers payment for his shares. If the Company does
not offer payment within 10 days of the later of the Effective Time or receipt
of a payment demand, then (i) the Shareholder may demand the financial
statements and other information of the Company, and the Company must provide
such information within 10 days after receipt of the written demand and (ii) the
Shareholder may notify the Company of his own estimate of the fair value of his
shares and the amount of interest due, and may demand payment of that estimate.
If a demand for payment by a Shareholder remains unsettled, the Company
must commence a nonjury equity valuation proceeding in the appropriate court, as
specified in Article 13, within 60 days after receiving the payment demand and
must petition the court to determine the fair value of the shares and accrued
interest. If the Company does not commence proceeding within 60 days, the
Company is required to pay each dissenting Shareholder whose demand remains
unsettled, the amount demanded. The Company is required to make all dissenting
Shareholders whose demands remain unsettled parties to the proceeding and to
serve a copy of the petition upon each dissenting Shareholder. The court may
appoint appraisers to receive evidence and to recommend a decision on fair
value. Each dissenting Shareholder made a party to the proceeding is entitled to
judgment for the fair value of his shares plus interest to the date of judgment.
In an appraisal proceeding commenced under Article 13, the court must
determine the costs of the proceeding, excluding fees and expenses of attorneys
and experts for the respective parties, and must assess those costs against the
Company, except that the court may assess the costs against all or some of the
dissenting Shareholders to the extent the court finds they acted arbitrarily,
vexatiously or not in good faith in demanding payment under Article 13. The
court also may assess the fees and expenses of attorneys and experts for the
respective parties against the Company if the court finds the Company did not
substantially comply with the requirements of Article 13, or against either the
Company or a dissenting Shareholder if the
13
<PAGE> 1057
court finds that such party acted arbitrarily, vexatiously or not in good faith
with respect to the rights provided by Article 13.
If the court finds that the services of the attorneys for any dissenting
Shareholder were of substantial benefit to other dissenting Shareholders
similarly situated, and that the fees for those services should not be assessed
against the Company, the court may award those attorneys reasonable fees out of
the amounts awarded the dissenting Shareholders who were benefited. No action by
any dissenting Shareholder to enforce dissenters' rights may be brought more
than three years after the Effective Time, regardless of whether notice of the
Merger and of the right to dissent was given by the Company in compliance with
the provisions of Article 13.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
14
<PAGE> 1058
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ----------- ----------- -------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales................. $28,689,464 $28,689,464 0.6 $10,843,214 $ 6,370,464
EBITDA.................... 2,018,818 656,022 7 10,843,214 (6,251,060)
EBIT...................... 1,145,195 (217,601) 10 10,843,214 (13,019,224)
Net Income (loss)......... 25,376 (674,490) 15 -- (10,117,350)
Book Equity............... 12,727,667 2,266,419 1 -- 2,266,419
</TABLE>
15
<PAGE> 1059
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk's Department
Store, Incorporated
of Aiken, South
Carolina 6.6667% X $ 3,110,056 = $ 207,338
Belk's Department
Store of Albany,
Georgia 1.6667 X 6,361,249 = 106,023
Belk of Athens, Ga.,
Inc. .2402 X 14,290,078 = 34,325
Belk's Department
Store of
Cartersville,
Georgia,
Incorporated .1426 X 3,810,247 = 5,433
Belk of Covington,
Ga., Inc. .4167 X 4,579,688 = 19,084
Belk of Dalton, Ga.,
Inc. .6292 X 8,605,064 = 54,143
Belk of LaGrange,
Ga., Inc. 5.2214 X 25,267,594 = 1,319,322
Belk-Matthews Company
of Macon, Georgia .6400 X 14,496,059 = 92,775
Belk of Monroe, Ga.,
Inc. .6300 X 1,961,637 = 12,358
Belk of Cornelia,
Ga., Inc. .7523 X 4,947,119 = 37,217
Belk of Thomson, Ga.,
Inc. .4399 X 1,433,519 = 6,306
Belk of Newnan, Ga.,
Inc. .0543 X 1,320,331 = 717
Belk of Orangeburg,
S.C., Inc. 1.1047 X 11,906,703 = 131,533
Belk-Rhodes Company,
(Rome, Georgia) 2.3693 X 6,599,184 = 156,354
Belk of Toccoa, Ga.,
Inc. 1.5789 X 4,349,985 = 68,682
Belk of Walterboro,
S.C., Inc. .4013 X 2,473,317 = 9,925
Belk of Waycross,
Ga., Inc. 49.3901 X 43,828,148 = 21,646,766
Belk of Canton, Ga.,
Inc. 1.2422 X 2,207,655 = 27,423
Belk of Winnsboro,
S.C. .3663 X 845,995 = 3,099
-----------
Total $23,938,825
===========
Relative Operating Value of Company $ 6,370,464
-----------
Relative Operating Value of Other Companies Owned by Company + 23,938,825
-----------
Total Relative Value of Company = $30,309,289
===========
</TABLE>
16
<PAGE> 1060
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk of Athens, Ga.,
Inc. 11.0555% X $30,309,289 = $ 3,350,843
Belk Brothers Company 10.0048% X 30,309,289 = 3,032,384
Belk Enterprises,
Inc. 41.5589% X 30,309,289 = 12,596,207
Belk Finance Company 3.8180% X 30,309,289 = 1,157,209
Belk of LaGrange,
Ga., Inc. .0027% X 30,309,289 = 818
-----------
Total $20,137,461
===========
Total Relative Value of Company $30,309,289
Total Relative Value of Company Owned by Other Belk Companies - 20,137,461
-----------
Net Relative Value of Company = $10,171,828
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$10,171,828 / $1,156,226,577 = .8797%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.8797% X 59,998,834) / 1,257,927 = .4196
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
17
<PAGE> 1061
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 0.01
Dividends(2).............................................. 0.03
Book value per share(3)................................... 3.40
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 0.40
Dividends(2).............................................. 0.11
Book value per share...................................... 5.25
</TABLE>
- ---------------
(1) Based on 3,748,276 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 3,748,276 shares
of Common Stock, the number of shares of Common Stock outstanding at the end
of the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
18
<PAGE> 1062
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $28,779 $29,560 $28,689
Net income.................................................. 1,638 622 25
Per common share
Net income (loss)(1)...................................... 0.44 0.17 0.01
Dividends................................................. 0.01 0.02 0.03
Book value(2)............................................. 3.23 3.42 3.40
Total assets................................................ 27,634 30,689 27,588
Shareholders' equity........................................ 12,124 12,803 12,728
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $19,646 $18,246
Income (loss) from operations............................... (1,034) (316)
</TABLE>
- ---------------
(1) Based on 3,748,276 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding for the years ended January 31, 1995,
February 3, 1996 and February 1, 1997.
(2) Based on 3,748,276 shares of Common Stock outstanding as of January 31,
1995, February 3, 1996 and February 1, 1997.
19
<PAGE> 1063
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
To the extent a discussion of the financial condition and results of
operations of the Company for any of the fiscal years ended January 31, 1995,
February 3, 1996 or February 1, 1997 or for either of the nine-month periods
ended November 2, 1996 or November 1, 1997 is necessary to identify certain
trends or conditions that differ from the combined Belk Companies and that are
material to Shareholders' understanding of the financial condition or results of
operations of the Company, such discussion is included below. The discussion
which follows is based upon and should be read in conjunction with the
historical financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus Supplement.
During fiscal year 1995, the Company opened a store located in the
Chattanooga, Tennessee Northgate Mall which was subsequently closed in August of
fiscal year 1998. In addition, the company closed their Newport, Tennessee
location in fiscal year 1996.
The majority of the Company's capital needs have been funded by loans from
other Belk companies. The Company would not be able to obtain similar financing
from third party lenders.
BUSINESS OF THE COMPANY
General. The Company operates two retail department stores in the
following locations in Georgia: North Griffin Square in Griffin and North Creek
Mall in Thomaston. The Company's stores operate in a manner consistent with the
business of the Belk Companies described in the Proxy Statement/Prospectus. The
Company also operates the Kerr group office, which provides buying, advertising,
accounting, personnel and other services to stores in the Kerr group area.
In addition, the Company owns 100% of the capital stock of Belk Department
Store of Chattanooga, Tennessee, Incorporated, a Tennessee Corporation ("Belk
Chattanooga"), which operates a retail department store in Hamilton Place in
Chattanooga. The department store operated by Belk Chattanooga generally
operates in a manner consistent with the operations of the Belk Companies'
retail department store business.
Facilities. The Company operates two stores, both of which are leased
under long-term leases. The store leases have termination dates ranging from
1998 through 2007, and for the lease terminating in 1998, the Company has
options to extend the lease until 2018. The Company believes these facilities
are adequate to meet its current needs; however, the Company is evaluating the
profitability of continuing its operations at North Creek Mall in Thomaston.
These stores are managed out of the Kerr group office in Norcross, Georgia.
Belk Chattanooga leases the store building in Hamilton Place, which
contains approximately 132,000 square feet of floor area. The current term of
the lease expires in 2007. The Company does not believe that the facilities at
Hamilton Place are adequate to meet its current needs. The Company is currently
evaluating the possibility of expanding its Hamilton Place store. This store is
managed out of the Kuhne/Greiner group office in Greenville, South Carolina.
Competition. Specific competitors in the Company's markets include
Wal-Mart, Penney and Goody's. Specific competitors within Belk Chattanooga's
market include Proffitt's, Parisian, Penney and Sears.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
20
<PAGE> 1064
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)(f)........................................ 2,815,978 75.1%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(e)(f)(g).............................................. 2,624,399 70.0%
H. W. McKay Belk (Director and Executive Officer)
(b)(e)(f)(h).............................................. 2,624,291 70.0%
John R. Belk (Director and Executive Officer)
(b)(e)(f)(i).............................................. 2,616,439 69.8%
Henderson Belk (Director) (c)(d)............................ 31,933 *
Sarah Belk Gambrell (c)(d).................................. 352,533 9.4%
Leroy Robinson (Director) (b)............................... 69,176 1.8%
Robert K. Kerr, Jr. (Director and Executive Officer)........ 0 *
Belk of Athens, Ga., Inc. .................................. 414,389 11.1%
Belk Enterprises, Inc. ..................................... 1,557,743 41.6%
J.V. Properties............................................. 375,007 10.0%
All Directors and Executive Officers as a group (7
persons).................................................. 3,003,032 80.1%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk and Leroy Robinson -- 2801 West Tyvola Road, Charlotte, N.C.
28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207;
Robert K. Kerr, Jr. -- 1890-D Beaver Ridge Circle, Norcross, Ga. 30071; Belk of
Athens, Ga., Inc., Belk Enterprises, Inc. and J.V. Properties -- 2801 West
Tyvola Road, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 76,701 shares held by Montgomery Investment Company, of which John
M. Belk is the majority shareholder.
(b) Includes 69,176 shares held by Thomas M. Belk, Trustee U/A dated September
15, 1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(c) Includes 29,920 shares held in several Trusts established by the Will of W.
H. Belk for the benefit of his children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(d) Includes 2,013 shares held in several Trusts established by the Will of
Mary I. Belk for the benefit of her children. Voting and investment power
of the Trusts for John M. Belk and Thomas M. Belk is shared by John M.
Belk, Sarah Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and
investment power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and
Henderson Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson
Belk, W. H. Belk, Jr. and Irwin Belk.
21
<PAGE> 1065
(e) Includes 414,389 shares held by Belk of Athens, Ga., Inc., 100 shares held
by Belk of LaGrange, Ga., Inc., 1,557,743 shares held by Belk Enterprises,
Inc. and 143,110 shares held by Belk Finance Company, which shares are
voted by the members of the Executive Committee of the Board of Directors
of each such Corporation, under authority given by the directors of each
such Corporation at the annual meeting of directors held in March, 1997.
The Executive Committee of each such Corporation consists of John M. Belk,
Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(f) Includes 375,007 shares held by J.V. Properties, a partnership. The Board
of Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay
Belk and John R. Belk, have voting and investment power with respect to
such shares.
(g) Includes 2,344 shares held by Thomas M. Belk, Jr. as custodian for his
minor children and 555 shares held as custodian for the minor children of
his brother, H. W. McKay Belk.
(h) Includes 3,344 shares held by H. W. McKay Belk as custodian for his minor
children.
(i) Includes 1,258 shares held by John R. Belk as custodian for his minor
children.
22
<PAGE> 1066
INDEX TO UNAUDITED CONSOLIDATED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Consolidated Balance Sheets....................... F-2
Unaudited Consolidated Statements of Earnings and Retained
Earnings.................................................. F-3
Condensed Notes to Unaudited Consolidated Historical
Financial Statements...................................... F-4
</TABLE>
F-1
<PAGE> 1067
BELK OF THOMASTON, GA., INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 6,068,564 $ 1,074,202
Accounts receivable, net.................................. 4,741,324 5,576,275
Merchandise inventory..................................... 5,847,048 6,251,019
Refundable income taxes................................... 209,132 356,953
Deferred income taxes..................................... 143,193 101,696
Other..................................................... 468,227 422,527
----------- -----------
Total current assets........................................ 17,477,488 13,782,672
Investments................................................. 8,854,937 10,461,248
Property, plant and equipment, net.......................... 4,003,469 3,010,104
Deferred income taxes....................................... 230,098 211,304
Other noncurrent assets..................................... 122,514 122,242
----------- -----------
$30,688,506 $27,587,570
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable............................................. $ -- $ 2,500,000
Accounts payable and accrued expenses..................... 1,589,229 1,684,969
Payables to affiliates, net............................... 3,650,011 1,776,296
Accrued income taxes...................................... -- 46,449
----------- -----------
Total current liabilities................................... 5,239,240 6,007,714
Loans payable to affiliates, net............................ 11,313,119 7,641,119
Other noncurrent liabilities................................ 1,045,999 1,178,872
----------- -----------
Total liabilities........................................... 17,598,358 14,827,705
Deferred income............................................. 37,564 32,198
Minority interest........................................... 249,503 --
Shareholders' equity:
Common stock.............................................. 3,748,276 3,748,276
Retained earnings......................................... 9,054,805 8,979,391
----------- -----------
Total shareholders' equity.................................. 12,803,081 12,727,667
----------- -----------
$30,688,506 $27,587,570
=========== ===========
</TABLE>
F-2
<PAGE> 1068
BELK OF THOMASTON, GA., INC.
UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Total store sales....................................... $29,097,866 $29,900,536 $28,991,847
Less: Leased Sales...................................... 318,564 340,797 302,384
----------- ----------- -----------
Net sales............................................... 28,779,302 29,559,739 28,689,463
Operating costs and expenses............................ 27,562,591 29,697,890 28,953,092
Impairment loss......................................... -- -- 312,309
----------- ----------- -----------
Income from operations.................................. 1,216,711 (138,151) (575,938)
----------- ----------- -----------
Other income (expense):
Interest, net......................................... (308,665) (606,127) (705,407)
Dividend income....................................... 11,224 13,912 13,862
Gain (loss) on disposal of property, plant and
equipment.......................................... (1,605) 7,149 (6,273)
Miscellaneous, net.................................... 140,488 62,206 46,027
----------- ----------- -----------
Total other expense, net................................ (158,558) (522,860) (651,791)
----------- ----------- -----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities..... 1,058,153 (661,011) (1,227,729)
Income tax expense (benefit)............................ 398,053 (203,643) (34,564)
----------- ----------- -----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities................... 660,100 (457,368) (1,193,165)
Equity in earnings (loss) of unconsolidated entity, net
of tax................................................ 978,164 1,083,696 1,218,540
Minority interest in (earnings) loss of unconsolidated
subsidiaries.......................................... -- 4,425 --
----------- ----------- -----------
Net earnings............................................ 1,638,264 621,903 25,375
Retained earnings at beginning of period................ 7,341,178 8,375,533 9,054,805
Dividends paid.......................................... (37,483) (74,966) (112,448)
Purchase of treasury stock.............................. -- -- (70,674)
Retained earnings adjustments........................... (566,426) 132,335 82,333
----------- ----------- -----------
Retained earnings at end of period...................... $ 8,375,533 $ 9,054,805 8,979,391
=========== =========== ===========
</TABLE>
F-3
<PAGE> 1069
BELK OF THOMASTON, GA., INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED HISTORICAL
FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31. Fiscal years 1997, 1996, and 1995 ended on February 1, 1997,
February 3, 1996, and January 31, 1995 respectively.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
F-4
<PAGE> 1070
BELK OF THOMASTON, GA., INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED HISTORICAL
FINANCIAL STATEMENTS -- (CONTINUED)
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. (BSS) in obtaining
merchandising, architectural, legal, accounting, internal audit, accounts
payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1995 and 1996 amounts have been reclassified in order to be
consistent with classifications adopted in 1997. These reclassifications have no
effect on the Company's total shareholders' equity or net earnings as previously
reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements
F-5
<PAGE> 1071
BELK OF THOMASTON, GA., INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED HISTORICAL
FINANCIAL STATEMENTS -- (CONTINUED)
issued for all fiscal periods starting after December 15, 1995 and requires the
recognition of impairment losses on long-lived assets when book values exceed
expected future cash flows.
(12) RETAINED EARNINGS ADJUSTMENT
Adjustment to Retained Earnings of the Company at February 1, 1997, is due
to the liquidation of Belk Department Store of Chattanooga, Tennessee,
Incorporated's (Chattanooga) wholly owned subsidiary, Parks-Belk Company of
Newport, Tennessee (Newport) and the flow through of the retained earnings
adjustment by the equity subsidiary, Belk-Hudson Company, of Waycross, Ga., Inc.
(Waycross).
Adjustment to Retained Earnings of the Company at February 3, 1996, is due
to the correction of the ownership percentage of Waycross and purchase of
Newport by Chattanooga.
The financial statements for the year ended January 31, 1995 represent a
combination of Thomaston, Chattanooga, and Newport and are presented for
comparative purposes only.
F-6
<PAGE> 1072
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 14, CHAPTER 2
BUSINESS CORPORATIONS
STATE OF GEORGIA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
A-1
<PAGE> 1073
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's right.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
A-2
<PAGE> 1074
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
A-3
<PAGE> 1075
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing
A-4
<PAGE> 1076
under subsection (a) of this Code section within 30 days after the corporation
offered payment for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
A-5
<PAGE> 1077
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
A-6
<PAGE> 1078
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement.............. $28,689,464 $ 25,376 $ 1,145,195 $ 2,018,818 $ 12,727,667
Adjustments to eliminate less than
wholly-owned subsidiaries.............. -- -- -- -- --
----------- ----------- ----------- ----------- ------------
Adjusted Shareholders' Statement......... $28,689,464 25,376 1,145,195 2,018,818 12,727,667
=========== ----------- ----------- ----------- ------------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E.......... 4,584 6,273 6,273
Gain/loss on sale of securities........ -- -- --
Impairment loss........................ 228,220 312,309 312,309
Equity in earnings of unconsolidated
subsidiaries......................... (1,218,540) (1,667,516) (1,667,516)
Gain/loss on discontinued operations... -- -- --
Adjustment to tax expense.............. 296,000 -- -- --
----------- ----------- -----------
Total non-operating items................ (689,736) (1,348,934) (1,348,934)
----------- ----------- -----------
Other Adjustments:
Adjustment for dividends received from
other Belk entities.................. (10,130) (13,862) (13,862)
Adjustment for ownership in other Belk
entities............................. (10,461,248)
----------- ----------- ----------- ------------
Per Model................................ $ (674,490) $ (217,601) $ 656,022 $ 2,266,419
=========== =========== =========== ============
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents.............. $(1,074,201)
Negative cash balances reclassified
to accounts payable................ --
Receivables from affiliates, net..... --
Loans receivable from affiliates,
net................................ --
Liabilities
Notes payable........................ 2,500,000
Current installments of long-term
debt............................... --
Current portion of obligations under
capital leases..................... --
Payables to affiliates, net.......... 1,776,296
Long-term debt, excluding current
installments....................... --
Obligations under capital leases,
excluding current portion.......... --
Loans payable to affiliates, net..... 7,641,119
-----------
Net debt (cash).......................... 10,843,214
Adjustments to eliminate less than
wholly-owned subsidiaries.............. --
-----------
Per Model................................ $10,843,214
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 1079
SUPPLEMENT NO. 24
<PAGE> 1080
BELK OF THOMASTON, GA., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 3:10 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
-------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 24
<PAGE> 1081
BELK OF TOCCOA, GA., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk of Toccoa, Ga., Inc. (the "Company"), to
be held on April 15, 1998, at 2:40 p.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Georgia law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 30.4628 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 127,091 shares of New Belk Class A Common Stock which will
represent approximately 0.2118% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage paid
(25)
<PAGE> 1082
envelope. If you plan to attend the Special Meeting, you may vote in person if
you wish, even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 1083
BELK OF TOCCOA, GA., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK OF TOCCOA, GA., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk of Toccoa, Ga., Inc. (the "Company") will be held on April 15,
1998, at 2:40 p.m., local time, at the offices of Belk Stores Services, Inc.,
2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for the following
purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization (the "Reorganization Agreement"), dated as of
November 25, 1997, by and among the Company, the other Belk Companies named
therein, Belk Acquisition Co., a South Carolina corporation, and Belk,
Inc., a Delaware corporation ("New Belk"), pursuant to which the Company
would be merged with and into New Belk (the "Merger") and (b) the Merger.
The Merger will be part of a transaction pursuant to which 112 separate
Belk companies will be merged into a single operating entity. If the Merger
is consummated, each outstanding share of common stock, par value $100 per
share, of the Company ("Company Common Stock") (other than shares entitled
to dissenters' rights of appraisal under Georgia law and other than shares
of Company Common Stock owned by other Belk Companies, which will be
canceled) will be converted into the right to receive 30.4628 shares of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk
Class A Common Stock"). All of the shares of New Belk Class A Common Stock
to be received by each shareholder in the Reorganization will be aggregated
and the total will be rounded to the nearest whole share. No fractional
shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 1084
BELK OF TOCCOA, GA., INC.
SUPPLEMENT NO. 25
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 25 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK OF TOCCOA, GA.,
INC. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE DISCUSSION IN THE
PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED HEREIN ASSUMES THAT
ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION. IF ANY ONE OR MORE
BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE INFORMATION
CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 13
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 1085
THE COMPANY
The Company was incorporated as Georgia corporation in 1937 as Gallant Belk
Company. The Company changed its name to Belk of Toccoa, Ga., Inc. on July 23,
1997. The mailing address of the Company's principal executive offices is 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, and its telephone number
at that address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 2:40 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under Georgia law),
will be converted, without any action on the part of the Shareholder, into the
right to receive 30.4628 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk (the "New Belk Class A Common Stock"). All
of the shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 7,410 shares of Common Stock
outstanding held of record by 42 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 77.3% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 1086
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Georgia Business Corporation Code (the "GBCC"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 8,000 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock held by a New Belk Stockholder who is a Class A Permitted
Holder will also automatically convert into New
3
<PAGE> 1087
Belk Class B Common Stock in the event that such New Belk Stockholder no longer
meets the requirements of a Class A Permitted Holder. New Belk Class B Common
Stock has no conversion rights. The Company Articles provide for only one class
of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the GBCC, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as the
effect of such distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to be less than the sum of its total liabilities plus
(unless the articles of incorporation permit otherwise) the amount that would be
needed if the corporation dissolved at the time of the payment of the dividend
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
4
<PAGE> 1088
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The GBCC permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 25%, or such
greater or lesser percentages as may be provided in the articles of
incorporation or bylaws, of all votes entitled to be cast on the proposed
corporate action to call a special meeting. The Company Bylaws authorize the
Chairman, President, Secretary, the Company Board and any Shareholder pursuant
to the written request of the holders of not less than 10% of all the shares
entitled to vote at the meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the GBCC, unless the articles of incorporation, the bylaws or
the provisions regarding meetings in the GBCC specify a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the shareholders. The Company Articles specify that to liquidate and
discontinue the business of the Company requires a two-thirds vote.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
Under the GBCC, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the GBCC
requires an amendment to the articles of incorporation to be recommended by the
board of directors to the
5
<PAGE> 1089
shareholders and approved by a majority (unless the articles of incorporation or
the board of directors requires a greater vote or a vote by voting groups) of
the votes entitled to be cast on the amendment by any voting group. As under the
DGCL, the holders of the outstanding shares of a class or series are entitled to
vote as a separate voting group (if shareholder voting is otherwise required by
the GBCC) on a proposed amendment if the amendment would change certain
fundamental rights and preferences of that class or series. The Company Articles
do not specify a greater vote or a vote by voting groups to amend the Company
Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the GBCC, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or the
GBCC reserves this power exclusively to the shareholders in whole or part or
(ii) the shareholders in amending or repealing a particular bylaw provided
expressly that the board of directors may not amend or repeal that bylaw. The
shareholders of the corporation may amend or repeal the bylaws of the
corporation even though such bylaws may be amended or repealed by the board of
directors of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board, or by the affirmative vote of a majority of the shares
outstanding and entitled to vote at any regular or special meeting of the
Shareholders. Further, the Company Bylaws provide that the Company Board has no
power to adopt a bylaw: (i) requiring more than a majority of the voting shares
for a quorum at a meeting of the Shareholders, except where higher percentages
are required by law; (ii) providing for the management of the Company otherwise
than by the Company Board or its executive committees; (iii) increasing or
decreasing the number of directors; or (iv) classifying and staggering the
election of directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the GBCC, any action that may be taken by an annual or special
meeting of shareholders may be taken without a meeting and without prior notice,
if all holders of outstanding shares entitled to vote on such action or, if so
provided in the articles of incorporation, by persons entitled to vote at a
meeting shares having voting power to cast not less than the minimum number (or
numbers, in the case of voting groups) of votes that would be necessary to
authorize or take the action at which all shareholders entitled to vote were
present and voted sign the written consent(s) describing such action. The
Company Bylaws permit any action which may be taken at a meeting of the
Shareholders to be taken without a meeting if a consent in writing, setting
forth the action so taken, is signed by all of the persons who would be entitled
to vote upon such action at a meeting and filed with the Secretary of the
Company.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding
6
<PAGE> 1090
having the right to vote for such directors, order an election to be held to
fill any such vacancies or newly created directorships or to replace the
directors chosen by the directors then in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation or a bylaw
approved by the shareholders, the GBCC permits a vacancy in the board of
directors to be filled by the shareholders or by the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board and if
the vacancy is one that the directors are authorized to fill, then the directors
may fill the vacancy by the affirmative vote of a majority of all the directors
remaining in office.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors may be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The GBCC requires a corporation to have at least one director. The articles
of incorporation or the bylaws may authorize the shareholders or the board of
directors to change the number of directors. If the articles of incorporation or
the bylaws establish a variable range for the size of directors, the number of
directors may be changed, within the prescribed range, by the shareholders or,
if the articles of incorporation so provide, by the board of directors. The
Company Bylaws require the Company Board to consist of at least three, but no
more than 15, directors.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
Under the GBCC, a director must be a natural person and at least 18 years
of age, but does not have to be a resident of Georgia or a shareholder of the
corporation unless otherwise provided for in the articles of incorporation. The
Company Articles do not require directors of the Company to be residents of
Georgia or shareholders of the Company. The GBCC also allows the articles of
incorporation or the bylaws to provide for additional qualifications of
directors.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each
7
<PAGE> 1091
class expiring at the annual meeting in successive years beginning with the
first class and progressing to the third class, if any. Thereafter, directors
are chosen for a full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
Under the GBCC, the articles of incorporation may allow for staggering the
terms of directors by dividing the total number of directors into two or three
groups, with each group containing one-half or one-third of the total. The term
of each group expires in each successive year beginning with the first group and
progressing to the third group, if any. Thereafter, directors are chosen for a
term of two or three years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
According to the GBCC, unless the articles of incorporation or bylaws
provide that directors may be removed only for cause, the shareholders may
remove one or more directors with or without cause. If a director is elected by
a voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove him. If cumulative voting is not authorized, a
director may be removed only by a majority of votes entitled to be cast.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under both the DGCL and the GBCC, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the GBCC generally permits transactions involving a
Georgia corporation and an interested director of that corporation if: (i) the
transaction received the affirmative vote of a majority (but not less than two)
of those qualified directors on the board of directors or on a duly empowered
committee thereof who voted on the transaction after required disclosure to
them; (ii) if a majority of the votes entitled to be cast by the holders of all
qualified shares were cast in favor of the transaction after (a) notice to
shareholders describing the director's conflicting interest transaction, (b)
provision of the information with regard to any unqualified shares and (c)
required disclosure to the shareholders who voted on the transaction (to the
extent the information was not known by them); or (iii) the transaction, judged
in the circumstances at the time of commitment, is established to have been fair
to the corporation.
8
<PAGE> 1092
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the GBCC, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the GBCC (i) in connection with a
proceeding by or in the right of the corporation, except for reasonable expenses
incurred in connection with the proceeding if it is determined that the director
or officer has met the relevant standard of conduct under the GBCC or (ii) in
connection with any proceeding with respect to conduct for which he was adjudged
liable on the basis that personal benefit was improperly received by him,
whether or not involving action in his official capacity. A Georgia corporation
must indemnify a director or officer who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party because he
was a director or officer of the corporation against reasonable expenses
incurred by the director or officer in connection with the proceeding.
The Company Bylaws authorize indemnification as provided in the GBCC. In
addition, the Company Bylaws provide that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture,
9
<PAGE> 1093
trust or other enterprise, as a partner of a partnership or as a trustee or
administrator under an employee benefit plan. The Company will also indemnify a
director or officer for reasonable costs, expenses and attorneys' fees in
connection with the enforcement of rights to indemnification granted therein, if
it is so determined in accordance with the Company Articles that the director or
officer is entitled to indemnification thereunder. The Company Articles provide
that to the fullest extent permitted by the GBCC, a director will not be
personally liable to the Company or any of its Shareholders or otherwise for
monetary damages for breach of duty of care or other duty as a director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The GBCC concerning the approval of mergers and share exchanges is similar
in all material respects to the DGCL, except action by the shareholders of the
surviving corporation is not required if the number and kind of shares
outstanding immediately after the merger or share exchange, plus the number and
kind of shares issuable as a result of the merger or share exchange and by the
conversion of securities issued pursuant to the merger or share exchange or the
exercise of rights and warrants issued pursuant to the merger or share exchange
does not exceed the total number and kind of shares of the surviving or
acquiring corporation authorized by its articles of incorporation immediately
before the merger or share exchange. The GBCC and DGCL provisions concerning the
approval of the sale of all or substantially all of the assets of a corporation
are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the GBCC include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined in the DGCL and the
GBCC, "business combinations" generally encompass (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder, (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested shareholder of a substantial percentage of assets of the corporation,
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested shareholder,
except in certain circumstances, (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested shareholder, except
in certain circumstances or (v) any receipt by the interested shareholder of the
benefit of any loans, advances, guarantees, pledges or other financial benefits
(other than those expressly permitted in (i) through (iv) above) provided by or
through the corporation.
The DGCL defines an "interested stockholder" as any person who (i) is the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation and within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation. Under the
GBCC, an "interested shareholder" is any person who owns 10% of the outstanding
voting shares or is an affiliate of the corporation owning 10% of the
outstanding voting shares within the prior two years, and a "continuing
director" is a director not associated or affiliated with any interested
shareholder.
10
<PAGE> 1094
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
According to the GBCC, if at least three continuing directors serve on the
board of directors, then those directors must unanimously approve the business
combination. If three continuing directors do not serve on the board of
directors, then 66 2/3% of the continuing directors must recommend the business
combination and a majority of shareholders entitled to cast a vote must approve
the business combination. Also, except under certain circumstances, no mergers
may occur between a corporation and an interested shareholder within five years
of the date the shareholder became an interested shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the GBCC provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The GBCC concerning preemptive rights is equivalent to the DGCL. The
Company Articles do not contain any provision with respect to preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the GBCC, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the
11
<PAGE> 1095
purpose and the records the shareholder desires to inspect, (iii) the records
are directly connected with the purpose and (iv) the shareholder gives the
corporation written notice of the demand at least five business days before the
date on which the shareholder wishes to inspect and copy such records. Such
documents include: (i) excerpts from minutes of any meeting of the board of
directors, records of any action of a committee of the board of directors while
acting in place of the board of directors on behalf of the corporation, minutes
of any meeting of the shareholders and records of action taken by the
shareholders or board of directors without a meeting; (ii) accounting records of
the corporations; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the GBCC ("Article 13") has
the right to receive in cash the fair value of such Shareholder's shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN
ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
To exercise appraisal rights under Article 13, a holder of Common Stock
must (i) deliver to the Company before the taking of the vote of Shareholders on
the Reorganization Agreement written notice of his intent to demand payment for
his shares if the Merger is effected and (ii) not vote his shares in favor of
the Reorganization Agreement. A Shareholder who does not satisfy these two
requirements is not entitled to payment for his shares under Article 13. In
addition, any Shareholder who returns a signed proxy but fails to provide
instructions as to the manner in which such shares are to be voted will be
deemed to have voted in favor of the Reorganization Agreement and will not be
entitled to assert dissenters' rights of appraisal.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial Shareholder and he notifies the Company
in writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of such a partial dissenter are determined as if
the shares as to which he dissents and his other shares are registered in the
names of different Shareholders.
If the Reorganization Agreement is approved at the Special Meeting, the
Company must deliver a written dissenters' notice (the "Dissenters' Notice") to
all Shareholders who satisfied the notice requirements of Article 13. The
Dissenters' Notice must be sent within 10 days after the Effective Time and must
(i) state where the demand for payment must be sent and where and when
certificates for shares must be deposited, (ii) inform holders of uncertificated
shares to what extent transfer of those shares will be restricted after the
demand for payment is received, (iii) set a date by which the Company must
receive the demand for payment (which date may not be fewer than 30 nor more
than 60 days after the Dissenters' Notice is delivered) and (iv) be accompanied
by a copy of Article 13.
A record Shareholder who receives the Dissenters' Notice must demand
payment and deposit his certificates in accordance with the Dissenters' Notice.
Such Shareholder will retain all other rights of a Shareholder until those
rights are canceled or modified by the consummation of the Merger. A record
Shareholder who does not demand payment or deposit his share certificates where
required, each by the date set in the Dissenters' Notice, is not entitled to
payment for his shares under Article 13.
Within 10 days of the later of the Effective Time or receipt of a payment
demand, the Company must offer to pay each dissenting Shareholder who complied
with Article 13 the amount the Company estimates to be the fair value of his
shares, plus accrued interest from the Effective Time. Such offer of payment
must be accompanied by (i) certain recent Company financial statements, (ii) the
Company's estimate of the fair value of the shares and interest due, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Article 13 and (v) a copy of Article
13. If the Shareholder
12
<PAGE> 1096
accepts the Company's offer by written notice to the Company within 30 days
after the Company's offer, the Company must make payment within 60 days after
the later of the making of the offer or the Effective Time.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing share certificates, the Company must return the
deposited certificates. If, after such return, the Merger is consummated, the
Company must send a new Dissenters' Notice and repeat the payment procedure
described above.
A dissenting Shareholder may notify the Company in writing of his own
estimate of the fair value of his shares and the interest due, and may demand
payment of his estimate, if (i) he believes that the amount offered by the
Company is less than the fair value of his shares or that the interest due has
been calculated incorrectly or (ii) the Company, having failed to consummate the
Merger, does not return the deposited certificates within 60 days after the date
set for demanding payment. A dissenting Shareholder waives his right to demand
payment unless he notifies the Company of his demand in writing within 30 days
after the Company makes or offers payment for his shares. If the Company does
not offer payment within 10 days of the later of the Effective Time or receipt
of a payment demand, then (i) the Shareholder may demand the financial
statements and other information of the Company, and the Company must provide
such information within 10 days after receipt of the written demand and (ii) the
Shareholder may notify the Company of his own estimate of the fair value of his
shares and the amount of interest due, and may demand payment of that estimate.
If a demand for payment by a Shareholder remains unsettled, the Company
must commence a nonjury equity valuation proceeding in the appropriate court, as
specified in Article 13, within 60 days after receiving the payment demand and
must petition the court to determine the fair value of the shares and accrued
interest. If the Company does not commence a valuation proceeding within 60
days, the Company is required to pay each dissenting Shareholder whose demand
remains unsettled, the amount demanded. The Company is required to make all
dissenting Shareholders whose demands remain unsettled parties to the proceeding
and to serve a copy of the petition upon each dissenting Shareholder. The court
may appoint appraisers to receive evidence and to recommend a decision on fair
value. Each dissenting Shareholder made a party to the proceeding is entitled to
judgment for the fair value of his shares plus interest to the date of judgment.
In an appraisal proceeding commenced under Article 13, the court must
determine the costs of the proceeding, excluding fees and expenses of attorneys
and experts for the respective parties, and must assess those costs against the
Company, except that the court may assess the costs against all or some of the
dissenting Shareholders to the extent the court finds they acted arbitrarily,
vexatiously or not in good faith in demanding payment under Article 13. The
court also may assess the fees and expenses of attorneys and experts for the
respective parties against the Company if the court finds the Company did not
substantially comply with the requirements of Article 13, or against either the
Company or a dissenting Shareholder if the court finds that such party acted
arbitrarily, vexatiously or not in good faith with respect to the rights
provided by Article 13.
If the court finds that the services of the attorneys for any dissenting
Shareholder were of substantial benefit to other dissenting Shareholders
similarly situated, and that the fees for those services should not be assessed
against the Company, the court may award those attorneys reasonable fees out of
the amounts awarded the dissenting Shareholders who were benefited. No action by
any dissenting Shareholder to enforce dissenters' rights may be brought more
than three years after the Effective Time, regardless of whether notice of the
Merger and of the right to dissent was given by the Company in compliance with
the provisions of Article 13.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996
13
<PAGE> 1097
to February 1, 1997 (the "Measurement Period") multiplied by six-tenths, less
Net Debt (calculated in accordance with Annex B of this Prospectus Supplement
under "Components of Net Debt (Cash) per Shareholders' Statement") at the end of
the Measurement Period; (ii) the Company's adjusted earnings before interest,
taxes, depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Revenue Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales..................... $4,592,753 $4,592,753 0.6 $678,546 $2,077,106
EBITDA........................ 372,059 353,039 7 678,546 1,792,727
EBIT.......................... 192,187 173,167 10 678,546 1,053,124
Net Income.................... 123,879 104,882 15 -- 1,573,230
Book Equity................... 2,605,022 2,205,439 1 -- 2,205,439
</TABLE>
14
<PAGE> 1098
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk's Department
Store of Albany,
Georgia 10.3056% X $ 6,361,249 = $ 655,565
Belk of Americus,
Ga., Inc. 9.4072% X 2,375,853 = 223,501
Belk of Athens, Ga.,
Inc. 1.7356% X 14,290,078 = 248,019
Belk-Simpson Co., of
Bainbridge, Ga.,
Inc. 5.3333% X 3,606,676 = 192,355
Belk of Dalton, Ga.,
Inc. 7.5024% X 8,605,064 = 645,586
Belk of Waycross,
Ga., Inc. .4096% X 43,828,148 = 179,520
----------
Total $2,144,526
==========
Relative Operating Value of Company $2,205,439
Relative Operating Value of Other Companies Owned by Company + 2,144,546
----------
Total Relative Value of Company = $4,349,985
==========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Gallant-Belk Company 4.8043% X $4,349,985 = $ 208,986
Belk Brothers Company 9.4467% X 4,349,985 = 410,930
Belk Enterprises,
Inc. 14.2105% X 4,349,985 = 618,155
Belk of Cornelia,
Ga., Inc. .9717% X 4,349,985 = 42,269
Belk of LaGrange,
Ga., Inc. 9.0148% X 4,349,985 = 392,142
Belk Brothers of
Monroe, North
Carolina,
Incorporated 3.6707% X 4,349,985 = 159,675
Belk of Thomaston,
Ga., Inc. 1.5789% X 4,349,985 = 68,682
----------
Total $1,900,839
==========
Total Relative Value of Company $4,349,985
Total Relative Value of Company Owned by Other Belk Companies - 1,900,839
----------
Net Relative Value of Company = $2,449,150
==========
</TABLE>
15
<PAGE> 1099
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$2,449,150 / $1,156,226,577 = .2118%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.2118% X 59,998,834) / 4,172 = 30.4628
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 1100
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 16.72
Dividends(2).............................................. 10.00
Book value per share(3)................................... 351.55
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 29.24
Dividends(2).............................................. 7.92
Book value per share...................................... 381.39
</TABLE>
- ---------------
(1) Based on 7,410 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 7,410 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
17
<PAGE> 1101
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 3,525 $ 4,697 $ 4,593
Net income (loss)........................................... 125 (60) 124
Per common share
Net income (loss)(1)...................................... 16.84 (8.06) 16.72
Dividends................................................. 10.00 10.00 10.00
Book value(2)............................................. 362.90 344.84 351.55
Total assets................................................ 2,849 3,586 3,766
Shareholders' equity........................................ 2,689 2,555 2,605
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $3,223 $3,223
Income from operations...................................... 19 113
</TABLE>
- ---------------
(1) Based on 7,410 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 7,410 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 1102
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
To the extent a discussion of the financial condition and results of
operations of the Company for any of the fiscal years ended January 31, 1995,
February 3, 1996 or February 1, 1997 or for either of the nine-month periods
ended November 2, 1996 or November 1, 1997 is necessary to identify certain
trends or conditions that differ from the combined Belk Companies and that are
material to Shareholders' understanding of the financial condition or results of
operations of the Company, such discussion is included below. The discussion
which follows is based upon and should be read in conjunction with the
historical financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus Supplement.
In July of fiscal year 1996, the Company relocated its only store from a
downtown location to a shopping center site. Income from operations decreased
for the year as a result of increased rent and depreciation expense due to the
relocation along with a decrease in gross margin incurred during the closing of
the old downtown location.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in the Ingles
Shopping Center in Toccoa, Georgia. The Company's store operates in a manner
consistent with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is managed out of the Long group office in
Anderson, South Carolina.
Facilities. The Company leases its store building, which contains
approximately 41,000 square feet of floor area. The current term of the lease
expires in 2003. The Company believes the building is adequate to meet its
current needs.
Competition. The Company's principal competitor in the market is Wal-Mart.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 1103
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)(f)........................................ 5,278 71.2%
Thomas M. Belk, Jr. (Director and Executive Officer)
(c)(e)(f)(g).............................................. 3,814 51.5%
H. W. McKay Belk (Director and Executive Officer)
(c)(e)(f)................................................. 3,698 49.9%
John R. Belk (Director and Executive Officer) (c)(e)(f)..... 3,754 50.6%
Henderson Belk (Director) (d)............................... 640 8.6%
Sarah Belk Gambrell (d)..................................... 1,696 22.9%
Leroy Robinson (Director) (c)............................... 346 4.7%
B. Neal Long (Director and Executive Officer)............... 0 *
Katherine Belk Morris (c)................................... 516 7.0%
Montgomery Investment Company............................... 640 8.6%
Belk of LaGrange, Ga., Inc. ................................ 668 9.0%
Belk Enterprises, Inc. ..................................... 1,053 14.2%
J.V. Properties............................................. 700 9.4%
All Directors and Executive Officers as a group (7
persons).................................................. 5,730 77.3%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson and Katherine Belk Morris -- 2801 West Tyvola
Road, Charlotte, N.C. 28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road,
Charlotte, N.C. 28207; B. Neal Long -- 3101 N. Main Street, Anderson, S.C.
29621; Montgomery Investment Company, Belk of LaGrange, Ga., Inc., Belk
Enterprises, Inc. and J.V. Properties -- 2801 West Tyvola Road, Charlotte, N.C.
28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 640 shares held by Montgomery Investment Company, of which John M.
Belk is the majority shareholder.
(b) Includes 8 shares held by Claudia W. Belk, U/A f/b/o Mary Claudia Belk.
Claudia W. Belk, the Trustee, is John M. Belk's wife.
(c) Includes 346 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(d) Includes 640 shares held in several Trusts established by the Will of W. H.
Belk for the benefit of his children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
20
<PAGE> 1104
(e) Includes 272 shares held by Belk Brothers of Monroe, North Carolina,
Incorporated, 356 shares held by Gallant-Belk Company, 668 shares held by
Belk of LaGrange, Ga., Inc., 72 shares held by Belk of Cornelia, Ga., Inc.,
1,053 shares held by Belk Enterprises, Inc. and 117 shares held by Belk of
Thomaston, Ga., Inc., which shares are voted by the members of the
Executive Committee of the Board of Directors of each such Corporation,
under authority given by the directors of each such Corporation at the
annual meeting of directors held in March, 1997. The Executive Committee of
each such Corporation consists of John M. Belk, Thomas M. Belk, Jr., H. W.
McKay Belk and John R. Belk.
(f) Includes 700 shares held by J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
(g) Includes 62 shares held by Thomas M. Belk, Jr. as custodian for the minor
children of his brother, H. W. McKay Belk.
21
<PAGE> 1105
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 1106
BELK OF TOCCOA, GA., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 125,695 $ 231,997
Accounts receivable, net.................................. 642,174 716,035
Merchandise inventory..................................... 1,033,663 1,104,504
Receivable from affiliates, net........................... 1,606 --
Refundable income taxes................................... 36,599 44,041
Deferred income taxes..................................... 8,036 6,784
Other..................................................... 34,741 46,134
---------- ----------
Total current assets........................................ 1,882,514 2,149,495
Investments................................................. 399,684 399,684
Property, plant and equipment, net.......................... 1,283,321 1,199,756
Other noncurrent assets..................................... 20,325 17,308
---------- ----------
$3,585,844 $3,766,243
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 231,503 $ 183,160
Payables to affiliates, net............................... -- 1,175
---------- ----------
Total current liabilities................................... 231,503 184,335
Deferred income taxes....................................... 7,403 26,465
Loans payable to affiliates, net............................ 759,260 909,260
Other noncurrent liabilities................................ 32,434 41,161
---------- ----------
Total liabilities........................................... 1,030,600 1,161,221
Shareholders' equity:
Common stock.............................................. 741,000 741,000
Additional paid in capital................................ 4,465 4,465
Retained earnings......................................... 1,809,779 1,859,557
---------- ----------
Total shareholders' equity.................................. 2,555,244 2,605,022
---------- ----------
$3,585,844 $3,766,243
========== ==========
</TABLE>
F-2
<PAGE> 1107
BELK OF TOCCOA, GA., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $3,524,509 $4,696,719 $4,592,752
Operating costs and expenses............................... 3,381,296 4,790,886 4,422,630
---------- ---------- ----------
Income from operations..................................... 143,213 (94,167) 170,122
---------- ---------- ----------
Other income (expense):
Interest, net............................................ 21,515 (22,304) (68,161)
Dividend income.......................................... 16,784 21,988 19,020
Gain (loss) on disposal of property, plant and
equipment............................................. -- 18,394 --
Miscellaneous, net....................................... (514) 486 3,044
---------- ---------- ----------
Total other expense, net................................... 37,785 18,564 (46,097)
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 180,998 (75,603) 124,025
Income tax expense (benefit)............................... 56,201 (15,876) 147
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 124,797 (59,727) 123,878
---------- ---------- ----------
Net earnings............................................... 124,797 (59,727) 123,878
Retained earnings at beginning of period................... 1,892,909 1,943,606 1,809,779
Dividends paid............................................. (74,100) (74,100) (74,100)
---------- ---------- ----------
Retained earnings at end of period......................... $1,943,606 $1,809,779 $1,859,557
========== ========== ==========
</TABLE>
F-3
<PAGE> 1108
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 1109
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 1110
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 14, CHAPTER 2
BUSINESS CORPORATIONS
STATE OF GEORGIA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
A-1
<PAGE> 1111
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's right.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
A-2
<PAGE> 1112
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
A-3
<PAGE> 1113
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing
A-4
<PAGE> 1114
under subsection (a) of this Code section within 30 days after the corporation
offered payment for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
A-5
<PAGE> 1115
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
A-6
<PAGE> 1116
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
---------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement.................... $4,592,753 $123,879 $192,187 $372,059 $2,605,022
Adjustments to eliminate less than wholly-owned
subsidiaries................................. -- -- -- -- --
---------- -------- -------- -------- ----------
Adjusted Shareholders' Statement............... $4,592,753 123,879 192,187 372,059 2,605,022
========== -------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E................ -- -- --
Gain/loss on sale of securities.............. -- -- --
Impairment loss.............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries............................... -- -- --
Gain/loss on discontinued operations......... -- -- --
Adjustment to tax expense.................... -- -- -- --
-------- -------- --------
Total non-operating items...................... -- -- --
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities.............................. (18,997) (19,020) (19,020)
Adjustment for ownership in other Belk
entities................................... (399,583)
-------- -------- -------- ----------
Per Model...................................... $104,882 $173,167 $353,039 $2,205,439
======== ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER SHAREHOLDERS'
STATEMENT
Assets
Cash & cash equivalents.................... $ (231,997)
Negative cash balances reclassified to
accounts payable......................... 108
Receivables from affiliates, net........... --
Loans receivable from affiliates, net...... --
Liabilities
Notes payable.............................. --
Current installments of long-term debt..... --
Current portion of obligations under
capital leases........................... --
Payables to affiliates, net................ 1,175
Long-term debt, excluding current
installments............................. --
Obligations under capital leases, excluding
current portion.......................... --
Loans payable to affiliates, net........... 909,260
----------
Net debt (cash)................................ 678,546
Adjustments to eliminate less than wholly-owned
subsidiaries................................. --
----------
Per Model...................................... $ 678,546
==========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 1117
SUPPLEMENT NO. 25
<PAGE> 1118
BELK OF TOCCOA, GA., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 2:40 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 25
<PAGE> 1119
BELK-MATTHEWS COMPANY, VIDALIA, GEORGIA, INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk-Matthews Company, Vidalia, Georgia, Inc.
(the "Company"), to be held on April 15, 1998, at 2:00 p.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Georgia law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 51.5862 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 217,900 shares of New Belk Class A Common Stock which will
represent approximately 0.3632% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(26)
<PAGE> 1120
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 1121
BELK-MATTHEWS COMPANY, VIDALIA, GEORGIA, INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK-MATTHEWS COMPANY, VIDALIA, GEORGIA, INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk-Matthews Company, Vidalia, Georgia, Inc. (the "Company") will
be held on April 15, 1998, at 2:00 p.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Georgia law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 51.5862 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 1122
BELK-MATTHEWS COMPANY, VIDALIA, GEORGIA, INC.
SUPPLEMENT NO. 26
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 26 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK-MATTHEWS
COMPANY, VIDALIA, GEORGIA, INC. (THE "COMPANY"), THE DISCUSSION HEREIN
SUPERSEDES THE DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE
INFORMATION CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE
IN THE REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN
THE REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY
AND THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT
BE ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL
CAPITALIZED TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE
MEANINGS SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 16
SELECTED HISTORICAL FINANCIAL INFORMATION................... 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 18
BUSINESS OF THE COMPANY..................................... 18
SECURITY OWNERSHIP OF THE COMPANY........................... 19
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 1123
THE COMPANY
The Company was incorporated as a Georgia corporation in 1956. The mailing
address of the Company's principal executive offices is 2801 West Tyvola Road,
Charlotte, North Carolina 28217-4500, and its telephone number at that address
is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 2:00 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under Georgia law),
will be converted, without any action on the part of the Shareholder, into the
right to receive 51.5862 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk (the "New Belk Class A Common Stock"). All
of the shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 4,992 shares of Common Stock
outstanding held of record by 15 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 61.7% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 1124
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Georgia Business Corporation Code (the "GBCC"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 5,760 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock held by a New Belk Stockholder who is a Class A Permitted
Holder will also automatically convert into New
3
<PAGE> 1125
Belk Class B Common Stock in the event that such New Belk Stockholder no longer
meets the requirements of a Class A Permitted Holder. New Belk Class B Common
Stock has no conversion rights. The Company Articles provide for only one class
of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the GBCC, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as the
effect of such distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to be less than the sum of its total liabilities plus
(unless the articles of incorporation permit otherwise) the amount that would be
needed if the corporation dissolved at the time of the payment of the dividend
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
4
<PAGE> 1126
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The GBCC permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 25%, or such
greater or lesser percentages as may be provided in the articles of
incorporation or bylaws, of all votes entitled to be cast on the proposed
corporate action to call a special meeting. The Company Bylaws authorize the
Chairman, President, Secretary, the Company Board and any Shareholder pursuant
to the written request of the holders of not less than 10% of all the shares
entitled to vote at the meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the GBCC, unless the articles of incorporation, the bylaws or
the provisions regarding meetings in the GBCC specify a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the shareholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
Under the GBCC, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the GBCC
requires an amendment to the articles of incorporation to be recommended by the
board of directors to the
5
<PAGE> 1127
shareholders and approved by a majority (unless the articles of incorporation or
the board of directors requires a greater vote or a vote by voting groups) of
the votes entitled to be cast on the amendment by any voting group. As under the
DGCL, the holders of the outstanding shares of a class or series are entitled to
vote as a separate voting group (if shareholder voting is otherwise required by
the GBCC) on a proposed amendment if the amendment would change certain
fundamental rights and preferences of that class or series. The Company Articles
do not specify a greater vote or a vote by voting groups to amend the Company
Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the GBCC, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or the
GBCC reserves this power exclusively to the shareholders in whole or part or
(ii) the shareholders in amending or repealing a particular bylaw provided
expressly that the board of directors may not amend or repeal that bylaw. The
shareholders of the corporation may amend or repeal the bylaws of the
corporation even though such bylaws may be amended or repealed by the board of
directors of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board, or by the affirmative vote of a majority of the shares
outstanding and entitled to vote at any regular or special meeting of the
Shareholders. Further, the Company Bylaws provide that the Company Board has no
power to adopt a bylaw: (i) requiring more than a majority of the voting shares
for a quorum at a meeting of the Shareholders, except where higher percentages
are required by law; (ii) providing for the management of the Company otherwise
than by the Company Board or its executive committees; (iii) increasing or
decreasing the number of directors; or (iv) classifying and staggering the
election of directors. The Company Articles provide that the Company Board shall
have concurrent power, by vote of a majority of all of the directors, to make,
alter, amend and rescind the Company Bylaws. The bylaws enacted by the
Shareholders may be affected by action of the Company Board and vice versa;
provided, however, the Company Board may not re-enact a bylaw which the
Shareholders have repealed or altered, nor may it repeal a bylaw enacted by the
Shareholders which limits the powers of the Company Board or enhances or
protects the right of Shareholders, without the consent of the Shareholders.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the GBCC, any action that may be taken by an annual or special
meeting of shareholders may be taken without a meeting and without prior notice,
if all holders of outstanding shares entitled to vote on such action or, if so
provided in the articles of incorporation, by persons entitled to vote at a
meeting shares having voting power to cast not less than the minimum number (or
numbers, in the case of voting groups) of votes that would be necessary to
authorize or take the action at which all shareholders entitled to vote were
present and voted sign the written consent(s) describing such action. The
Company Bylaws permit any action which may be taken at a meeting of the
Shareholders to be taken without a meeting if a consent in writing, setting
forth the action so taken, is signed by all of the persons who would be entitled
to vote upon such action at a meeting and filed with the Secretary of the
Company.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be
6
<PAGE> 1128
filled by a majority of the directors then in office, although less than a
quorum, or by a sole remaining director. If at the time of filling any vacancy
or newly created directorship, the directors then in office constitute less than
a majority of the whole board as constituted immediately prior to such increase,
the Delaware Court of Chancery may, upon application of stockholders holding at
least 10% of the total number of shares outstanding having the right to vote for
such directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation or a bylaw
approved by the shareholders, the GBCC permits a vacancy in the board of
directors to be filled by the shareholders or by the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board and if
the vacancy is one that the directors are authorized to fill, then the directors
may fill the vacancy by the affirmative vote of a majority of all the directors
remaining in office.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors may be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The GBCC requires a corporation to have at least one director. The
articles of incorporation or the bylaws may authorize the shareholders or the
board of directors to change the number of directors. If the articles of
incorporation or the bylaws establish a variable range for the size of
directors, the number of directors may be changed, within the prescribed range,
by the shareholders or, if the articles of incorporation so provide, by the
board of directors. The Company Bylaws require the Company Board to consist of
at least three, but no more than 15, directors.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
Under the GBCC, a director must be a natural person and at least 18 years
of age, but does not have to be a resident of Georgia or a shareholder of the
corporation unless otherwise provided for in the articles of incorporation. The
Company Articles do not require directors of the Company to be residents of
Georgia or
7
<PAGE> 1129
shareholders of the Company. The GBCC also allows the articles of incorporation
or the bylaws to provide for additional qualifications of directors.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each class expiring at the
annual meeting in successive years beginning with the first class and
progressing to the third class, if any. Thereafter, directors are chosen for a
full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
Under the GBCC, the articles of incorporation may allow for staggering the
terms of directors by dividing the total number of directors into two or three
groups, with each group containing one-half or one-third of the total. The term
of each group expires in each successive year beginning with the first group and
progressing to the third group, if any. Thereafter, directors are chosen for a
term of two or three years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
According to the GBCC, unless the articles of incorporation or bylaws
provide that directors may be removed only for cause, the shareholders may
remove one or more directors with or without cause. If a director is elected by
a voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove him. If cumulative voting is not authorized, a
director may be removed only by a majority of votes entitled to be cast.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under both the DGCL and the GBCC, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the GBCC generally permits transactions involving a
Georgia corporation and an interested director of that corporation if: (i) the
transaction received the affirmative vote of a majority (but not less than two)
of those qualified directors on the board of directors or on a duly empowered
committee thereof who voted on the transaction after required disclosure to
them, (ii) if a majority of the votes entitled to be cast by the holders of all
qualified shares were cast in favor of the transaction after (a) notice to
shareholders describing the director's conflicting interest transaction, (b)
provision of the information with
8
<PAGE> 1130
regard to any unqualified shares and (c) required disclosure to the shareholders
who voted on the transaction (to the extent the information was not known by
them); or (iii) the transaction, judged in the circumstances at the time of
commitment, is established to have been fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the GBCC, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the GBCC (i) in connection with a
proceeding by or in the right of the corporation, except for reasonable expenses
incurred in connection with the proceeding if it is determined that the director
or officer has met the relevant standard of conduct under the GBCC or (ii) in
connection with any proceeding with respect to conduct for which he was adjudged
liable on the basis that personal benefit was improperly received by him,
whether or not involving action in his official capacity. A Georgia corporation
must indemnify a director or officer who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party because he
was a director or officer of the corporation against reasonable expenses
incurred by the director or officer in connection with the proceeding.
The Company Bylaws authorize indemnification as provided in the GBCC. In
addition, the Company Bylaws provide that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not
9
<PAGE> 1131
indemnify a director or officer against liability or litigation expense that he
may incur on account of his activities which were, at the time taken, known or
believed by him to be clearly in conflict with the best interest of the Company.
The Company will likewise and to the same extent indemnify any person who, at
the request of the Company, is or was serving as a director or as an officer of
another corporation, joint venture, trust or other enterprise, as a partner of a
partnership or as a trustee or administrator under an employee benefit plan. The
Company will also indemnify a director or officer for reasonable costs, expenses
and attorneys' fees in connection with the enforcement of rights to
indemnification granted therein, if it is so determined in accordance with the
Company Articles that the director or officer is entitled to indemnification
thereunder. The Company Articles provide that to the fullest extent permitted by
the GBCC, a director will not be personally liable to the Company or any of its
Shareholders or otherwise for monetary damages for breach of duty of care or
other duty as a director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The GBCC concerning the approval of mergers and share exchanges is similar
in all material respects to the DGCL, except action by the shareholders of the
surviving corporation is not required if the number and kind of shares
outstanding immediately after the merger or share exchange, plus the number and
kind of shares issuable as a result of the merger or share exchange and by the
conversion of securities issued pursuant to the merger or share exchange or the
exercise of rights and warrants issued pursuant to the merger or share exchange
does not exceed the total number and kind of shares of the surviving or
acquiring corporation authorized by its articles of incorporation immediately
before the merger or share exchange. The GBCC and DGCL provisions concerning the
approval of the sale of all or substantially all of the assets of a corporation
are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the GBCC include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined in the DGCL and the
GBCC, "business combinations" generally encompass (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder, (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested shareholder of a substantial percentage of assets of the corporation,
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested shareholder,
except in certain circumstances, (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested shareholder, except
in certain circumstances or (v) any receipt by the interested shareholder of the
benefit of any loans, advances, guarantees, pledges or other financial benefits
(other than those expressly permitted in (i) through (iv) above) provided by or
through the corporation.
The DGCL defines an "interested stockholder" as any person who (i) is the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation and within three years of the date in
question was the direct
10
<PAGE> 1132
or indirect owner of at least 15% of the voting power of any class or series of
the then outstanding stock of the corporation. Under the GBCC, an "interested
shareholder" is any person who owns 10% of the outstanding voting shares or is
an affiliate of the corporation owning 10% of the outstanding voting shares
within the prior two years, and a "continuing director" is a director not
associated or affiliated with any interested shareholder.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (a) by persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
According to the GBCC, if at least three continuing directors serve on the
board of directors, then those directors must unanimously approve the business
combination. If three continuing directors do not serve on the board of
directors, then 66 2/3% of the continuing directors must recommend the business
combination and a majority of shareholders entitled to cast a vote must approve
the business combination. Also, except under certain circumstances, no mergers
may occur between a corporation and an interested shareholder within five years
of the date the shareholder became an interested shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the GBCC provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The GBCC concerning preemptive rights is equivalent to the DGCL. The
Company Articles do not contain any provision with respect to preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other
11
<PAGE> 1133
books and records and to make copies or extracts therefrom. A proper purpose
means a purpose reasonably related to such person's interest as a stockholder.
Pursuant to the GBCC, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to
inspect,(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) excerpts from minutes of any
meeting of the board of directors, records of any action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporations; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the GBCC ("Article 13") has
the right to receive in cash the fair value of such Shareholder's shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN
ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
To exercise appraisal rights under Article 13, a holder of Common Stock
must (i) deliver to the Company before the taking of the vote of Shareholders on
the Reorganization Agreement written notice of his intent to demand payment for
his shares if the Merger is effected and (ii) not vote his shares in favor of
the Reorganization Agreement. A Shareholder who does not satisfy these two
requirements is not entitled to payment for his shares under Article 13. In
addition, any Shareholder who returns a signed proxy but fails to provide
instructions as to the manner in which such shares are to be voted will be
deemed to have voted in favor of the Reorganization Agreement and will not be
entitled to assert dissenters' rights of appraisal.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial Shareholder and he notifies the Company
in writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of such a partial dissenter are determined as if
the shares as to which he dissents and his other shares are registered in the
names of different Shareholders.
If the Reorganization Agreement is approved at the Special Meeting, the
Company must deliver a written dissenters' notice (the "Dissenters' Notice") to
all Shareholders who satisfied the notice requirements of Article 13. The
Dissenters' Notice must be sent within 10 days after the Effective Time and must
(i) state where the demand for payment must be sent and where and when
certificates for shares must be deposited, (ii) inform holders of uncertificated
shares to what extent transfer of those shares will be restricted after the
demand for payment is received, (iii) set a date by which the Company must
receive the demand for payment (which date may not be fewer than 30 nor more
than 60 days after the Dissenters' Notice is delivered) and (iv) be accompanied
by a copy of Article 13.
A record Shareholder who receives the Dissenters' Notice must demand
payment and deposit his certificates in accordance with the Dissenters' Notice.
Such Shareholder will retain all other rights of a Shareholder until those
rights are canceled or modified by the consummation of the Merger. A record
Shareholder who does not demand payment or deposit his share certificates where
required, each by the date set in the Dissenters' Notice, is not entitled to
payment for his shares under Article 13.
12
<PAGE> 1134
Within 10 days of the later of the Effective Time or receipt of a payment
demand, the Company must offer to pay each dissenting Shareholder who complied
with Article 13 the amount the Company estimates to be the fair value of his
shares, plus accrued interest from the Effective Time. Such offer of payment
must be accompanied by (i) certain recent Company financial statements, (ii) the
Company's estimate of the fair value of the shares and interest due, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Article 13 and (v) a copy of Article
13. If the Shareholder accepts the Company's offer by written notice to the
Company within 30 days after the Company's offer, the Company must make payment
within 60 days after the later of the making of the offer or the Effective Time.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing share certificates, the Company must return the
deposited certificates. If, after such return, the Merger is consummated, the
Company must send a new Dissenters' Notice and repeat the payment procedure
described above.
A dissenting Shareholder may notify the Company in writing of his own
estimate of the fair value of his shares and the interest due, and may demand
payment of his estimate, if (i) he believes that the amount offered by the
Company is less than the fair value of his shares or that the interest due has
been calculated incorrectly or (ii) the Company, having failed to consummate the
Merger, does not return the deposited certificates within 60 days after the date
set for demanding payment. A dissenting Shareholder waives his right to demand
payment unless he notifies the Company of his demand in writing within 30 days
after the Company makes or offers payment for his shares. If the Company does
not offer payment within 10 days of the later of the Effective Time or receipt
of a payment demand, then (i) the Shareholder may demand the financial
statements and other information of the Company, and the Company must provide
such information within 10 days after receipt of the written demand and (ii) the
Shareholder may notify the Company of his own estimate of the fair value of his
shares and the amount of interest due, and may demand payment of that estimate.
If a demand for payment by a Shareholder remains unsettled, the Company
must commence a nonjury equity valuation proceeding in the appropriate court, as
specified in Article 13, within 60 days after receiving the payment demand and
must petition the court to determine the fair value of the shares and accrued
interest. If the Company does not commence a valuation proceeding within 60
days, the Company is required to pay each dissenting Shareholder whose demand
remains unsettled, the amount demanded. The Company is required to make all
dissenting Shareholders whose demands remain unsettled parties to the proceeding
and to serve a copy of the petition upon each dissenting Shareholder. The court
may appoint appraisers to receive evidence and to recommend a decision on fair
value. Each dissenting Shareholder made a party to the proceeding is entitled to
judgment for the fair value of his shares plus interest to the date of judgment.
In an appraisal proceeding commenced under Article 13, the court must
determine the costs of the proceeding, excluding fees and expenses of attorneys
and experts for the respective parties, and must assess those costs against the
Company, except that the court may assess the costs against all or some of the
dissenting Shareholders to the extent the court finds they acted arbitrarily,
vexatiously or not in good faith in demanding payment under Article 13. The
court also may assess the fees and expenses of attorneys and experts for the
respective parties against the Company if the court finds the Company did not
substantially comply with the requirements of Article 13, or against either the
Company or a dissenting Shareholder if the court finds that such party acted
arbitrarily, vexatiously or not in good faith with respect to the rights
provided by Article 13.
If the court finds that the services of the attorneys for any dissenting
Shareholder were of substantial benefit to other dissenting Shareholders
similarly situated, and that the fees for those services should not be assessed
against the Company, the court may award those attorneys reasonable fees out of
the amounts awarded the dissenting Shareholders who were benefited. No action by
any dissenting Shareholder to enforce dissenters' rights may be brought more
than three years after the Effective Time, regardless of whether notice of the
Merger and of the right to dissent was given by the Company in compliance with
the provisions of Article 13.
13
<PAGE> 1135
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales...................... $8,257,483 $8,257,483 0.6 $59,453 $4,895,037
EBITDA......................... 671,511 671,511 7 59,453 4,641,124
EBIT........................... 502,204 502,204 10 59,453 4,962,587
Net Income..................... 276,731 276,731 15 -- 4,150,965
Book Equity.................... 4,479,503 4,479,503 1 -- 4,479,503
</TABLE>
14
<PAGE> 1136
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
N/A N/A% X $N/A = $ N/A
----------
Total $ N/A
==========
Relative Operating Value of Company $4,962,587
Relative Operating Value of Other Companies Owned by Company + --
----------
Total Relative Value of Company = $4,962,587
==========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk of Dalton, Ga.,
Inc. 5.3686% X $4,962,587 = $ 266,421
Belk of LaGrange,
Ga., Inc. 10.0160% X $4,962,587 = 497,053
----------
Total $ 763,474
==========
Total Relative Value of Company $4,962,587
Total Relative Value of Company Owned by Other Belk Companies - 763,474
----------
Net Relative Value of Company = $4,199,113
==========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders upon consummation of
the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$4,199,113 / $1,156,226,577 = .3632%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.3632% X 59,998,834) / 4,224 = 51.5862
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
15
<PAGE> 1137
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 55.43
Dividends(2).............................................. 15.00
Book value per share(3)................................... 897.34
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 49.52
Dividends(2).............................................. 13.41
Book value per share...................................... 645.86
</TABLE>
- ---------------
(1) Based on 4,992 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 4,992 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
16
<PAGE> 1138
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 8,560 $ 8,426 $ 8,257
Net income.................................................. 190 213 277
Per common share
Net income (loss)(1)...................................... 37.97 42.68 55.43
Dividends................................................. 10.00 15.00 15.00
Book value(2)............................................. 829.22 856.90 897.34
Total assets................................................ 5,385 5,192 5,493
Shareholders' equity........................................ 4,139 4,278 4,480
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $5,764 $5,758
Income from operations...................................... 256 237
</TABLE>
- ---------------
(1) Based on 4,992 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 4,992 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
17
<PAGE> 1139
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates two retail department stores in the
following locations in Georgia: Cordele Square in Cordele and Brice Square in
Vidalia. The Company's stores operate in a manner consistent with the business
of the Belk Companies described in the Proxy Statement/Prospectus. The store is
managed out of the Matthews group office in Macon, Georgia.
Facilities. The Company operates two stores, of which one is leased under
a long-term lease and the other is owned by the Company. The lease has a
termination date of 2000. The floor area of the leased building in Cordele is
approximately 29,000 square feet. The floor area of the owned building in
Vidalia is approximately 45,000 square feet. The Company believes the facilities
are adequate to meet its current needs.
Competition. Specific competitors in the Company's market include Wal-Mart
and Goody's.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
18
<PAGE> 1140
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer) (a)(b)........ 2,304 46.2%
Thomas M. Belk, Jr. (Director and Executive Officer)
(a)(b).................................................... 1,536 30.8%
H. W. McKay Belk (Director and Executive Officer) (a)(b).... 1,536 30.8%
John R. Belk (Director and Executive Officer) (a)(b)........ 1,536 30.8%
Henderson Belk (Director)................................... 0 *
Sarah Belk Gambrell......................................... 768 15.4%
Leroy Robinson (Director) (a)............................... 768 15.4%
B. Frank Matthews, II (Director and Executive Officer)
(c)....................................................... 340 6.8%
Betty Choate Matthews....................................... 300 6.0%
William M. Matthews, IV (Director and Executive Officer).... 434 8.7%
William McGill Matthews, Jr................................. 282 5.6%
Carson Henry Matthews....................................... 282 5.6%
Evelyn Matthews Rehn........................................ 282 5.6%
Katherine McKay Belk (a).................................... 768 15.4%
Katherine Belk Morris (a)................................... 768 15.4%
Thomas M. Belk, Trustee U/A dated September 15, 1993........ 768 15.4%
Belk of LaGrange, Ga., Inc.................................. 500 10.0%
Belk of Dalton, Ga., Inc.................................... 268 5.4%
All Directors and Executive Officers as a group (8
persons).................................................. 3,078 61.7%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson, Katherine McKay Belk and Katherine Belk
Morris -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk
Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207; B. Frank Matthews, II and
Betty Choate Matthews -- 2240 Remount Road, Gastonia, N.C. 28054; William M.
Matthews, V, William McGill Matthews, Jr., Carson Henry Matthews and Evelyn
Matthews Rehn -- 3661 Eisenhower Parkway, Macon, Ga. 31206; Belk of LaGrange,
Ga., Inc., Belk of Dalton, Ga., Inc. and Thomas M. Bell, Trustee U/A dated
September 15, 1993 -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 768 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(b) Includes 600 shares held by Belk LaGrange, Ga., Inc. and 268 shares held by
Belk of Dalton, Ga., Inc., which shares are voted by the members of the
Executive Committee of the Board of Directors of each such Corporation,
under authority given by the directors of each such Corporation at the
annual meeting
19
<PAGE> 1141
of directors held in March, 1997. The Executive Committee of each such
Corporation consists of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk.
(c) Includes 300 shares held by B. Frank Matthews, II's wife, Betty Choate
Matthews.
20
<PAGE> 1142
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 1143
BELK-MATTHEWS COMPANY, VIDALIA, GEORGIA, INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 156,418 $ 238,093
Accounts receivable, net.................................. 1,214,286 1,384,200
Merchandise inventory..................................... 1,675,695 1,847,127
Deferred income taxes..................................... 24,616 16,650
Other..................................................... 72,749 66,917
---------- ----------
Total current assets........................................ 3,143,764 3,552,987
Loans receivable from affiliates, net....................... 5,263 5,263
Property, plant and equipment, net.......................... 2,011,736 1,908,290
Other noncurrent assets..................................... 31,496 26,619
---------- ----------
$5,192,259 $5,493,159
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 468,096 $ 514,749
Payables to affiliates, net............................... 289,219 302,808
Accrued income taxes...................................... 3,253 60,656
---------- ----------
Total current liabilities................................... 760,568 878,213
Deferred income taxes....................................... 120,335 93,847
Other noncurrent liabilities................................ 33,704 41,596
---------- ----------
Total liabilities........................................... 914,607 1,013,656
Shareholders' equity:
Common stock.............................................. 499,200 499,200
Retained earnings......................................... 3,778,452 3,980,303
---------- ----------
Total shareholders' equity.................................. 4,277,652 4,479,503
---------- ----------
$5,192,259 $5,493,159
========== ==========
</TABLE>
F-2
<PAGE> 1144
BELK-MATTHEWS COMPANY, VIDALIA, GEORGIA, INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $8,559,655 $8,426,346 $8,257,483
Operating costs and expenses............................... 8,154,506 8,046,660 7,765,689
---------- ---------- ----------
Income from operations..................................... 405,149 379,686 491,794
---------- ---------- ----------
Other income (expense):
Interest, net............................................ (69,357) (47,682) (59,120)
Gain (loss) on disposal of property, plant and
equipment............................................. -- 1,246 --
Miscellaneous, net....................................... (2,742) 6,897 10,410
---------- ---------- ----------
Total other expense, net................................... (72,099) (39,539) (48,710)
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 333,050 340,147 443,084
Income tax expense (benefit)............................... 143,490 127,099 166,353
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 189,560 213,048 276,731
---------- ---------- ----------
Net earnings............................................... 189,560 213,048 276,731
Retained earnings at beginning of period................... 3,500,644 3,640,284 3,778,452
Dividends paid............................................. (49,920) (74,880) (74,880)
---------- ---------- ----------
Retained earnings at end of period......................... $3,640,284 $3,778,452 $3,980,303
========== ========== ==========
</TABLE>
F-3
<PAGE> 1145
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years evidence suggests that the Company
will not generate federal taxable income as projected by management, some or all
of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 1146
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 1147
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 14, CHAPTER 2
BUSINESS CORPORATIONS
STATE OF GEORGIA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
A-1
<PAGE> 1148
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's right.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
A-2
<PAGE> 1149
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
A-3
<PAGE> 1150
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing
A-4
<PAGE> 1151
under subsection (a) of this Code section within 30 days after the corporation
offered payment for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
A-5
<PAGE> 1152
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
A-6
<PAGE> 1153
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Applicable Exchange Ratio for the Merger.
The data set forth below should be read in conjunction with the historical
financial statement of the Company contained elsewhere in this Prospectus
Supplement and the calculation of the Applicable Exchange Ratio under
"Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
---------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement.................... $8,257,483 $276,731 $502,204 $671,511 $4,479,503
Adjustments to eliminate less than wholly-owned
subsidiaries................................. -- -- -- -- --
---------- -------- -------- -------- ----------
Adjusted Shareholders' Statement............... $8,257,483 276,731 502,204 671,511 4,479,503
========== -------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E................ -- -- --
Gain/loss on sale of securities.............. -- --
Impairment loss.............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries............................... -- -- --
Gain/loss on discontinued operations......... -- -- --
Adjustment to tax expense.................... -- -- -- --
-------- -------- --------
Total non-operating items...................... -- -- --
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities.............................. -- -- --
Adjustment for ownership in other Belk
entities................................... --
-------- -------- -------- ----------
Per Model...................................... $276,731 $502,204 $671,511 $4,479,503
======== ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER SHAREHOLDERS'
STATEMENT
Assets
Cash & cash equivalents.................... $ (238,092)
Negative cash balances reclassified to
accounts payable......................... --
Receivables from affiliates, net........... --
Loans receivable from affiliates, net...... (5,263)
Liabilities
Notes payable.............................. --
Current installments of long-term debt..... --
Current portion of obligations under
capital leases........................... --
Payables to affiliates, net................ 302,808
Long-term debt, excluding current
installments............................. --
Obligations under capital leases, excluding
current portion.......................... --
Loans payable to affiliates, net........... --
----------
Net debt (cash)................................ 59,453
Adjustments to eliminate less than wholly-owned
subsidiaries................................. --
----------
Per Model...................................... $ 59,453
==========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 1154
SUPPLEMENT NO. 26
<PAGE> 1155
BELK-MATTHEWS COMPANY, VIDALIA, GEORGIA, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 2:00 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
-------------------
-------------------------------
Signature
-------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 26
<PAGE> 1156
BELK OF WASHINGTON, GA., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk of Washington, Ga., Inc. (the "Company"),
to be held on April 15, 1998, at 9:40 a.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Georgia law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 27.4037 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 31,021 shares of New Belk Class A Common Stock which will
represent approximately 0.0517% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage paid
(27)
<PAGE> 1157
envelope. If you plan to attend the Special Meeting, you may vote in person if
you wish, even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 1158
BELK OF WASHINGTON, GA., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK OF WASHINGTON, GA., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk of Washington, Ga., Inc. (the "Company") will be held on April
15, 1998, at 9:40 a.m., local time, at the offices of Belk Stores Services,
Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for the
following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Georgia law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 27.4037 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 1159
BELK OF WASHINGTON, GA., INC.
SUPPLEMENT NO. 27
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 27 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK OF WASHINGTON,
GA., INC. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE DISCUSSION IN
THE PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED HEREIN ASSUMES
THAT ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION. IF ANY ONE OR
MORE BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE INFORMATION
CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 16
SELECTED HISTORICAL FINANCIAL INFORMATION................... 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 18
BUSINESS OF THE COMPANY..................................... 18
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION.................................. B-1
</TABLE>
<PAGE> 1160
THE COMPANY
The Company was incorporated as a Georgia corporation in 1941 as
Belk-Gallant Company of Washington, Georgia. The Company changed its name to
Belk of Washington, Ga., Inc. on July 23, 1997. The mailing address of the
Company's principal executive offices is 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500, and its telephone number at that address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 9:40 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under Georgia law),
will be converted, without any action on the part of the Shareholder, into the
right to receive 27.4037 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk (the "New Belk Class A Common Stock"). All
of the shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 2,414 shares of Common Stock
outstanding held of record by 23 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 70.3% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock
2
<PAGE> 1161
vote in favor of the Merger, the vote of such persons, corporations and trusts
in favor of the Merger would be sufficient to approve the Merger under the
governing documents of the Company and applicable state law.
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. In addition, the Reorganization is expected to have
certain other benefits for the Company and the Shareholders, including the
ability to share the risks of the Company's uncertain prospects in its market.
The Company's store is located in a smaller market that has recently experienced
relatively little growth. The Company's management has considered from time to
time whether to relocate the Company's store to another market with better
growth prospects. The Merger would enable the Company to rely on New Belk to
provide the capital necessary to effect any such relocation. If the Company does
not participate in the Reorganization and is required to finance the relocation
of its store on its own, there can be no assurance that the Company would be
able to obtain the financing necessary to relocate its store to another market
with better growth prospects.
There can be no assurance, however, that any of these benefits will be
achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Georgia Business Corporation Code (the "GBCC"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New
3
<PAGE> 1162
Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 2,428 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock held by a New Belk Stockholder who is a Class A Permitted
Holder will also automatically convert into New Belk Class B Common Stock in the
event that such New Belk Stockholder no longer meets the requirements of a Class
A Permitted Holder. New Belk Class B Common Stock has no conversion rights. The
Company Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common
4
<PAGE> 1163
Stock must be one-tenth of the voting rights of each security underlying the
convertible or exchangeable security paid to the holders of the New Belk Class A
Common Stock and (ii) such underlying securities paid to the holders of New Belk
Class A Common Stock must convert into the underlying securities paid to the
holders of New Belk Class B Common Stock upon the same terms and conditions
applicable to the conversion of New Belk Class A Common Stock into New Belk
Class B Common Stock and must have the same restrictions on transfer and
ownership applicable to the transfer and ownership of the New Belk Class A
Common Stock.
Pursuant to the GBCC, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as the
effect of such distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to be less than the sum of its total liabilities plus
(unless the articles of incorporation permit otherwise) the amount that would be
needed if the corporation dissolved at the time of the payment of the dividend
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The GBCC permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 25%, or such
greater or lesser percentages as may be provided in the articles of
incorporation or bylaws, of all votes entitled to be cast on the proposed
corporate action to call a special meeting. The Company Bylaws authorize the
Chairman, President, Secretary, the Company Board and any Shareholder pursuant
to the written request of the holders of not less than 10% of all the shares
entitled to vote at the meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the GBCC, unless the articles of incorporation, the bylaws or
the provisions regarding meetings in the GBCC specify a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the shareholders. The Company Articles specify that to liquidate and
discontinue the business of the Company requires a two-thirds vote.
5
<PAGE> 1164
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
Under the GBCC, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the GBCC
requires an amendment to the articles of incorporation to be recommended by the
board of directors to the shareholders and approved by a majority (unless the
articles of incorporation or the board of directors requires a greater vote or a
vote by voting groups) of the votes entitled to be cast on the amendment by any
voting group. As under the DGCL, the holders of the outstanding shares of a
class or series are entitled to vote as a separate voting group (if shareholder
voting is otherwise required by the GBCC) on a proposed amendment if the
amendment would change certain fundamental rights and preferences of that class
or series. The Company Articles do not specify a greater vote or a vote by
voting groups to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the GBCC, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or the
GBCC reserves this power exclusively to the shareholders in whole or part or
(ii) the shareholders in amending or repealing a particular bylaw provided
expressly that the board of directors may not amend or repeal that bylaw. The
shareholders of the corporation may amend or repeal the bylaws of the
corporation even though such bylaws may be amended or repealed by the board of
directors of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board, or by the affirmative vote of a majority of the shares
outstanding and entitled to vote at any regular or special meeting of the
Shareholders. Further, the Company Bylaws provide that the Company Board has no
power to adopt a bylaw: (i) requiring more than a majority of the voting shares
for a quorum at a meeting of the Shareholders, except where higher percentages
are required by law; (ii) providing for the management of the Company otherwise
than by the Company Board or its executive committees; (iii) increasing or
decreasing the number of directors; or (iv) classifying and staggering the
election of directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may to taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the GBCC, any action that may be taken by an annual or special
meeting of shareholders may be taken without a meeting and without prior notice,
if all holders of outstanding shares entitled to vote
6
<PAGE> 1165
on such action or, if so provided in the articles of incorporation, by persons
entitled to vote at a meeting shares having voting power to cast not less than
the minimum number (or numbers, in the case of voting groups) of votes that
would be necessary to authorize or take the action at which all shareholders
entitled to vote were present and voted sign the written consent(s) describing
such action. The Company Bylaws permit any action which may be taken at a
meeting of the Shareholders to be taken without a meeting if a consent in
writing, setting forth the action so taken, is signed by all of the persons who
would be entitled to vote upon such action at a meeting and filed with the
Secretary of the Company.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation or a bylaw
approved by the shareholders, the GBCC permits a vacancy in the board of
directors to be filled by the shareholders or by the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board and if
the vacancy is one that the directors are authorized to fill, then the directors
may fill the vacancy by the affirmative vote of a majority of all the directors
remaining in office.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors may be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The GBCC requires a corporation to have at least one director. The articles
of incorporation or the bylaws may authorize the shareholders or the board of
directors to change the number of directors. If the articles of incorporation or
the bylaws establish a variable range for the size of directors, the number of
directors may be changed, within the prescribed range, by the shareholders or,
if the articles of incorporation so provide, by the
7
<PAGE> 1166
board of directors. The Company Bylaws require the Company Board to consist of
at least three, but no more than 15, directors.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
Under the GBCC, a director must be a natural person and at least 18 years
of age, but does not have to be a resident of Georgia or a shareholder of the
corporation unless otherwise provided for in the articles of incorporation. The
Company Articles do not require directors of the Company to be residents of
Georgia or shareholders of the Company. The GBCC also allows the articles of
incorporation or the bylaws to provide for additional qualifications of
directors.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each class expiring at the
annual meeting in successive years beginning with the first class and
progressing to the third class, if any. Thereafter, directors are chosen for a
full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
Under the GBCC, the articles of incorporation may allow for staggering the
terms of directors by dividing the total number of directors into two or three
groups, with each group containing one-half or one-third of the total. The term
of each group expires in each successive year beginning with the first group and
progressing to the third group, if any. Thereafter, directors are chosen for a
term of two or three years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
According to the GBCC, unless the articles of incorporation or bylaws
provide that directors may be removed only for cause, the shareholders may
remove one or more directors with or without cause. If a director is elected by
a voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove him. If cumulative voting is not authorized, a
director may be removed only by a majority of votes entitled to be cast.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under both the DGCL and the GBCC, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a
8
<PAGE> 1167
majority of disinterested directors consents; (ii) the material facts are
disclosed and a majority of shares entitled to vote thereon consents; or (iii)
the transaction is fair to the corporation at the time it is authorized by the
board of directors, a committee of the board or the stockholders.
Similar to the DGCL, the GBCC generally permits transactions involving a
Georgia corporation and an interested director of that corporation if: (i) the
transaction received the affirmative vote of a majority (but not less than two)
of those qualified directors on the board of directors or on a duly empowered
committee thereof who voted on the transaction after required disclosure to
them; (ii) if a majority of the votes entitled to be cast by the holders of all
qualified shares were cast in favor of the transaction after (a) notice to
shareholders describing the director's conflicting interest transaction, (b)
provision of the information with regard to any unqualified shares and (c)
required disclosure to the shareholders who voted on the transaction (to the
extent the information was not known by them); or (iii) the transaction, judged
in the circumstances at the time of commitment, is established to have been fair
to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the GBCC, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the GBCC (i) in connection with a
proceeding by or in the right of the corporation, except for reasonable expenses
incurred in connection with the proceeding if it is determined that the director
or officer has met the relevant standard of conduct under the GBCC or (ii) in
connection with any proceeding with respect to conduct for which he was
9
<PAGE> 1168
adjudged liable on the basis that personal benefit was improperly received by
him, whether or not involving action in his official capacity. A Georgia
corporation must indemnify a director or officer who was wholly successful, on
the merits or otherwise, in the defense of any proceeding to which he was a
party because he was a director or officer of the corporation against reasonable
expenses incurred by the director or officer in connection with the proceeding.
The Company Bylaws authorize indemnification as provided in the GBCC. In
addition, the Company Bylaws provide that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify a director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the GBCC, a director
will not be personally liable to the Company or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The GBCC concerning the approval of mergers and share exchanges is similar
in all material respects to the DGCL, except action by the shareholders of the
surviving corporation is not required if the number and kind of shares
outstanding immediately after the merger or share exchange, plus the number and
kind of shares issuable as a result of the merger or share exchange and by the
conversion of securities issued pursuant to the merger or share exchange or the
exercise of rights and warrants issued pursuant to the merger or share exchange
does not exceed the total number and kind of shares of the surviving or
acquiring corporation authorized by its articles of incorporation immediately
before the merger or share exchange. The GBCC and DGCL provisions concerning the
approval of the sale of all or substantially all of the assets of a corporation
are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the GBCC include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined in the DGCL and the
GBCC, "business combinations" generally encompass (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder, (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested shareholder of a substantial percentage of assets of the corporation,
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested
10
<PAGE> 1169
shareholder, except in certain circumstances, (iv) any transaction involving the
corporation which has the effect of increasing the proportionate share of the
stock of any class or series, or securities convertible into the stock of any
class or series, of the corporation which is owned by the interested
shareholder, except in certain circumstances or (v) any receipt by the
interested shareholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits (other than those expressly permitted in (i)
through (iv) above) provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who (i) is the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation and within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation. Under the
GBCC, an "interested shareholder" is any person who owns 10% of the outstanding
voting shares or is an affiliate of the corporation owning 10% of the
outstanding voting shares within the prior two years, and a "continuing
director" is a director not associated or affiliated with any interested
shareholder.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
According to the GBCC, if at least three continuing directors serve on the
board of directors, then those directors must unanimously approve the business
combination. If three continuing directors do not serve on the board of
directors, then 66 2/3% of the continuing directors must recommend the business
combination and a majority of shareholders entitled to cast a vote must approve
the business combination. Also, except under certain circumstances, no mergers
may occur between a corporation and an interested shareholder within five years
of the date the shareholder became an interested shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the GBCC provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a
11
<PAGE> 1170
preemptive right to purchase, subscribe for or otherwise acquire stock of any
class or series of New Belk or any security convertible into or exchangeable
for, or any warrant, option or right to purchase, subscribe for or otherwise
acquire, stock of any class or series of New Belk, whether now or hereafter
authorized.
The GBCC concerning preemptive rights is equivalent to the DGCL. The
Company Articles do not contain any provision with respect to preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the GBCC, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) excerpts from minutes of any
meeting of the board of directors, records of any action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporations; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the GBCC ("Article 13") has
the right to receive in cash the fair value of such Shareholder's shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN
ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
To exercise appraisal rights under Article 13, a holder of Common Stock
must (i) deliver to the Company before the taking of the vote of Shareholders on
the Reorganization Agreement written notice of his intent to demand payment for
his shares if the Merger is effected and (ii) not vote his shares in favor of
the Reorganization Agreement. A Shareholder who does not satisfy these two
requirements is not entitled to payment for his shares under Article 13. In
addition, any Shareholder who returns a signed proxy but fails to provide
instructions as to the manner in which such shares are to be voted will be
deemed to have voted in favor of the Reorganization Agreement and will not be
entitled to assert dissenters' rights of appraisal.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial Shareholder and he notifies the Company
in writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of such a partial dissenter are determined as if
the shares as to which he dissents and his other shares are registered in the
names of different Shareholders.
If the Reorganization Agreement is approved at the Special Meeting, the
Company must deliver a written dissenters' notice (the "Dissenters' Notice") to
all Shareholders who satisfied the notice requirements of Article 13. The
Dissenters' Notice must be sent within 10 days after the Effective Time and must
(i) state where the demand for payment must be sent and where and when
certificates for shares must be deposited, (ii) inform holders of uncertificated
shares to what extent transfer of those shares will be restricted after the
12
<PAGE> 1171
demand for payment is received, (iii) set a date by which the Company must
receive the demand for payment (which date may not be fewer than 30 nor more
than 60 days after the Dissenters' Notice is delivered) and (iv) be accompanied
by a copy of Article 13.
A record Shareholder who receives the Dissenters' Notice must demand
payment and deposit his certificates in accordance with the Dissenters' Notice.
Such Shareholder will retain all other rights of a Shareholder until those
rights are canceled or modified by the consummation of the Merger. A record
Shareholder who does not demand payment or deposit his share certificates where
required, each by the date set in the Dissenters' Notice, is not entitled to
payment for his shares under Article 13.
Within 10 days of the later of the Effective Time or receipt of a payment
demand, the Company must offer to pay each dissenting Shareholder who complied
with Article 13 the amount the Company estimates to be the fair value of his
shares, plus accrued interest from the Effective Time. Such offer of payment
must be accompanied by (i) certain recent Company financial statements, (ii) the
Company's estimate of the fair value of the shares and interest due, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Article 13, and (v) a copy of Article
13. If the Shareholder accepts the Company's offer by written notice to the
Company within 30 days after the Company's offer, the Company must make payment
within 60 days after the later of the making of the offer or the Effective Time.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing share certificates, the Company must return the
deposited certificates. If, after such return, the Merger is consummated, the
Company must send a new Dissenters' Notice and repeat the payment procedure
described above.
A dissenting Shareholder may notify the Company in writing of his own
estimate of the fair value of his shares and the interest due, and may demand
payment of his estimate, if (i) he believes that the amount offered by the
Company is less than the fair value of his shares or that the interest due has
been calculated incorrectly or (ii) the Company, having failed to consummate the
Merger, does not return the deposited certificates within 60 days after the date
set for demanding payment. A dissenting Shareholder waives his right to demand
payment unless he notifies the Company of his demand in writing within 30 days
after the Company makes or offers payment for his shares. If the Company does
not offer payment within 10 days of the later of the Effective Time or receipt
of a payment demand, then (i) the Shareholder may demand the financial
statements and other information of the Company, and the Company must provide
such information within 10 days after receipt of the written demand and (ii) the
Shareholder may notify the Company of his own estimate of the fair value of his
shares and the amount of interest due, and may demand payment of that estimate.
If a demand for payment by a Shareholder remains unsettled, the Company
must commence a nonjury equity valuation proceeding in the appropriate court, as
specified in Article 13, within 60 days after receiving the payment demand and
must petition the court to determine the fair value of the shares and accrued
interest. If the Company does not commence a valuation proceeding within 60
days, the Company is required to pay each dissenting Shareholder whose demand
remains unsettled, the amount demanded. The Company is required to make all
dissenting Shareholders whose demands remain unsettled parties to the proceeding
and to serve a copy of the petition upon each dissenting Shareholder. The court
may appoint appraisers to receive evidence and to recommend a decision on fair
value. Each dissenting Shareholder made a party to the proceeding is entitled to
judgment for the fair value of his shares plus interest to the date of judgment.
In an appraisal proceeding commenced under Article 13, the court must
determine the costs of the proceeding, excluding fees and expenses of attorneys
and experts for the respective parties, and must assess those costs against the
Company, except that the court may assess the costs against all or some of the
dissenting Shareholders to the extent the court finds they acted arbitrarily,
vexatiously or not in good faith in demanding payment under Article 13. The
court also may assess the fees and expenses of attorneys and experts for the
respective parties against the Company if the court finds the Company did not
substantially comply with the requirements of Article 13, or against either the
Company or a dissenting Shareholder if the court finds that such party acted
arbitrarily, vexatiously or not in good faith with respect to the rights
provided by Article 13.
13
<PAGE> 1172
If the court finds that the services of the attorneys for any dissenting
Shareholder were of substantial benefit to other dissenting Shareholders
similarly situated, and that the fees for those services should not be assessed
against the Company, the court may award those attorneys reasonable fees out of
the amounts awarded the dissenting Shareholders who were benefited. No action by
any dissenting Shareholder to enforce dissenters' rights may be brought more
than three years after the Effective Time, regardless of whether notice of the
Merger and of the right to dissent was given by the Company in compliance with
the provisions of Article 13.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period")multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on the November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales.................... $ 843,575 $ 843,575 0.6 $(768,670) $1,274,815
EBITDA....................... 36,273 36,273 7 (768,670) 1,022,581
EBIT......................... 29,972 29,972 10 (768,670) 1,068,390
Net Income................... 65,674 65,674 15 -- 985,110
Book Equity.................. 1,081,768 1,081,569 1 -- 1,081,569
</TABLE>
14
<PAGE> 1173
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
N/A N/A% X $N/A = $ N/A
----------
Total N/A
==========
Relative Operating Value of Company $1,274,815
Relative Operating Value of Other Companies Owned by Company + --
----------
Total Relative Value of Company = $1,274,815
==========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Gallant-Belk Company 9.9420% X $1,274,815 = $ 126,742
Belk Brothers Company 16.5700% X 1,274,815 = 211,237
Belk Enterprises,
Inc. 23.1980% X 1,274,815 = 295,732
Belk of Dalton, Ga.,
Inc. 3.3969% X 1,274,815 = 43,304
----------
Total $ 677,015
==========
Total Relative Value of Company $1,274,815
Total Relative Value of Company Owned by Other Belk Companies - 677,015
----------
Net Relative Value of Company = $ 597,800
==========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$597,800 / $1,156,226,577 = .0517%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.0517% X 59,998,834) / 1,132 = 27.4037
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
15
<PAGE> 1174
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 27.21
Dividends(2).............................................. 15.00
Book value per share(3)................................... 448.12
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 26.31
Dividends(2).............................................. 7.12
Book value per share...................................... 343.09
</TABLE>
- ---------------
(1) Based on 2,414 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 2,414 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
16
<PAGE> 1175
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales............................................... $ 872 $ 888 $ 844
Net income.............................................. 50 44 66
Per common share
Net income (loss)(1).................................. 20.71 18.17 27.21
Dividends............................................. 15.00 15.00 15.00
Book value(2)......................................... 432.74 435.92 448.12
Total assets............................................ 1,093 1,156 1,157
Shareholders' equity.................................... 1,045 1,052 1,082
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $603 $525
Income from operations...................................... 19 28
</TABLE>
- ---------------
(1) Based on 2,414 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 2,414 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
17
<PAGE> 1176
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
To the extent a discussion of the financial condition and results of
operations of the Company for any of the fiscal years ended January 31, 1995,
February 3, 1996 or February 1, 1997 or for either of the nine-month periods
ended November 2, 1996 or November 1, 1997 is necessary to identify certain
trends or conditions that differ from the combined Belk Companies and that are
material to Shareholders' understanding of the financial condition or results of
operations of the Company, such discussion is included below. The discussion
which follows is based upon and should be read in conjunction with the
historical financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus Supplement.
Other income (expense), net increased in fiscal year 1997 due to increased
interest income.
Net income increased in fiscal year 1997 primarily due to a lower cost of
merchandise due to better inventory management and lower markdowns.
Comparable store sales decreased in fiscal year 1997 and for the nine
months ended November 1, 1997 as a result of decreased customer traffic. The
shopping center is only 40% occupied. Access is partially blocked by the
Department of Transportation due to the construction of an interstate connector
that runs by the center.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Wilkes Village
in Washington, Georgia. The Company's store operates in a manner consistent with
the business of the Belk Companies described in the Proxy Statement/Prospectus.
The store is managed out of the Long group office in Anderson, South Carolina.
Facilities. The Company leases its store building, which contains
approximately 11,000 square feet of floor area. The current term of the lease
expires in 1998. The Company has no options to renew the lease. The Company is
currently studying the profitability of continuing its operations in Washington.
Should the Company elect to continue operations, management believes that
options to renew the lease at market rates would be available. The Company
believes the store building is adequate to meet its current needs.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
18
<PAGE> 1177
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)........................................... 1,510 62.6%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(d)(e)................................................. 1,410 58.4%
H. W. McKay Belk (Director and Executive Officer)
(b)(d)(e)................................................. 1,410 58.4%
John R. Belk (Director and Executive Officer) (b)(d)(e)..... 1,406 58.2%
Henderson Belk (Director) (c)............................... 16 *
Sarah Belk Gambrell (c)..................................... 406 16.8%
Leroy Robinson (Director) (b)............................... 64 2.7%
B. Neal Long (Director and Executive Officer)............... 0 *
Katherine Belk Morris (b)................................... 124 5.1%
Gallant-Belk Company........................................ 240 9.9%
Belk Enterprises, Inc....................................... 560 23.2%
J.V. Properties............................................. 400 16.6%
All Directors and Executive Officers as a group (7
persons).................................................. 1,698 70.3%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson and Katherine Belk Morris -- 2801 West Tyvola
Road, Charlotte, N.C. 28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road,
Charlotte, N.C. 28207; B. Neal Long -- 3101 N. Main Street, Anderson, S.C.
29621; Gallant-Belk Company, Belk Enterprises, Inc. and J.V. Properties -- 2801
West Tyvola Road, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 40 shares held by Claudia Belk Irrevocable Trust dated 1/4/94.
Claudia W. Belk, the Trustee, is John M. Belk's wife.
(b) Includes 64 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(c) Includes 16 shares held in several Trusts established by the Will of Mary
I. Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(d) Includes 240 shares held by Gallant-Beck Company, 82 shares held by Belk of
Dalton, Ga., Inc. and 560 shares held by Belk Enterprises, Inc., which
shares are voted by the members of the Executive Committee of the Board of
Directors of each such Corporation, under authority given by the directors
of each such Corporation at the annual meeting of directors held in March,
1997. The Executive Committee of each such Corporation consists of John M.
Belk, Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
19
<PAGE> 1178
(e) Includes 400 shares held by J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
20
<PAGE> 1179
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 1180
BELK OF WASHINGTON, GA., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 23,237 $ 15,394
Accounts receivable, net.................................. 114,832 134,906
Merchandise inventory..................................... 223,316 216,616
Receivable from affiliates, net........................... -- 3,278
Refundable income taxes................................... 1,193 --
Deferred income taxes..................................... 2,230 --
Other..................................................... 11,031 10,396
---------- ----------
Total current assets........................................ 375,839 380,590
Loans receivable from affiliates, net....................... 750,000 750,000
Investments................................................. 199 199
Property, plant and equipment, net.......................... 23,999 21,208
Deferred income taxes....................................... -- 390
Other noncurrent assets..................................... 5,488 4,776
---------- ----------
$1,155,525 $1,157,163
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 53,439 $ 39,572
Payables to affiliates, net............................... 33,554 --
Deferred income taxes..................................... -- 2,276
Accrued income taxes...................................... -- 18,039
---------- ----------
Total current liabilities................................... 86,993 59,887
Deferred income taxes....................................... 945 --
Other noncurrent liabilities................................ 15,283 15,508
---------- ----------
Total liabilities........................................... 103,221 75,395
Shareholders' equity:
Common stock.............................................. 241,400 241,400
Additional paid in capital................................ 1,911 1,911
Retained earnings......................................... 808,993 838,457
---------- ----------
Total shareholders' equity.................................. 1,052,304 1,081,768
---------- ----------
$1,155,525 $1,157,163
========== ==========
</TABLE>
F-2
<PAGE> 1181
BELK OF WASHINGTON, GA., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales................................................... $872,110 $888,457 $843,575
Operating costs and expenses................................ 827,862 868,983 815,130
-------- -------- --------
Income from operations...................................... 44,248 19,474 28,445
-------- -------- --------
Other income (expense):
Interest, net............................................. 18,679 33,276 58,652
Gain (loss) on disposal of property, plant and
equipment.............................................. -- 500 --
Miscellaneous, net........................................ (310) 1,330 1,527
-------- -------- --------
Total other expense, net.................................... 18,369 35,106 60,179
-------- -------- --------
Earnings from continuing operations before income taxes, and
equity in earnings of unconsolidated entities............. 62,617 54,580 88,624
Income tax expense (benefit)................................ 12,622 10,710 22,950
-------- -------- --------
Earnings from continuing operations before equity in
earnings of unconsolidated entities....................... 49,995 43,870 65,674
-------- -------- --------
Net earnings................................................ 49,995 43,870 65,674
Retained earnings at beginning of period.................... 787,548 801,333 808,993
Dividends paid.............................................. (36,210) (36,210) (36,210)
-------- -------- --------
Retained earnings at end of period.......................... $801,333 $808,993 $838,457
======== ======== ========
</TABLE>
F-3
<PAGE> 1182
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 1183
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 1184
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 14, CHAPTER 2
BUSINESS CORPORATIONS
STATE OF GEORGIA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
A-1
<PAGE> 1185
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's right.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
A-2
<PAGE> 1186
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
A-3
<PAGE> 1187
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing
A-4
<PAGE> 1188
under subsection (a) of this Code section within 30 days after the corporation
offered payment for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
A-5
<PAGE> 1189
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
A-6
<PAGE> 1190
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
--------- ---------- ------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement..................... $ 843,575 $65,674 $29,972 $36,273 $1,081,768
Adjustments to eliminate less than wholly-owned
subsidiaries.................................. -- -- -- -- --
--------- ------- ------- ------- ----------
Adjusted Shareholders' Statement................ $ 843,575 65,674 29,972 36,273 1,081,768
========= ------- ------- ------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E................. -- -- --
Gain/loss on sale of securities............... -- --
Impairment loss............................... -- -- --
Equity in earnings of unconsolidated
subsidiaries................................ -- -- --
Gain/loss on discontinued operations.......... -- -- --
Adjustment to tax expense..................... -- -- -- --
------- ------- -------
Total non-operating items....................... -- -- --
------- ------- -------
Other Adjustments:
Adjustment for dividends received from other
Belk entities............................... -- -- --
Adjustment for ownership in other Belk
entities.................................... (199)
------- ------- ------- ----------
Per Model....................................... $65,674 $29,972 $36,273 $1,081,569
======= ======= ======= ==========
COMPONENTS OF NET DEBT (CASH) PER SHAREHOLDERS'
STATEMENT
Assets
Cash & cash equivalents..................... $ (15,392)
Negative cash balances reclassified to
accounts payable.......................... --
Receivables from affiliates, net............ (3,278)
Loans receivable from affiliates, net....... (750,000)
Liabilities
Notes payable............................... --
Current installments of long-term debt...... --
Current portion of obligations under capital
leases.................................... --
Payables to affiliates, net................. --
Long-term debt, excluding current
installments.............................. --
Obligations under capital leases, excluding
current portion........................... --
Loans payable to affiliates, net............ --
---------
Net debt (cash)................................. (768,670)
Adjustments to eliminate less than wholly-owned
subsidiaries.................................. --
---------
Per Model....................................... $(768,670)
=========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 1191
SUPPLEMENT NO. 27
<PAGE> 1192
BELK OF WASHINGTON, GA., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 9:40 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 27
<PAGE> 1193
BELK OF WAYCROSS, GA., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk of Waycross, Ga., Inc. (the "Company"), to
be held on April 16, 1998, at 2:50 p.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Georgia law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 15.6819 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 963,621 shares of New Belk Class A Common Stock which will
represent approximately 1.6061% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage paid
(28)
<PAGE> 1194
envelope. If you plan to attend the Special Meeting, you may vote in person if
you wish, even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 1195
BELK OF WAYCROSS, GA., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK OF WAYCROSS, GA., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk of Waycross, Ga., Inc. (the "Company") will be held on April
16, 1998, at 2:50 p.m., local time, at the offices of Belk Stores Services,
Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for the
following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Georgia law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 15.6819 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 1196
BELK OF WAYCROSS, GA., INC.
SUPPLEMENT NO. 28
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 28 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK OF WAYCROSS,
GA., INC. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE DISCUSSION IN
THE PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED HEREIN ASSUMES
THAT ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION. IF ANY ONE OR
MORE BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE INFORMATION
CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 18
SELECTED HISTORICAL FINANCIAL INFORMATION................... 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 20
BUSINESS OF THE COMPANY..................................... 20
SECURITY OWNERSHIP OF THE COMPANY........................... 22
INDEX TO UNAUDITED CONSOLIDATED HISTORICAL FINANCIAL
STATEMENTS................................................ F-1
Unaudited Consolidated Balance Sheets..................... F-2
Unaudited Consolidated Statements of Earnings and Retained
Earnings............................................... F-3
Condensed Notes to Unaudited Consolidated Historical
Financial Statements................................... F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION.................................. B-1
</TABLE>
<PAGE> 1197
THE COMPANY
The Company was incorporated as a Georgia corporation in 1954. The Company
changed its name from Belk-Hudson Company of Waycross, Ga., Inc. to Belk of
Waycross, Ga., Inc. on July 23, 1997. The mailing address of the Company's
principal executive offices is 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, and its telephone number at that address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 2:50 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina Corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under Georgia law),
will be converted, without any action on the part of the Shareholder, into the
right to receive 15.6819 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk (the "New Belk Class A Common Stock"). All
of the shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 145,029 shares of Common Stock
outstanding held of record by 58 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of the Common Stock,
voting in person or by proxy, is required to approve and adopt the
Reorganization Agreement and the Merger. Holders of record of Common Stock are
entitled to one vote per share on any matter that may properly come before the
Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 80.4% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock
2
<PAGE> 1198
vote in favor of the Merger, the vote of such persons, corporations and trusts
in favor of the Merger would be sufficient to approve the Merger under the
governing documents of the Company and applicable state law.
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Georgia Business Corporation Code (the "GBCC"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 150,000 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A
3
<PAGE> 1199
Common Stock are convertible into New Belk Class B Common Stock, in whole or in
part, at any time and from time to time at the option of the holder, on the
basis of one share of New Belk Class B Common Stock for each share of New Belk
Class A Common Stock converted. Shares of New Belk Class A Common Stock held by
a New Belk Stockholder who is a Class A Permitted Holder will also automatically
convert into New Belk Class B Common Stock in the event that such New Belk
Stockholder no longer meets the requirements of a Class A Permitted Holder. New
Belk Class B Common Stock has no conversion rights. The Company Articles provide
for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the GBCC, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as the
effect of such distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to
4
<PAGE> 1200
be less than the sum of its total liabilities plus (unless the articles of
incorporation permit otherwise) the amount that would be needed if the
corporation dissolved at the time of the payment of the dividend to satisfy the
preferential rights upon dissolution of shareholders whose preferential rights
are superior to those receiving the distribution. The Company Bylaws provide
that the Board of Directors of the Company (the "Company Board") may from time
to time declare dividends on the Company's outstanding shares in the manner and
upon the terms and conditions provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The GBCC permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 25%, or such
greater or lesser percentages as may be provided in the articles of
incorporation or bylaws, of all votes entitled to be cast on the proposed
corporate action to call a special meeting. The Company Bylaws authorize the
Chairman, President, Secretary, the Company Board and any shareholder pursuant
to the written request of the holders of not less than 10% of all the shares
entitled to vote at the meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the GBCC, unless the articles of incorporation, the bylaws or
the provisions regarding meetings in the GBCC specify a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the shareholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
5
<PAGE> 1201
Under the GBCC, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the GBCC
requires an amendment to the articles of incorporation to be recommended by the
board of directors to the shareholders and approved by a majority (unless the
articles of incorporation or the board of directors requires a greater vote or a
vote by voting groups) of the votes entitled to be cast on the amendment by any
voting group. As under the DGCL, the holders of the outstanding shares of a
class or series are entitled to vote as a separate voting group (if shareholder
voting is otherwise required by the GBCC) on a proposed amendment if the
amendment would change certain fundamental rights and preferences of that class
or series. The Company Articles do not specify a greater vote or a vote by
voting groups to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the GBCC, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or the
GBCC reserves this power exclusively to the shareholders in whole or part or
(ii) the shareholders in amending or repealing a particular bylaw provided
expressly that the board of directors may not amend or repeal that bylaw. The
shareholders of the corporation may amend or repeal the bylaws of the
corporation even though such bylaws may be amended or repealed by the board of
directors of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board, or by the affirmative vote of a majority of the shares
outstanding and entitled to vote at any regular or special meeting of the
Shareholders. Further, the Company Bylaws provide that the Company Board has no
power to adopt a bylaw: (i) requiring more than a majority of the voting shares
for a quorum at a meeting of the Shareholders, except where higher percentages
are required by law; (ii) providing for the management of the Company otherwise
than by the Company Board or its executive committees; (iii) increasing or
decreasing the number of directors; or (iv) classifying and staggering the
election of directors. The Company Articles provide that the Company Board shall
have concurrent power, by vote of a majority of all of the directors, to make,
alter, amend and rescind the Company Bylaws. The bylaws enacted by the
Shareholders may be affected by action of the Company Board and vice versa;
provided, however, the Company Board may not re-enact a bylaw which the
Shareholders have repealed or altered, nor may it repeal a bylaw enacted by the
Shareholders which limits the powers of the Company Board or enhances or
protects the right of Shareholders, without the consent of the Shareholders.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the GBCC, any action that may be taken by an annual or special
meeting of shareholders may be taken without a meeting and without prior notice,
if all holders of outstanding shares entitled to vote on such action or, if so
provided in the articles of incorporation, by persons entitled to vote at a
meeting shares having voting power to cast not less than the minimum number (or
numbers, in the case of voting groups) of votes that would be necessary to
authorize or take the action at which all shareholders entitled to vote were
present and voted sign the written consent(s) describing such action. The
Company Bylaws permit any action which may be taken at a meeting of the
Shareholders to be taken without a meeting if a consent in writing,
6
<PAGE> 1202
setting forth the action so taken, is signed by all of the persons who would be
entitled to vote upon such action at a meeting and filed with the Secretary of
the Company.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation or a bylaw
approved by the shareholders, the GBCC permits a vacancy in the board of
directors to be filled by the shareholders or by the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board and if
the vacancy is one that the directors are authorized to fill, then the directors
may fill the vacancy by the affirmative vote of a majority of all the directors
remaining in office.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors may be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The GBCC requires a corporation to have at least one director. The articles
of incorporation or the bylaws may authorize the shareholders or the board of
directors to change the number of directors. If the articles of incorporation or
the bylaws establish a variable range for the size of directors, the number of
directors may be changed, within the prescribed range, by the shareholders or,
if the articles of incorporation so provide, by the board of directors. The
Company Bylaws require the Company Board to consist of at least three, but no
more than 15, directors.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless
7
<PAGE> 1203
otherwise provided in the certificate of incorporation or the bylaws. The New
Belk Bylaws and the New Belk Certificate do not provide for any qualifications
for directors of the New Belk Board.
Under the GBCC, a director must be a natural person and at least 18 years
of age, but does not have to be a resident of Georgia or a shareholder of the
corporation unless otherwise provided for in the articles of incorporation. The
Company Articles do not require directors of the Company to be residents of
Georgia or shareholders of the Company. The GBCC also allows the articles of
incorporation or the bylaws to provide for additional qualifications of
directors.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each class expiring at the
annual meeting in successive years beginning with the first class and
progressing to the third class, if any. Thereafter, directors are chosen for a
full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
Under the GBCC, the articles of incorporation may allow for staggering the
terms of directors by dividing the total number of directors into two or three
groups, with each group containing one-half or one-third of the total. The term
of each group expires in each successive year beginning with the first group and
progressing to the third group, if any. Thereafter, directors are chosen for a
term of two or three years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
According to the GBCC, unless the articles of incorporation or bylaws
provide that directors may be removed only for cause, the shareholders may
remove one or more directors with or without cause. If a director is elected by
a voting group of shareholders, only the shareholders of that voting group may
participate in the vote to remove him. If cumulative voting is not authorized, a
director may be removed only by a majority of votes entitled to be cast.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under both the DGCL and the GBCC, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
8
<PAGE> 1204
Similar to the DGCL, the GBCC generally permits transactions involving a
Georgia corporation and an interested director of that corporation if: (i) the
transaction received the affirmative vote of a majority (but not less than two)
of those qualified directors on the board of directors or on a duly empowered
committee thereof who voted on the transaction after required disclosure to
them; (ii) if a majority of the votes entitled to be cast by the holders of all
qualified shares were cast in favor of the transaction after (a) notice to
shareholders describing the director's conflicting interest transaction, (b)
provision of the information with regard to any unqualified shares and (c)
required disclosure to the shareholders who voted on the transaction (to the
extent the information was not known by them); or (iii) the transaction, judged
in the circumstances at the time of commitment, is established to have been fair
to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the GBCC, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the GBCC (i) in connection with a
proceeding by or in the right of the corporation, except for reasonable expenses
incurred in connection with the proceeding if it is determined that the director
or officer has met the relevant standard of conduct under the GBCC or (ii) in
connection with any proceeding with respect to conduct for which he was adjudged
liable on the basis that personal benefit was improperly received by him whether
or not involving action in his official capacity. A Georgia corporation must
indemnify a director or officer who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party because he
9
<PAGE> 1205
was a director or officer of the corporation against reasonable expenses
incurred by the director or officer in connection with the proceeding.
The Company Bylaws authorize indemnification as provided in the GBCC. In
addition, the Company Bylaws provide that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership, or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify a director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the GBCC, a director
will not be personally liable to the Company or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The GBCC concerning the approval of mergers and share exchanges is similar
in all material respects to the DGCL, except action by the shareholders of the
surviving corporation is not required if the number and kind of shares
outstanding immediately after the merger or share exchange, plus the number and
kind of shares issuable as a result of the merger or share exchange and by the
conversion of securities issued pursuant to the merger or share exchange or the
exercise of rights and warrants issued pursuant to the merger or share exchange
does not exceed the total number and kind of shares of the surviving or
acquiring corporation authorized by its articles of incorporation immediately
before the merger or share exchange. The GBCC and DGCL provisions concerning the
approval of the sale of all or substantially all of the assets of a corporation
are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the GBCC include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined in the DGCL and the
GBCC, "business combinations" generally encompass (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder, (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested shareholder of a substantial percentage of assets of the corporation,
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested shareholder,
except in certain circumstances, (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested shareholder, except
in certain
10
<PAGE> 1206
circumstances or (v) any receipt by the interested shareholder of the benefit of
any loans, advances, guarantees, pledges or other financial benefits (other than
those expressly permitted in (i) through (iv) above) provided by or through the
corporation.
The DGCL defines an "interested stockholder" as any person who (i) is the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation and within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation. Under the
GBCC, an "interested shareholder" is any person who owns 10% of the outstanding
voting shares or is an affiliate of the corporation owning 10% of the
outstanding voting shares within the prior two years, and a "continuing
director" is a director not associated or affiliated with any interested
shareholder.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned (a) by persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
According to the GBCC, if at least three continuing directors serve on the
board of directors, then those directors must unanimously approve the business
combination. If three continuing directors do not serve on the board of
directors, then 66 2/3% of the continuing directors must recommend the business
combination and a majority of shareholders entitled to cast a vote must approve
the business combination. Also, except under certain circumstances, no mergers
may occur between a corporation and an interested shareholder within five years
of the date the shareholder became an interested shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the GBCC provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
11
<PAGE> 1207
The GBCC concerning preemptive rights is equivalent to the DGCL. The
Company Articles do not contain any provision with respect to preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the GBCC, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) excerpts from minutes of any
meeting of the board of directors, records of any action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporations; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the GBCC ("Article 13") has
the right to receive in cash the fair value of such Shareholder's shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN
ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
To exercise appraisal rights under Article 13, a holder of Common Stock
must (i) deliver to the Company before the taking of the vote of Shareholders on
the Reorganization Agreement written notice of his intent to demand payment for
his shares if the Merger is effected and (ii) not vote his shares in favor of
the Reorganization Agreement. A Shareholder who does not satisfy these two
requirements is not entitled to payment for his shares under Article 13. In
addition, any Shareholder who returns a signed proxy but fails to provide
instructions as to the manner in which such shares are to be voted will be
deemed to have voted in favor of the Reorganization Agreement and will not be
entitled to assert dissenters' rights of appraisal.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial Shareholder and he notifies the Company
in writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of such a partial dissenter are determined as if
the shares as to which he dissents and his other shares are registered in the
names of different Shareholders.
If the Reorganization Agreement is approved at the Special Meeting, the
Company must deliver a written dissenters' notice (the "Dissenters' Notice") to
all Shareholders who satisfied the notice requirements of Article 13. The
Dissenters' Notice must be sent within 10 days after the Effective Time and must
(i) state where the demand for payment must be sent and where and when
certificates for shares must be deposited, (ii) inform holders of uncertificated
shares to what extent transfer of those shares will be restricted after the
demand for payment is received, (iii) set a date by which the Company must
receive the demand for payment (which date may not be fewer than 30 nor more
than 60 days after the Dissenters' Notice is delivered) and (iv) be accompanied
by a copy of Article 13.
12
<PAGE> 1208
A record Shareholder who receives the Dissenters' Notice must demand
payment and deposit his certificates in accordance with the Dissenters' Notice.
Such Shareholder will retain all other rights of a Shareholder until those
rights are canceled or modified by the consummation of the Merger. A record
Shareholder who does not demand payment or deposit his share certificates where
required, each by the date set in the Dissenters' Notice, is not entitled to
payment for his shares under Article 13.
Within 10 days of the later of the Effective Time or receipt of a payment
demand, the Company must offer to pay each dissenting Shareholder who complied
with Article 13 the amount the Company estimates to be the fair value of his
shares, plus accrued interest from the Effective Time. Such offer of payment
must be accompanied by (i) certain recent Company financial statements, (ii) the
Company's estimate of the fair value of the shares and interest due, (iii) an
explanation of how the interest was calculated, (iv) a statement of the
dissenter's right to demand payment under Article 13 and (v) a copy of Article
13. If the Shareholder accepts the Company's offer by written notice to the
Company within 30 days after the Company's offer, the Company must make payment
within 60 days after the later of the making of the offer or the Effective Time.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing share certificates, the Company must return the
deposited certificates. If, after such return, the Merger is consummated, the
Company must send a new Dissenters' Notice and repeat the payment procedure
described above.
A dissenting Shareholder may notify the Company in writing of his own
estimate of the fair value of his shares and the interest due, and may demand
payment of his estimate, if (i) he believes that the amount offered by the
Company is less than the fair value of his shares or that the interest due has
been calculated incorrectly or (ii) the Company, having failed to consummate the
Merger, does not return the deposited certificates within 60 days after the date
set for demanding payment. A dissenting Shareholder waives his right to demand
payment unless he notifies the Company of his demand in writing within 30 days
after the Company makes or offers payment for his shares. If the Company does
not offer payment within 10 days of the later of the Effective Time or receipt
of a payment demand, then (i) the Shareholder may demand the financial
statements and other information of the Company, and the Company must provide
such information within 10 days after receipt of the written demand and (ii) the
Shareholder may notify the Company of his own estimate of the fair value of his
shares and the amount of interest due, and may demand payment of that estimate.
If a demand for payment by a Shareholder remains unsettled, the Company
must commence a nonjury equity valuation proceeding in the appropriate court, as
specified in Article 13, within 60 days after receiving the payment demand and
must petition the court to determine the fair value of the shares and accrued
interest. If the Company does not commence a valuation proceeding within 60
days, the Company is required to pay each dissenting Shareholder whose demand
remains unsettled, the amount demanded. The Company is required to make all
dissenting Shareholders whose demands remain unsettled parties to the proceeding
and to serve a copy of the petition upon each dissenting Shareholder. The court
may appoint appraisers to receive evidence and to recommend a decision on fair
value. Each dissenting Shareholder made a party to the proceeding is entitled to
judgment for the fair value of his shares plus interest to the date of judgment.
In an appraisal proceeding commenced under Article 13, the court must
determine the costs of the proceeding, excluding fees and expenses of attorneys
and experts for the respective parties, and must assess those costs against the
Company, except that the court may assess the costs against all or some of the
dissenting Shareholders to the extent the court finds they acted arbitrarily,
vexatiously or not in good faith in demanding payment under Article 13. The
court also may assess the fees and expenses of attorneys and experts for the
respective parties against the Company if the court finds the Company did not
substantially comply with the requirements of Article 13, or against either the
Company or a dissenting Shareholder if the court finds that such party acted
arbitrarily, vexatiously or not in good faith with respect to the rights
provided by Article 13.
If the court finds that the services of the attorneys for any dissenting
Shareholder were of substantial benefit to other dissenting Shareholders
similarly situated, and that the fees for those services should not be assessed
against the Company, the court may award those attorneys reasonable fees out of
the amounts
13
<PAGE> 1209
awarded the dissenting Shareholders who were benefited. No action by any
dissenting Shareholder to enforce dissenters' rights may be brought more than
three years after the Effective Time, regardless of whether notice of the Merger
and of the right to dissent was given by the Company in compliance with the
provisions of Article 13.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on the November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ----------- ----------- -------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $54,396,600 $54,396,600 0.6 $11,124,680 $21,513,280
EBITDA............... 5,772,420 5,545,139 7 11,124,680 27,691,293
EBIT................. 4,557,166 4,329,885 10 11,124,680 32,174,170
Net Income........... 2,445,550 2,297,920 15 -- 34,468,800
Book Equity.......... 17,935,978 9,885,267 1 -- 9,885,267
</TABLE>
14
<PAGE> 1210
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk of Albany, Ga.,
Inc. 37.3472% X $ 6,361,246 = $ 2,375,749
Gallant-Belk Company 4.2230 X 31,711,816 = 1,339,194
Belk's Department
Store of Brevard,
N.C. Incorporated 20.5833 X 3,632,918 = 747,774
Belk Department Store
of Charleston,
S.C., Inc. 8.0983 X 21,169,909 = 2,524,233
Belk of Dalton, Ga.,
Inc. 9.1049 X 8,605,017 = 783,482
Belk-Lindsey Stores,
Inc. .9672 X 76,945,152 = 747,503
Belk of Walterboro,
S.C., Inc. 17.8170 X 2,473,319 = 440,671
Belk-Simpson Co., of
Bainbridge, Ga.,
Inc. 11.1111 X 3,606,673 = 400,741
-----------
Total $ 9,359,348
===========
Relative Operating Value of Company $34,468,800
Relative Operating Value of Other Companies Owned by Company + 9,359,348
-----------
Total Relative Value of Company = $43,828,148
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk's Department
Store of Albany,
Georgia .1179% X $43,828,148 = $ 51,673
Belk Enterprises,
Inc. 1.5025 X 43,828,148 = 658,518
Belk of Dalton, Ga.,
Inc. 1.3652 X 43,828,148 = 598,342
Belk of LaGrange,
Ga., Inc. 1.3163 X 43,828,148 = 576,910
Belk of Orangeburg,
S.C., Inc. 3.5289 X 43,828,148 = 1,546,652
Belk of Thomaston,
Ga., Inc. 49.3901 X 43,828,148 = 21,646,766
Belk of Toccoa, Ga.,
Inc. .4096 X 43,828,148 = 179,520
-----------
Total $25,258,381
===========
Total Relative Value of Company $43,828,148
Total Relative Value of Company Owned by Other Belk Companies - 25,258,381
-----------
Net Relative Value of Company = $18,569,767
===========
</TABLE>
15
<PAGE> 1211
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$18,569,767 / $1,156,226,577 = 1.6061%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(1.6061% X 59,998,834) / 61,448 = 15.6819
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 1212
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 16.86
Dividends(2).............................................. 4.00
Book value per share(3)................................... 123.67
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 15.05
Dividends(2).............................................. 4.08
Book value per share...................................... 196.34
</TABLE>
- ---------------
(1) Based on 145,029 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 145,029 shares
of Common Stock, the number of shares of Common Stock outstanding at the end
of the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
17
<PAGE> 1213
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $57,121 $54,648 $54,397
Net income.................................................. 1,976 2,194 2,446
Per common share
Net income (loss)(1)...................................... 13.63 15.13 16.86
Dividends................................................. 4.00 4.00 4.00
Book value(2)............................................. 98.04 110.46 123.67
Total assets................................................ 29,474 26,844 33,059
Shareholders' equity........................................ 14,218 16,020 17,936
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $36,791 $37,870
Income from operations...................................... 2,157 3,082
</TABLE>
- ---------------
(1) Based on 145,029 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding for the years ended January 31, 1995,
February 3, 1996 and February 1, 1997.
(2) Based on 145,029 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 1214
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
To the extent a discussion of the financial condition and results of
operations of the Company for any of the fiscal years ended January 31, 1995,
February 3, 1996 or February 1, 1997 or for either of the nine-month periods
ended November 2, 1996 or November 1, 1997 is necessary to identify certain
trends or conditions that differ from the combined Belk Companies and that are
material to Shareholders' understanding of the financial condition or results of
operations of the Company, such discussion is included below. The discussion
which follows is based upon and should be read in conjunction with the
historical financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus Supplement.
The decrease in other income (expense), net to an expense of 0.8% of sales
in fiscal year 1997 compared to an expense of 1.2% in 1996 is partially
attributable to a $341,000 gain on sale of property related to the sale of the
Company's Valdosta Mall out-parcel site recognized in fiscal year 1997.
Other income (expense), net increased to an expense of 1.2% of sales in
fiscal year 1996 from an expense of 0.1% in 1995 due to a $947,000 gain on the
sale of equipment realized in fiscal year 1995.
BUSINESS OF THE COMPANY
General. The Company operates eight retail department stores in Hatcher
Point Mall in Waycross, Glynn Place Mall in Brunswick, downtown Douglas, Sunset
Plaza Shopping Center in Moultrie, Kings Bay Village in St. Mary's, Gateway
Shopping Center in Thomasville, Tifton Mall in Tifton and Valdosta Mall in
Valdosta, Georgia. The Company's stores operate in a manner consistent with the
business of the Belk Companies described in the Proxy Statement/Prospectus. The
stores are managed out of the Bergren group office in Gainesville, Florida.
The Company has one wholly-owned subsidiary, Belk of St. Augustine Fla.,
Inc. ("Belk St. Augustine").
Belk St. Augustine operates a retail department store in Ponce de Leon Mall
in St. Augustine, Florida. The store operates in a manner consistent with the
business of the Belk Companies described in the Proxy Statement/Prospectus. The
store is managed out of the Bergren group office in Gainesville, Florida.
Facilities. The Company operates eight stores, of which five are leased
under long-term leases and three are owned by the Company. The leases have
termination dates ranging from 2000 through 2011. The floor space of the leased
buildings ranges from 44,000 to 68,000 square feet. The floor space of the owned
buildings ranges from 22,000 to 80,000 square feet. The 80,000 square feet
building owned by the Company in Valdosta was expanded by 8,400 feet in 1997,
pursuant to a ten-year lease, increasing the size of the store to 88,400 square
feet. The Company believes the facilities are adequate to meet its current needs
with the exception of the downtown Douglas location and the Thomasville
location. With respect to the Thomasville store, the Board of Directors has
approved an expansion of 12,000 square feet. With respect to the Douglas store,
the Board of Directors has approved a relocation of the existing downtown store
to a suburban building containing 45,000 square feet formerly operated as a
Wal-Mart. The new Douglas store is scheduled to open in October 1998. The
Company owns the current downtown Douglas store building which it intends to
offer for sale after the new store opens for business.
Belk St. Augustine leases its store building under a long-term lease. The
store lease has a termination date of 2000. The floor space of the leased
building is 50,000 square feet. The Company believes the store building is
adequate to meet its current needs.
19
<PAGE> 1215
Competition. Specific competitors in the Company's markets include Penney,
Goody's and Wal-Mart.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
20
<PAGE> 1216
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)........................................... 107,740 74.3%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(e)(f)................................................. 94,931 65.5%
H. W. McKay Belk (Director and Executive Officer)
(b)(e)(g)................................................. 95,190 65.6%
John R. Belk (Director and Executive Officer) (b)(e)(h)..... 94,716 65.3%
Henderson Belk (Director) (c)(d)............................ 1,382 1.0%
Sarah Belk Gambrell (c)(d).................................. 17,658 12.2%
Leroy Robinson (Director) (b)............................... 8,406 5.8%
E. O. Hudson, Jr. (Director)................................ 0 *
Byron L. Bergren (Executive Officer)........................ 0 *
James Madden (Executive Officer)............................ 0 *
M. F. Campbell (Executive Officer).......................... 0 *
Katherine McKay Belk (b).................................... 9,237 6.4%
Katherine Belk Morris (b)(i)................................ 11,215 7.7%
Thomas M. Belk, Trustee U/A dated September 15, 1993........ 8,406 5.8%
Belk of Thomaston, Ga., Inc................................. 71,630 49.4%
All Directors and Executive Officers as a group (8
persons).................................................. 116,618 80.4%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson, Katherine McKay Belk and Katherine Belk
Morris -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk
Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207; M. F. Campbell, 1181 St.
Augustine Road, Valdosta, Ga. 31601; Byron L. Bergren and James Madden -- 1312
N. Main Street, Gainesville, Fla. 32601; E. O. Hudson, Jr. -- P. O. Box 968,
Orangeburg, S.C. 29116; Thomas M. Belk, Trustee U/A dated September 15, 1993
and; Belk of Thomaston, Ga., Inc. -- 2801 West Tyvola Road, Charlotte, N.C.
28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 4,825 shares held by Montgomery Investment Company, of which John
M. Belk is the majority shareholder.
(b) Includes 8,406 shares held by Thomas M. Belk, Trustee U/A dated September
15, 1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(c) Includes 550 shares held in several Trusts established by the Will of W. H.
Belk for the benefit of his children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
21
<PAGE> 1217
(d) Includes 830 shares held in several Trusts established by the Will of Mary
I. Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(e) Includes 5,118 shares held by Belk of Orangeburg, S.C., Inc., 1,909 shares
held by Belk of LaGrange, Ga., Inc., 594 shares held by Belk of Toccoa,
Ga., Inc., 171 shares held by Belk's Department Store of Albany, Georgia,
1,980 shares held by Belk of Dalton, Ga., Inc., 2,179 shares held by Belk
Enterprises, Inc. and 71,630 shares held by Belk of Thomaston, Ga., Inc.,
which shares are voted by the members of the Executive Committee of the
Board of Directors of each such Corporation, under authority given by the
directors of each such Corporation at the annual meeting of directors held
in March, 1997. The Executive Committee of each such Corporation consists
of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(f) Includes 812 held by Thomas M. Belk, Jr. as custodian for his minor
children and 203 shares held by his wife, Sarah F. Belk.
(g) Includes 1,015 shares held by H. W. McKay Belk as custodian for his minor
children and 203 shares held by his wife, Nina F. Belk.
(h) Includes 609 shares held by John R. Belk as custodian for his minor
children and 203 shares held by his wife, Kimberly D. Belk.
(i) Includes 609 shares held by Katherine Belk Morris as custodian for her
minor children and 203 shares held by her husband, Charles Walker Morris.
22
<PAGE> 1218
INDEX TO UNAUDITED CONSOLIDATED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Consolidated Balance Sheets....................... F-2
Unaudited Consolidated Statements of Earnings and Retained
Earnings.................................................. F-3
Condensed Notes to Unaudited Consolidated Historical
Financial Statements...................................... F-4
</TABLE>
F-1
<PAGE> 1219
BELK OF WAYCROSS, GA., INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 362,057 $ 83,211
Accounts receivable, net.................................. 7,342,357 8,912,508
Merchandise inventory..................................... 11,927,676 11,635,459
Deferred income taxes..................................... 97,816 96,081
Other..................................................... 460,151 388,311
----------- -----------
Total current assets........................................ 20,190,057 21,115,570
Loans receivable from affiliates, net....................... 32,258 32,258
Investments................................................. 2,232,388 8,050,711
Property, plant and equipment, net.......................... 4,203,613 3,646,028
Deferred income taxes....................................... -- 60,424
Other noncurrent assets..................................... 186,068 154,136
----------- -----------
$26,844,384 $33,059,127
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current installments of long-term debt.................... $ 1,600,000 $ 7,172,924
Accounts payable and accrued expenses..................... 3,259,942 3,212,570
Payables to affiliates, net............................... 2,460,534 2,594,282
Accrued income taxes...................................... 158,387 210,880
----------- -----------
Total current liabilities................................... 7,478,863 13,190,656
Deferred income taxes....................................... 20,895 --
Long-term debt, excluding current installments.............. 2,900,000 1,472,923
Other noncurrent liabilities................................ 424,547 459,570
----------- -----------
Total liabilities........................................... 10,824,305 15,123,149
Shareholders' equity:
Common stock.............................................. 14,502,900 14,502,900
Retained earnings......................................... 1,517,179 3,433,078
----------- -----------
Total shareholders' equity.................................. 16,020,079 17,935,978
----------- -----------
$26,844,384 $33,059,127
=========== ===========
</TABLE>
F-2
<PAGE> 1220
BELK OF WAYCROSS, GA., INC.
UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Total store sales....................................... $57,298,940 $55,034,298 $54,956,230
Less: Leased Sales...................................... 177,639 386,655 559,630
----------- ----------- -----------
Net sales............................................... 57,121,301 54,647,643 54,396,600
Operating costs and expenses............................ 54,126,698 50,543,138 50,054,312
Impairment loss......................................... -- -- 187,524
----------- ----------- -----------
Income from operations.................................. 2,994,603 4,104,505 4,154,764
----------- ----------- -----------
Other income (expense):
Interest, net......................................... (588,003) (713,619) (792,200)
Dividend income....................................... 7,770 7,770 7,770
Gain (loss) on disposal of property, plant and
equipment.......................................... 854,224 (465) 341,059
Miscellaneous, net.................................... (303,086) 47,822 (12,403)
----------- ----------- -----------
Total other expense, net................................ (29,095) (658,492) (455,774)
----------- ----------- -----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities..... 2,965,508 3,446,013 3,698,990
Income tax expense (benefit)............................ 989,300 1,245,094 1,296,295
----------- ----------- -----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities................... 1,976,208 2,200,919 2,402,695
Equity in earnings (loss) of unconsolidated entity, net
of tax................................................ -- (6,762) 42,855
----------- ----------- -----------
Net earnings............................................ 1,976,208 2,194,157 2,445,550
Retained earnings at beginning of period................ (1,680,957) (284,865) 1,517,179
Dividends paid.......................................... (580,116) (580,116) (580,116)
Retained earnings adjustments........................... -- 188,003 50,465
----------- ----------- -----------
Retained earnings at end of period...................... $ (284,865) $ 1,517,179 $ 3,433,078
=========== =========== ===========
</TABLE>
F-3
<PAGE> 1221
BELK OF WAYCROSS, GA., INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED
HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31. Fiscal years 1997, 1996, and 1995 ended on February 1, 1997,
February 3, 1996, and January 31, 1995 respectively.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
F-4
<PAGE> 1222
BELK OF WAYCROSS, GA., INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED
HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8)The Company's term loan agreement contains, among other provisions and
covenants, restrictions relating to the creation of additional funded debt,
except as permitted, and the disposal, expansion or purchase of fixed assets,
except as permitted. Under the most restrictive of these provisions, the
Company must maintain consolidated net working capital, as defined, of not
less than $12,000,000; and a consolidated tangible net worth, as defined, of
not less than $12,000,000. The Company was not in compliance with the working
capital restriction as of February 1, 1997. The Company has obtained waivers
for the out of compliance condition.
(9) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(10) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
F-5
<PAGE> 1223
BELK OF WAYCROSS, GA., INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED
HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(11) RETAINED EARNINGS ADJUSTMENT
Adjustment to Retained Earnings of the Company at February 1, 1997, is due
to the Company's share of Belk's Department Store of Albany Georgia's increase
in the market value of marketable securities.
An adjustment was made during fiscal 1966 to correct an over accrual of a
sales tax liability made in the prior year on the books of Belk-Hudson Co. of
St. Augustine, Fla., Inc. a wholly owned subsidiary of the Company. This prior
period adjustment resulted in an increase in retained earnings of $124,929, net
of applicable income taxes.
Adjustment to Retained Earnings of the Company at February 3, 1996 is due
to placing Belk's Department Store of Albany, Georgia on the equity method of
accounting.
(12) RECLASSIFICATIONS
Certain 1995 and 1996 amounts have been reclassified in order to be
consistent with classifications adopted in 1997. These reclassifications have no
effect on the Company's total stockholders' equity or net earnings as previously
reported.
F-6
<PAGE> 1224
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 14, CHAPTER 2
BUSINESS CORPORATIONS
STATE OF GEORGIA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
A-1
<PAGE> 1225
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's right.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
A-2
<PAGE> 1226
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Code Section
14-2-1302 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Code Section
14-2-1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
A-3
<PAGE> 1227
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing
A-4
<PAGE> 1228
under subsection (a) of this Code section within 30 days after the corporation
offered payment for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60 day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except as otherwise
provided in this chapter, Chapter 11 of Title 9, known as the "Georgia Civil
Practice Act," applies to any proceeding with respect to dissenters' rights
under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section
14-2-1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section
14-2-1327.
A-5
<PAGE> 1229
(b) The court may also assess the fees and expenses of attorneys and
experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
A-6
<PAGE> 1230
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................. $54,396,600 $2,445,551 $4,557,166 $5,772,420 $17,935,978
Adjustments to eliminate less than
wholly-owned subsidiaries................. -- -- -- -- --
----------- ---------- ---------- ---------- -----------
Adjusted Shareholders' Statement............ 54,396,600 2,445,551 4,557,166 5,772,420 17,935,978
=========== ---------- ---------- ---------- -----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............. (221,536) (341,059) (341,059)
Gain/loss on sale of securities........... -- -- --
Impairment loss........................... 121,807 187,524 187,524
Equity in earnings of unconsolidated
subsidiaries............................ (42,855) (65,976) (65,976)
Gain/loss on discontinued operations...... -- -- --
Adjustment to tax expense................. -- -- -- --
---------- ---------- ----------
Total non-operating items................... (142,584) (219,511) (219,511)
---------- ---------- ----------
Other Adjustments:
Adjustment for dividends received from
other Belk entities..................... (5,047) (7,770) (7,770)
Adjustment for ownership in other Belk
entities................................ (8,050,711)
---------- ---------- ---------- -----------
Per Model................................... $2,297,920 $4,329,885 $5,545,139 $ 9,885,267
========== ========== ========== ===========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................. $ (83,213)
Negative cash balances reclassified to
accounts payable...................... 22
Receivables from affiliates, net........ --
Loans receivable from affiliates, net... (32,258)
Liabilities
Notes payable........................... --
Current installments of long-term
debt.................................. 7,172,924
Current portion of obligations under
capital leases........................ --
Payables to affiliates, net............. 2,594,282
Long-term debt, excluding current
installments.......................... 1,472,923
Obligations under capital leases,
excluding current portion............. --
Loans payable to affiliates, net........ --
-----------
Net debt (cash)............................. 11,124,680
Adjustments to eliminate less than
wholly-owned subsidiaries................. --
-----------
Per Model................................... $11,124,680
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 1231
SUPPLEMENT NO. 28
<PAGE> 1232
BELK OF WAYCROSS, GA., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 2:50 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
-------------------
-------------------------------
Signature
-------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 28
<PAGE> 1233
BELK-SIMPSON COMPANY OF CORBIN, KENTUCKY, INCORPORATED
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk-Simpson Company of Corbin, Kentucky,
Incorporated (the "Company"), to be held on April 16, 1998, at 4:20 p.m., local
time, at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road,
Charlotte, North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Kentucky law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 107.7259 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 284,396 shares of New Belk Class A Common Stock which will
represent approximately 0.4740% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(29)
<PAGE> 1234
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 1235
BELK-SIMPSON COMPANY OF CORBIN, KENTUCKY, INCORPORATED
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK-SIMPSON COMPANY OF CORBIN, KENTUCKY, INCORPORATED:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk-Simpson Company of Corbin, Kentucky, Incorporated (the
"Company") will be held on April 16, 1998, at 4:20 p.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Kentucky law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 107.7259 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 1236
BELK-SIMPSON COMPANY OF CORBIN, KENTUCKY, INCORPORATED
SUPPLEMENT NO. 29
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 29 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK-SIMPSON COMPANY
OF CORBIN, KENTUCKY, INCORPORATED (THE "COMPANY"), THE DISCUSSION HEREIN
SUPERSEDES THE DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE
INFORMATION CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE
IN THE REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN
THE REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY
AND THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT
BE ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL
CAPITALIZED TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE
MEANINGS SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 1237
THE COMPANY
The Company was incorporated as a Kentucky corporation in 1947. The mailing
address of the Company's principal executive offices is 2801 West Tyvola Road,
Charlotte, North Carolina 28217-4500, and its telephone number at that address
is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 4:20 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights under Kentucky law), will be
converted, without any action on the part of the Shareholder, into the right to
receive 107.7259 shares (the "Exchange Ratio") of Class A Common Stock, par
value $.01 per share, of New Belk (the "New Belk Class A Common Stock"). All of
the shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 3,360 shares of Common Stock
outstanding held of record by 21 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 68.5% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 1238
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
New Belk has entered into an agreement dated February 27, 1998 (the
"Hanahan Agreement") with Mary E.S. Hanahan ("Mrs. Hanahan"), who is the owner
of 480 shares of Common Stock of the Company (the "Hanahan Shares"). In the
Hanahan Agreement, Mrs. Hanahan granted to certain employees of BSS her
irrevocable proxy to vote the Hanahan Shares in favor of the Merger, agreed to
withdraw her appeal in certain litigation instituted by Belk of Spartanburg,
S.C., Inc. against Mrs. Hanahan and another party and released New Belk and the
Belk Companies from any and all claims which Mrs. Hanahan has or may have
against New Belk and the Belk Companies. New Belk agreed, among other things, to
purchase from Mrs. Hanahan, at her election at any time prior to December 31,
1999, all of the shares of New Belk Common Stock received by Mrs. Hanahan in
exchange for the Hanahan Shares and shares in other Belk Companies in the
Reorganization for an aggregate purchase price of $3.85 million.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Kentucky Business Corporation Act (the "KBCA"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 6,720 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer
3
<PAGE> 1239
restrictions in respect of New Belk Class A Common Stock. The holders of New
Belk Class A Common Stock are entitled to 10 votes per share. The holders of New
Belk Class B Common Stock are entitled to one vote per share. Shares of New Belk
Class A Common Stock may be owned only by Class A Permitted Holders. If a share
of New Belk Class A Common Stock is transferred to any person other than a Class
A Permitted Holder, whether by sale, assignment, gift, bequest, appointment or
otherwise, such share will be converted automatically into a share of New Belk
Class B Common Stock. Shares of New Belk Class A Common Stock are convertible
into New Belk Class B Common Stock, in whole or in part, at any time and from
time to time at the option of the holder, on the basis of one share of New Belk
Class B Common Stock for each share of New Belk Class A Common Stock converted.
Shares of New Belk Class A Common Stock held by a New Belk Stockholder who is a
Class A Permitted Holder will also automatically convert into New Belk Class B
Common Stock in the event that such New Belk Stockholder no longer meets the
requirements of a Class A Permitted Holder. New Belk Class B Common Stock has no
conversion rights. The Company Articles provide for only one class of common
stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution, as the case may be,
New Belk makes the same dividend or distribution with respect to each other
class of outstanding New Belk Common Stock. In the case of dividends or other
distributions payable in shares of a class of New Belk Common Stock, including
distributions pursuant to stock splits or divisions of a class of New Belk
Common Stock which occur after the first issuance of a class of New Belk Common
Stock, only shares of New Belk Class A Common Stock may be distributed with
respect to New Belk Class A Common Stock and only shares of New Belk Class B
Common Stock may be distributed with respect to New Belk Class B Common Stock.
Whenever a dividend or distribution, including distributions pursuant to stock
splits or divisions of New Belk Common Stock, is payable in shares of New Belk
Class A Common Stock or New Belk Class B Common Stock, the number of shares of
each class of New Belk Common Stock payable per share of such class of New Belk
Common Stock must be equal in number. In the case of dividends or other
distributions consisting of other voting securities of New Belk or of voting
securities of any corporation which is a wholly-owned subsidiary of New Belk,
New Belk must declare and pay such dividends in two separate classes of such
voting securities, identical in all respects, except that (i) the voting rights
of each such security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each such security paid to the holders of
New Belk Class A Common Stock and (ii) such security paid to the holders of New
Belk Class A Common Stock must convert into the security paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock. In the case
of dividends or other distributions consisting of securities convertible into,
or exchangeable for, voting securities of New Belk or voting securities of
another corporation which is a wholly-owned subsidiary of New Belk, such
convertible or exchangeable securities and the underlying securities must be
identical in all respects (including, without limitation, the conversion or
exchange rate), except that (i) the voting rights of each security underlying
the convertible or exchangeable security paid to the holders of New Belk Class B
Common Stock must be one-tenth of the voting rights of each security underlying
the convertible or exchangeable security paid to the holders of the New Belk
Class A Common Stock and (ii) such underlying securities paid to the holders of
New Belk Class A Common Stock must convert into the underlying securities paid
to the holders of New Belk Class B Common Stock upon the same terms and
conditions applicable to the conversion of New Belk Class A Common Stock into
New Belk Class B Common
4
<PAGE> 1240
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the KBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as the
effect of such distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to be less than the sum of its total liabilities plus
(unless the articles of incorporation permit otherwise) the amount that would be
needed, if the corporation dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The KBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 33 1/3% (or
such higher or lower percentage as is contained in the articles of
incorporation) of all votes entitled to be cast on the proposed corporate action
to call a special meeting. The Company Bylaws authorize the Chairman, President,
Secretary, the Company Board and any shareholder pursuant to the written request
of the holders of not less than 10% of all the shares entitled to vote at the
meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the KBCA, unless the articles of incorporation or the KBCA
specifies a different voting requirement, if the votes cast within the voting
group in favor of the corporate action exceed the votes cast in opposition to
the corporate action at a duly held meeting at which a quorum is present, the
corporate action is deemed to be approved by the shareholders. The Company
Articles do not specify a different voting requirement.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or
5
<PAGE> 1241
alter or change the powers, preferences or special rights of the shares of such
class so as to affect them adversely. If any proposed amendment would alter or
change the powers, preferences or special rights of one or more series of any
class so as to affect them adversely, but would not so affect the entire class,
then only the shares of the series so affected by the amendment will be
considered a separate class for purposes of voting by classes. The New Belk
Certificate is consistent with the foregoing provisions of the DGCL.
Under the KBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the KBCA
requires an amendment to the articles of incorporation to be recommended by the
board of directors to the shareholders and approved (i) by a majority (unless
the articles of incorporation or the board of directors requires a greater vote
or a vote by voting groups) of the votes entitled to be cast on the amendment by
any voting group with respect to which the amendment would create dissenters'
rights and (ii) when a quorum is present, by all other voting groups entitled to
vote on the amendment through casting more affirmative than opposing votes. As
under the DGCL, the holders of the outstanding shares of a class or series are
entitled to vote as a separate voting group (if shareholder voting is otherwise
required by the KBCA) on a proposed amendment if the amendment would change
certain fundamental rights and preferences of that class or series. The Company
Articles do not specify a greater vote to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power, to adopt, amend or repeal the bylaws of the corporation.
The New Belk Certificate confers upon the New Belk Board the power to adopt,
amend or repeal the New Belk Bylaws.
Under the KBCA, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or the
KBCA reserves this power exclusively to the shareholders in whole or part or
(ii) the shareholders in amending or repealing a particular bylaw provide
expressly that the board of directors may not amend or repeal that bylaw. The
shareholders of the corporation may amend or repeal the bylaws of the
corporation even though such bylaws may be amended or repealed by the board of
directors of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board, or by the affirmative vote of a majority of the shares
outstanding and entitled to vote at any regular or special meeting of the
Shareholders. Furthermore, the Company Bylaws provide that the Company Board has
no power to adopt a bylaw: (i) requiring more than a majority of the voting
shares for a quorum at a meeting of the Shareholders, except where higher
percentages are required by law; (ii) providing for the management of the
Company otherwise than by the Company Board or its executive committees; (iii)
increasing or decreasing the number of directors; or (iv) classifying and
staggering the election of directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
The KBCA provides that, except as provided in the articles of
incorporation, action to be taken at a shareholders' meeting may be taken
without a meeting and without prior notice, if the action is taken by all the
shareholders entitled to vote on the action.
6
<PAGE> 1242
If the articles of incorporation so provide, any action except the election
of directors, may be taken without a meeting and without prior notice of the
holders of at least 80% (or such higher percentage required by the KBCA or the
articles of incorporation) of the votes entitled to be cast on such action sign
the written consent(s) describing such action. The Company Articles do not
provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the KBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum of the board and if the vacancy is one that the directors are
authorized to fill, then the directors may fill the vacancy by the affirmative
vote of a majority of all the directors remaining in office. If the vacant
office was held by a director elected by a voting group of shareholders, only
the holders of shares of that voting group are entitled to vote to fill the
vacancy if it is filled by the shareholders.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The KBCA requires a corporation to have at least one director. The number
of directors is set by the articles of incorporation or the bylaws. If a board
of directors has power to fix or change the number of directors, the board of
directors may increase or decrease by 30% or less the number of directors last
approved by the shareholders, but only the shareholders may increase or decrease
by more than 30% the number of directors last approved by the shareholders. If
the articles of incorporation or bylaws establish a variable range for the size
of the board of directors, the number of directors may be changed, within the
prescribed range, by the shareholders or by the board of directors. After shares
are issued, only the shareholders may change the
7
<PAGE> 1243
range for the size of the board or change from a fixed to a variable range size
board or vice versa. The Company Bylaws require the Company Board to consist of
at least three, but no more than 15, members. The Company Articles provides that
the Company Board shall consist of three directors.
Qualifications of Directors. The DGCL allows the articles of incorporation
or the bylaws to provide for the qualifications of directors. A director does
not have to be a stockholder in the corporation unless otherwise provided in the
certificate of incorporation or the bylaws. The New Belk Bylaws and the New Belk
Certificate do not provide for any qualifications for directors of the New Belk
Board.
The KBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of Kentucky
or a shareholder of the corporation unless otherwise provided for in the
articles of incorporation or the bylaws. The Company Articles and Company Bylaws
do not require directors of the Company to be residents of Kentucky or
shareholders of the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each class expiring at the
annual meeting in successive years beginning with the first class and
progressing to the third class, if any. Thereafter, directors are chosen for a
full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The KBCA provides that the articles of incorporation may allow for
staggering the terms of directors by dividing the total number of directors into
two or three groups, with each group containing one-half or one-third of the
total. The term of each group expires in each successive year beginning with the
first group and progressing to the third group, if any. Thereafter, directors
are chosen for a term of two or three years to succeed those whose terms expire.
The Company does not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
According to the KBCA, the shareholders may remove one or more directors
with or without cause, unless the articles of incorporation provide that
directors may be removed only for cause. If a director is elected by a voting
group of shareholders, only the shareholders of that voting group may
participate in the vote to remove him. A director may not be removed if the
number of votes sufficient to elect him under cumulative voting is voted against
his removal.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under the KBCA and the Constitution of the Commonwealth
of Kentucky, shareholders of Kentucky corporations are entitled to cumulative
voting in the election of directors. In an election of directors, each
shareholder has a number of votes equal to the product of (i) the number of
shares each shareholder is entitled to vote in such election, multiplied by (ii)
the number of positions on the board of directors to be filled in such election.
The shareholder may divide such votes among two or more nominees in
8
<PAGE> 1244
such manner as the shareholder shall determine or the shareholder may
cumulatively vote all of them for one nominee. Under the DGCL, cumulative voting
of stock applies only when so provided in the certificate of incorporation. The
New Belk Certificate does not provide for cumulative voting. The New Belk
Stockholders, therefore, will not be entitled to cumulative voting in the
election of directors.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the KBCA generally permits transactions involving a
Kentucky corporation and an interested director of that corporation if: (i) the
material facts of the transaction and the director's interest were disclosed or
known to the board of directors or a committee of the board of directors and the
board of directors or committee authorized, approved or ratified the
transaction; (ii) the material facts of the transaction and the director's
interest were disclosed or known to the shareholders entitled to vote and they
authorized, approved or ratified the transaction; or (iii) the transaction was
fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the KBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the KBCA (i) in
9
<PAGE> 1245
connection with a proceeding by or in the right of the corporation, except for
reasonable expenses incurred in connection with the proceeding if it is
determined that the director or officer has met the relevant standard of conduct
under the KBCA or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
capacity. Unless limited by its articles of incorporation, a corporation must
indemnify a director or officer who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party because he
was a director or officer of the corporation against reasonable expenses
incurred by the director or officer in connection with the proceeding. The KBCA
concerning prohibiting the elimination or limitation of a director's personal,
monetary liability is equivalent to the DGCL.
The Company Bylaws authorize indemnification as provided in the KBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The KBCA concerning the approval of mergers or share exchanges is similar
in all material respects to the DGCL, except that under the KBCA the surviving
company's shareholders must approve a merger or share exchange if, after giving
effect to the transaction, their interest in the participating shares is reduced
by more than 20%. "Participating shares" are those shares that are entitled to
participate without limitation in distributions. The KBCA and DGCL provisions
concerning the approval of the sale of all or substantially all of a corporation
are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the KBCA contain business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL and
KBCA, "business combinations" generally encompass the following: (i) any merger
or consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder,
except in certain circumstances; (iv) any transaction involving the corporation
which has the
10
<PAGE> 1246
effect of increasing the proportionate share of the stock of any class or
series, or securities convertible into the stock of any class or series, of the
corporation which is owned by the interested stockholder, except in certain
circumstances; or (v) any receipt by the interested stockholder of the benefit
of any loans, advances, guarantees, pledges or other financial benefits (other
than those expressly permitted in (i) through (iv) above) provided by or through
the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) an
affiliate or associate of the corporation and within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation.
The KBCA defines an "interested shareholder" as any person who (i) is the
direct or indirect beneficial owner of at least 10% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate of the corporation and within five years of the date in question was
the direct or indirect owner of at least 10% of the voting power of any class or
series of the then outstanding stock of such corporation. The KBCA defines a
"continuing director" as any member of the board of directors that is not an
affiliate or associate of an interested shareholder or any of its affiliates,
other than the corporation, and who was a director of the corporation prior to
the time the interested shareholder became an interested shareholder.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
The KBCA provides that in addition to any vote otherwise required by the
KBCA or the articles of incorporation, a business combination must be approved
by a majority of independent members of the board of directors who are also
continuing directors, or the business combination must be approved by 80% of the
votes entitled to be cast by outstanding shares of voting stock and two-thirds
of the votes entitled to be cast by holders of voting stock other than voting
stock beneficially owned by an interested shareholder or an associate or
affiliate of an interested shareholder. Furthermore, under the KBCA no business
combination may occur between the corporation and an interested shareholder for
five years after the date on which such person became an interested shareholder
unless such person became an interested shareholder before March 28, 1986 or
unless a majority of the independent directors approved the business combination
before the date on which such person became an interested shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the KBCA provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
11
<PAGE> 1247
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The KBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company has not granted preemptive rights to any Shareholder.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the KBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) excerpts from minutes of any
meeting of the board of directors, records of any action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Sections 271B.13-200 to 271B.13-280 of
the KBCA of the Kentucky Revised Statutes has the right to receive in cash the
fair value of such Shareholders' shares of Common Stock determined immediately
prior to the Merger, excluding any appreciation or depreciation in value in
anticipation of the Merger. The following is a summary of Section 271B.13-010,
et seq., of the KBCA ("Subtitle 13") and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Subtitle 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN SUBTITLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
A Shareholder may dissent as to less than all the shares registered in his
name, but must dissent as to all shares beneficially owned by any one person. In
that event, his rights shall be determined as if the shares to which he has
dissented and the other shares registered in his name were registered in the
names of different Shareholders.
A Shareholder desiring to pursue rights of appraisal must fulfill each of
the following requirements:
(1) The dissenting Shareholder must file a written objection to the
Reorganization Agreement with the Company at or prior to the Special
Meeting. Such objection must be delivered to the Company at
12
<PAGE> 1248
2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, Attention:
Ralph A. Pitts, General Counsel.
(2) The dissenting Shareholder must not vote in favor of the
Reorganization Agreement at the Special Meeting. A failure to vote against
the Reorganization Agreement will not constitute a waiver of a dissenting
Shareholder's appraisal rights under Subtitle 13.
(3) The dissenting Shareholder must make written demand upon the
Company for payment of the fair value of the dissenting Shareholder's
shares. The Company will deliver a written dissenters' notice (the
"Dissenters' Notice") to the dissenting Shareholder within 10 days after
the Special Meeting at which the Reorganization Agreement was approved
which will (i) state where dissenting Shareholders must (a) send the
Payment Demand (as defined below) and where and when they must (b) deposit
their common stock certificates (the "Certificates"), (ii) inform holders
of uncertificated shares of the extent of any restrictions on the
transferability of such shares, (iii) be accompanied by a form for
demanding payment that includes the date of the first announcement to the
news media or to Shareholders of the terms of the proposed Merger and
requires that the dissenting Shareholder certify whether he acquired
beneficial ownership of the shares before that date, (iv) set a date by
which the Company must receive the Payment Demand, which may not be fewer
than 30 nor more than 60 days after the date the Dissenters' Notice is
delivered, and (v) be accompanied by a copy of Subtitle 13.
(4) A dissenting Shareholder who is sent the Dissenters' Notice must
(i) certify whether he acquired beneficial ownership of the shares before
the date of the first announcement to the news media or to Shareholders of
the terms of the proposed Merger and (ii) demand payment and deposit the
Certificates by the date specified in the Dissenters' Notice. Any
dissenting Shareholder who makes a demand for payment and deposits the
Certificates as required by Subtitle 13 will retain all other rights of a
Shareholder until such rights are canceled or modified by the Merger. Any
Shareholder failing to make demand for payment by the date specified in the
Dissenters' Notice will not be entitled to payment under Subtitle 13.
Any dissenting Shareholder who has fulfilled the foregoing requirement of
Subtitle 13 will be paid by the Company, upon surrender of the Certificate or
Certificates representing the dissenting shares, the fair value of the
dissenting shares as of the day prior to the date of the Special Meeting at
which the Reorganization Agreement was approved, excluding any appreciation or
depreciation in anticipation of the Merger plus accrued interest. Subtitle 13
requires the payment to be accompanied by (i) certain of the Company's financial
statements, (ii) a statement of the Company's estimate of fair value of the
shares and explanation of how the interest was calculated, (iii) notification of
rights to demand payment and (iv) a copy of Subtitle 13. The Company may delay
any payments with respect to any shares (the "after-acquired shares") held by a
dissenting Shareholder which were not held by such Shareholder on November 25,
1997, the date of the first public announcement of the terms of the
Reorganization Agreement. When payments are so withheld, the Company must send
to the holder of the after-acquired shares after the Merger an offer to pay the
holder an amount equal to Company's estimate of their fair value plus accrued
interest, together with an explanation of the calculation of interest and a
statement of the holder's right to demand payment.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing Certificates, the Company must return the
deposited Certificates. If, after returning deposited Certificates, the Merger
is consummated, the Company must send a new Dissenters' Notice and repeat the
payment demand procedure.
If the dissenting Shareholder believes that the amount paid by the Company
or offered by the Company is less than the fair value of his shares or that the
interest due is calculated incorrectly, or if the Company fails to make payment
(or, if the Merger has not consummated, the Company does not return the
deposited Certificates) within 60 days after the date set in the Dissenters'
Notice, then the dissenting Shareholder may, within 30 days after the Company
made or offered payment for the shares or failed to pay for the shares, notify
the Company in writing of his own estimate of the fair value of such shares
(including interest due) and demand payment of such estimate (less any payment
previously received). Failure to notify the Company in
13
<PAGE> 1249
writing of a demand for payment within 30 days after the Company made or offered
payment for such shares will constitute a waiver of the right to demand payment.
If the Company and the dissenting Shareholder cannot agree on a fair price
within 60 days after the Company receives such a demand for payment, Subtitle 13
provides that the Company will institute judicial proceedings in the appropriate
court, as specified in Subtitle 13 (the "Court"), to fix (i) the fair value of
the shares immediately before consummation of the Merger, excluding any
appreciation or depreciation in anticipation of the Merger and (ii) the accrued
interest. The "fair value" of the Common Stock could be more than, the same as,
or less than that produced by the Exchange Ratio. The Company must make all
dissenters whose demands remain unsettled parties to the proceeding and all such
parties must be served with a copy of the petition. The Court may, in its
discretion, appoint an appraiser to receive evidence and recommend a decision on
the question of fair value. The Court is required to issue a judgment for the
amount, if any, by which the fair value of the shares, as determined by the
Court, plus accrued interest, exceeds the amount paid by the Company or for the
fair value, plus accrued interest, of his after-acquired shares for which the
Company elected to withhold payment. If the Company does not institute such
proceeding within such 60 day period, the Company must pay each dissenting
Shareholder whose demand remains unsettled the respective amount demanded by
each Shareholder.
The Court will assess the costs and expenses of such proceeding (including
reasonable compensation for and the expenses of the appraiser appointed by the
Court) against the Company, except that the Court may assess such costs and
expenses as it deems appropriate against any or all of the dissenting
Shareholders if it finds that their demand for additional payment was arbitrary,
vexatious or otherwise not in good faith in demanding payment from the Company.
The Court may also assess the fees and expenses of counsel and experts for the
respective parties against (i) the Company, if the Court finds that the Company
did not comply with the material requirements of Subtitle 13, or (ii) either the
Company or the dissenting Shareholders, if either acted arbitrarily, vexatiously
or otherwise not in good faith. If the Court finds that the services of counsel
for any dissenting Shareholders were of substantial benefit to other dissenting
Shareholders, the court may award these counsel reasonable attorneys fees to be
paid out of the amounts awarded to the dissenting Shareholders who were
benefitted.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
14
<PAGE> 1250
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on the November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $6,329,468 $6,329,468 0.6 $(1,627,330) $5,425,011
EBITDA............... 757,083 755,498 7 (1,627,330) 6,915,816
EBIT................. 536,377 534,792 10 (1,627,330) 6,975,250
Net Income........... 373,798 372,802 15 -- 5,592,030
Book Equity.......... 6,277,447 6,277,135 1 -- 6,277,135
</TABLE>
15
<PAGE> 1251
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
N/A N/A% X $ N/A = $ N/A
-----------
Total N/A
===========
Relative Operating Value of Company $ 6,975,250
Relative Operating Value of Other Companies Owned by Company + --
-----------
Total Relative Value of Company = $ 6,975,250
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Brothers Company 10.9524% X $ 6,975,250 = $ 763,957
Belk Enterprises,
Inc. 10.4762% X 6,975,250 = 730,741
-----------
Total $ 1,494,698
===========
Total Relative Value of Company $ 6,975,250
Total Relative Value of Company Owned by Other Belk Companies - 1,494,698
-----------
Net Relative Value of Company = $ 5,480,552
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 5,480,552 / $1,156,226,577 = .4740%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.4740% X 59,998,834) / 2,640 = 107.7259
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 1252
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share, dividends per
share and book value per share data of the Company, unaudited pro forma combined
per share data of New Belk and unaudited pro forma equivalent per share data of
New Belk giving effect to the Reorganization. The data set forth below should be
read in conjunction with the historical financial statements of the Company,
including the condensed notes thereto, contained elsewhere in this Prospectus
Supplement and unaudited pro forma combined financial statements of New Belk,
including the notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 111.25
Dividends(2).............................................. 50.00
Book value per share(3)................................... 1,868.29
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 103.42
Dividends(2).............................................. 28.01
Book value per share...................................... 1,348.73
</TABLE>
- ---------------
(1) Based on 3,360 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share numbers above
are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 3,360 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share, New Belk pro
forma combined dividends per share and New Belk pro forma combined earnings
per share from continuing operations by the Exchange Ratio for the Merger.
17
<PAGE> 1253
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 6,094 $ 6,052 $ 6,329
Net income.................................................. 340 426 374
Per common share
Net income (loss)(1)...................................... 101.13 126.83 111.25
Dividends................................................. 50.00 50.00 50.00
Book value(2)............................................. 1,717.86 1,804.79 1,868.29
Total assets................................................ 6,406 6,743 6,932
Shareholders' equity........................................ 5,772 6,064 6,277
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $4,196 $4,184
Income from operations...................................... 216 146
</TABLE>
- ---------------
(1) Based on 3,360 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 3,360 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 1254
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Trade Mart
Shopping Center in Corbin, Kentucky. The Company's store operates in a manner
consistent with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is managed out of the Kuhne/Greiner group office
in Greenville, South Carolina.
The Company also owns approximately $200,000 in marketable securities.
Facilities. The Company owns the store property and building, which
contains approximately 54,000 square feet of floor area, together with a portion
of the adjacent parking area. The store was remodeled in 1996. The Company
believes the facility is adequate for its current needs.
Competition. Specific competitors in the Company's market include
Wal-Mart, Goody's and Penney.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a materially adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 1255
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d).............................................. 964 28.7%
Thomas M. Belk, Jr. (Executive Officer) (a)(c)(d)........... 848 25.2%
H. W. McKay Belk (Executive Officer) (a)(c)(d).............. 848 25.2%
John R. Belk (Director and Executive Officer) (a)(c)(d)..... 848 25.2%
Henderson Belk (Director) (b)............................... 32 1.0%
Sarah Belk Gambrell (Director) (b).......................... 708 21.1%
John A. Kuhne (Director) (f)................................ 480 14.3%
Lucy S. Kuhne (e)........................................... 640 19.0%
Mary E. S. Hanahan.......................................... 480 14.3%
R. E. Greiner (Executive Officer)........................... 0 *
Welch Bostick, Jr. (Executive Officer)...................... 0 *
Kate McArver Simpson (e).................................... 204 6.1%
Belk Enterprise, Inc........................................ 352 10.5%
J.V. Properties............................................. 368 11.0%
All Directors and Executive Officers as a group (8
persons).................................................. 2,300 68.5%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk
and Henderson Belk -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; Sarah
Belk Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207; John A. Kuhne, Lucy
S. Kuhne, R. E. Greiner and Welch Bostick, Jr. -- 14 S. Main Street, Greenville,
S.C. 29601; Mary E. S. Hanahan -- P.O. Box 1294, Charleston, S.C. 29402; Belk
Enterprises, Inc. and J.V. Properties -- 2801 West Tyvola Road, Charlotte, N.C.
28217-4500; Kate McArver Simpson -- P.O. Box 17433, Greenville, S.C. 29606.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 68 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(b) Includes 32 shares held in several Trusts established by the Will of Mary I.
Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(c) Includes 352 shares held by Belk Enterprises, Inc., which shares are voted
by the members of the Executive Committee of the Board of Directors of such
Corporation, under authority given by the directors of such Corporation at
the annual meeting of directors held in March, 1997. The Executive
20
<PAGE> 1256
Committee of such Corporation consists of John M. Belk, Thomas M. Belk, Jr.,
H. W. McKay Belk and John R. Belk.
(d) Includes 368 shares of J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
(e) Includes 160 shares held by the Estate of William Henry Belk Simpson. Voting
and investment power is shared by the Personal Representatives, who are Kate
Simpson, Lucy S. Kuhne and Claire Russo.
(f) Includes 480 shares held by John A. Kuhne's wife, Lucy S. Kuhne.
21
<PAGE> 1257
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 1258
BELK-SIMPSON COMPANY OF CORBIN, KENTUCKY, INCORPORATED
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 105,422 $ 124,586
Accounts receivable, net.................................. 942,497 1,114,509
Merchandise inventory..................................... 1,120,436 1,244,853
Receivable from affiliates, net........................... 3,332,256 1,495,281
Refundable income taxes................................... -- 12,767
Deferred income taxes..................................... 19,764 17,576
Other..................................................... 58,473 52,378
---------- ----------
Total current assets........................................ 5,578,848 4,061,950
Loans receivable from affiliates, net....................... 7,464 7,464
Investments................................................. 241,673 256,984
Property, plant and equipment, net.......................... 889,463 2,584,017
Other noncurrent assets..................................... 25,687 21,434
---------- ----------
$6,743,135 $6,931,849
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 435,031 $ 396,912
Accrued income taxes...................................... 60,307 33,557
---------- ----------
Total current liabilities................................... 495,338 430,469
Deferred income taxes....................................... 18,380 38,353
Other noncurrent liabilities................................ 165,321 185,580
---------- ----------
Total liabilities........................................... 679,039 654,402
Shareholders' equity:
Common stock.............................................. 336,000 336,000
Net unrealized gain (loss) on investments, net of income
taxes.................................................. 80,375 87,928
Retained earnings......................................... 5,647,721 5,853,519
---------- ----------
Total shareholders' equity.................................. 6,064,096 6,277,447
---------- ----------
$6,743,135 $6,931,849
========== ==========
</TABLE>
F-2
<PAGE> 1259
BELK-SIMPSON COMPANY OF CORBIN, KENTUCKY, INCORPORATED
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $6,094,039 $6,051,615 $6,329,468
Operating costs and expenses............................... 5,645,700 5,539,376 5,806,986
---------- ---------- ----------
Income from operations..................................... 448,339 512,239 522,482
---------- ---------- ----------
Other income (expense):
Interest, net............................................ 98,147 141,128 58,488
Dividend income.......................................... 5,081 5,495 5,996
Gain (loss) on disposal of property, plant and
equipment............................................. 543 25 60
Gain (loss) on sale of securities........................ 5,391 30,921 1,525
Miscellaneous, net....................................... (15,194) (4,099) 6,314
---------- ---------- ----------
Total other expense, net................................... 93,968 173,470 72,383
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 542,307 685,709 594,865
Income tax expense (benefit)............................... 202,506 259,569 221,067
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 339,801 426,140 373,798
---------- ---------- ----------
Net earnings............................................... 339,801 426,140 373,798
Retained earnings at beginning of period................... 5,217,780 5,389,581 5,647,721
Dividends paid............................................. (168,000) (168,000) (168,000)
---------- ---------- ----------
Retained earnings at end of period......................... $5,389,581 $5,647,721 $5,853,519
========== ========== ==========
</TABLE>
F-3
<PAGE> 1260
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 1261
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 1262
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 23, CHAPTER 271B
BUSINESS CORPORATIONS
STATE OF KENTUCKY
SUBTITLE 13. DISSENTERS' RIGHTS
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
271B.13-010. DEFINITIONS.
As used in this subtitle:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer;
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under KENTUCKY REVISED STATUTES ("KRS") 271B.13-020 and who
exercises that right when and in the manner required by KRS 271B.13-200 to KRS
271B.13-280;
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable. In
any transaction subject to the requirements of KRS 271B.12- 210 or exempted by
KRS 271B.12-220(2), "fair value" shall be at least an amount required to be paid
under KRS 271B.12-220(2) in order to be exempt from the requirements of KRS
271B.12- 210;
(4) "Interest" means interest from the effective date of the corporate
until the date of payment, at the average rate currently paid by the corporation
on its principal bank loans or, if none, at a rate that is fair and equitable
under all the circumstances;
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation;
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
271B.13-020. RIGHT TO DISSENT.
(1) A shareholder is entitled to dissent from, and obtain payment of the
fair value of the shareholder's shares in the event of, any of the following
corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party;
1. If shareholder approval is required for the merger by KRS
271B.11-040 or the charter and the shareholder is entitled to vote on
the merger; or
2. If the corporation is a subsidiary that is merged with its
parent under KRS 271B.11-040;
(b) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(c) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a
A-1
<PAGE> 1263
sale for cash pursuant to a plan by which all or substantially all of the
net proceeds of the sale will be distributed to the shareholders within one
(1) year after the date of sale;
(d) An amendment of the charter that materially and adversely affects
rights in respect of a dissenter's shares because it:
1. Alters or abolishes a preferential right of the shares to a
distribution or in dissolution;
2. Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
3. Excludes or limits the right of the shares to vote on any matter
other than a limitation by dilution through issuance of shares or other
securities with similar voting rights; or
4. Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under KRS 271B.6-040; or
(e) Any transaction subject to the requirements of KRS 271B.12-210 or
exempted by KRS 271B.12-220(2); or
(f) Any corporate action taken pursuant to a shareholder vote to the
extent the charter, bylaws, or a resolution of the board of directors
provides that voting or nonvoting shareholders are entitled to dissent and
obtain payment for their shares.
(2) A shareholder entitled to dissent and obtain payment for his shares
under this subchapter may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
271B.13-030. DISSENT BY NOMINEE AND BENEFICIAL OWNERS.
(1) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one (1) person and notifies the corporation in writing
of the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(a) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(b) He does so with respect to all shares of which he is the
beneficial shareholder or over which he has power to direct the vote.
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
271B.13-200. NOTICE OF DISSENTERS' RIGHTS.
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this subtitle and the corporation shall undertake to provide a copy
of this subtitle to any shareholder entitled to vote at the shareholders'
meeting upon request of that shareholder.
(2) If corporate action creating dissenters' rights under KRS 271B.13-020
is taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in KRS 271B.13-220.
A-2
<PAGE> 1264
271B.13-210. NOTICE OF INTENT TO DEMAND PAYMENT.
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(a) Shall deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(b) Shall not vote his shares in favor of the proposed action.
(2) A shareholder who does not satisfy the requirements of subsection (1)
of this section is not entitled to payment for the shareholder's shares under
this chapter.
271B.13-220. DISSENTERS' NOTICE.
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of KRS 271B.13-210.
(2) The dissenters' notice must be sent no later than ten (10) days after
the corporate action was authorized by the shareholders or effectuated,
whichever is the first to occur, and must:
(a) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(b) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(c) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not he acquired beneficial ownership
of the shares before that date;
(d) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty (30) nor more than sixty
(60) days after the date the notice required by subsection (1) of this
section is delivered; and
(e) Be accompanied by a copy of this subtitle.
271B.13-230. DUTY TO DEMAND PAYMENT.
(1) A shareholder sent a dissenters' notice described in KRS 271B.13-220
must demand payment, certify whether he acquired beneficial ownership of the
shares before the date required to be set forth in the dissenters' notice
pursuant to subsection (2)(c) of KRS 271B.13-220, and deposit his certificates
in accordance with the terms of the notice.
(2) The shareholder who demands payment and deposits his share certificates
under subsection (1) of this section shall retain all other rights of a
shareholder until these rights are canceled or modified by the taking of the
proposed corporate action.
(3) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this subtitle.
271B.13-240. SHARE RESTRICTIONS.
(1) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under KRS 271B.13-260.
A-3
<PAGE> 1265
(2) The person for whom dissenters' rights are asserted as to
uncertificated shares shall retain all other rights of a shareholder until these
rights are canceled or modified by the effectuation of the proposed corporate
action.
271B.13-250. PAYMENT.
(1) Except as provided in KRS 271B.13-270, as soon as the proposed
corporate action is effectuated, or upon receipt of a payment demand, which ever
is later, the corporation shall pay each dissenter who complied with KRS
271B.13-230 the amount the corporation estimates to be the fair value of his
shares, plus accrued interest.
(2) The payment must be accompanied by:
(a) The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen (16) months before the date of payment, an
income statement for that year, a statement of changes in shareholders'
equity for that year, and the latest available interim financial
statements, if any;
(b) A statement of a corporations' estimate of the fair value of the
shares;
(c) An explanation of how the interest was calculated; and
(d) A statement of the dissenter's right to demand payment under KRS
271B.13-280.
271B.13-260. FAILURE TO TAKE ACTION.
(1) If the corporation does not effectuate the proposed action that gave
rise to the dissenters' rights within sixty (60) days after the date set for
demanding payment and depositing share certificates, the corporation shall
return the deposited certificates and release the transfer restrictions imposed
on uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporate effectuates the proposed action, it must send a new
dissenters' notice under KRS 271B.13-220 and repeat the payment demand
procedure.
271B.13-270. AFTER-ACQUIRED SHARES.
(1) A corporation may elect to withhold payment required by KRS 271B.13-250
from a dissenter unless he was the beneficial owner of the shares before the
date set forth in the dissenters' notice as the date of the first announcements
to news media or to shareholders of the terms of the proposed corporate action.
(2) To the extent the corporation elects to withhold payment under
subsection (1) of this section, after effectuating the proposed corporate
action, it shall estimate the fair value of the shares, plus accrued interest,
and shall pay this amount to each dissenter who agrees to accept it in full
satisfaction of his demand. The corporation shall send with its offer a
statement of its estimate of the fair value of the shares, an explanation of how
the interest was calculated, and a statement of the dissenter's right to demand
payment under KRS 271B.13-280.
271B.13-280. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(1) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate (less any payment under KRS 271B.13-250), or reject the
corporation's offer under KRS 271B.13-270 and demand payment of the fair value
of his shares and interest due, if:
(a) The dissenter believes that the amount paid under KRS 271B.13-250
or offered under KRS 271B.13-270 is less than the fair value of his shares
or that the interest due is incorrectly calculated;
(b) The corporation fails to make payment under KRS 271B.13-250 within
sixty (60) days after the date set for demanding payment; or
A-4
<PAGE> 1266
(c) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty (60) days after the date set
for demanding payment.
(2) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection (1)
of this section within thirty (30) days after the corporation made or offered
payment for his shares.
JUDICIAL APPRAISAL OF SHARES
271B.13-300. COURT ACTION.
(1) If a demand for payment under KRS 271B.13-280 remains unsettled, the
corporation shall commence a proceeding within sixty (60) days after receiving
the payment demand and petition the court to determine the fair value of the
shares and accrued interest. If the corporation does not commence the proceeding
within the sixty-day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
(2) The corporation shall commence the proceeding in the circuit court of
the county where the corporation's principal office (or, if none in this state,
its registered office) is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding the
county in this state where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign corporation was
located.
(3) The corporation shall make all dissenters (whether or not residents of
this state) whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section is plenary and exclusive. The court may
appoint one (1) or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to it. The dissenters are
entitled to the same discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding is entitled to judgment:
(a) For the amount, if any, by which the court finds the fair value of
his shares, plus interest, exceeds the amount paid by the corporation; or
(b) For the fair value, plus accrued interest, of his after-acquired
shares for which the corporation elected to withhold payment under KRS
271B.13-270.
271B.13-310. COURT COSTS AND COUNSEL FEES.
(1) The court in an appraisal proceeding commenced under KRS 271B.13-300
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under KRS 271B.13-280.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of KRS 271B.13-200 or KRS 271B.13-280; or
A-5
<PAGE> 1267
(b) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this subtitle.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 1268
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................... $ 6,329,468 $373,798 $536,377 $757,083 $6,277,447
Adjustments to eliminate less than
wholly-owned subsidiaries................... -- -- -- -- --
----------- -------- -------- -------- ----------
Adjusted Shareholders' Statement.............. $ 6,329,468 373,798 536,377 757,083 6,277,447
=========== -------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............... (38) (60) (60)
Gain/loss on sale of securities............. (958) (1,525) (1,525)
Impairment loss............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries.............................. -- -- --
Gain/loss on discontinued operations........ -- -- --
Adjustment to tax expense................... -- -- -- --
-------- -------- --------
Total non-operating items..................... (996) (1,585) (1,585)
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities............................. -- -- --
Adjustment for ownership in other Belk
entities.................................. (312)
-------- -------- -------- ----------
Per Model..................................... $372,802 $534,792 $755,498 $6,277,135
======== ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................... $ (124,585)
Negative cash balances reclassified to
accounts payable........................ --
Receivables from affiliates, net.......... (1,495,281)
Loans receivable from affiliates, net..... (7,464)
Liabilities
Notes payable............................. --
Current installments of long-term debt.... --
Current portion of obligations under
capital leases.......................... --
Payables to affiliates, net............... --
Long-term debt, excluding current
installments............................ --
Obligations under capital leases,
excluding current portion............... --
Loans payable to affiliates, net.......... --
-----------
Net debt (cash)............................... (1,627,330)
Adjustments to eliminate less than
wholly-owned subsidiaries................... --
-----------
Per Model..................................... $(1,627,330)
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 1269
SUPPLEMENT NO. 29
<PAGE> 1270
BELK-SIMPSON COMPANY OF CORBIN, KENTUCKY, INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 4:20 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 29
<PAGE> 1271
BELK-SIMPSON COMPANY OF HARLAN, KENTUCKY, INCORPORATED
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk-Simpson Company of Harlan, Kentucky,
Incorporated (the "Company"), to be held on April 16, 1998, at 4:30 p.m., local
time, at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road,
Charlotte, North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Kentucky law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 128.0566 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 201,625 shares of New Belk Class A Common Stock which will
represent approximately 0.3360% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(30)
<PAGE> 1272
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 1273
BELK-SIMPSON COMPANY OF HARLAN, KENTUCKY, INCORPORATED
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK-SIMPSON COMPANY OF HARLAN, KENTUCKY, INCORPORATED:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk-Simpson Company of Harlan, Kentucky, Incorporated (the
"Company") will be held on April 16, 1998, at 4:30 p.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Kentucky law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 128.0566 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 1274
BELK-SIMPSON COMPANY OF
HARLAN, KENTUCKY, INCORPORATED
SUPPLEMENT NO. 30
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 30 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK-SIMPSON COMPANY
OF HARLAN, KENTUCKY, INCORPORATED (THE "COMPANY"), THE DISCUSSION HEREIN
SUPERSEDES THE DISCUSSION IN THE PROXY STATEMENT/ PROSPECTUS. ALL OF THE
INFORMATION CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE
IN THE REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN
THE REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY
AND THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT
BE ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL
CAPITALIZED TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE
MEANINGS SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE ALSO
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 1275
THE COMPANY
The Company was incorporated as a Kentucky corporation in 1955. The mailing
address of the Company's principal executive offices is 2801 West Tyvola Road,
Charlotte, North Carolina 28217-4500, and its telephone number at that address
is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 4:30 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights under Kentucky law), will be
converted, without any action on the part of the Shareholder, into the right to
receive 128.0566 shares (the "Exchange Ratio") of Class A Common Stock, par
value $.01 per share, of New Belk (the "New Belk Class A Common Stock"). All of
the shares of New Belk Class A Common Stock received by each Existing Belk
Shareholder in the Reorganization will be aggregated and the total will be
rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 2,137.5 shares of Common Stock
outstanding held of record by 26 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 79.1% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 1276
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
New Belk has entered into an agreement dated February 27, 1998 (the
"Hanahan Agreement") with Mary E.S. Hanahan ("Mrs. Hanahan"), who is the owner
of 112.5 shares of Common Stock of the Company (the "Hanahan Shares"). In the
Hanahan Agreement, Mrs. Hanahan granted to certain employees of BSS her
irrevocable proxy to vote the Hanahan Shares in favor of the Merger, agreed to
withdraw her appeal in certain litigation instituted by Belk of Spartanburg,
S.C., Inc. against Mrs. Hanahan and another party and released New Belk and the
Belk Companies from any and all claims which Mrs. Hanahan has or may have
against New Belk and the Belk Companies. New Belk agreed, among other things, to
purchase from Mrs. Hanahan, at her election at any time prior to December 31,
1999, all of the shares of New Belk Common Stock received by Mrs. Hanahan in
exchange for the Hanahan Shares and shares in other Belk Companies in the
Reorganization for an aggregate purchase price of $3.85 million.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Kentucky Business Corporation Act (the "KBCA"), between the New Belk Certificate
and the Articles of Incorporation of the Company (the "Company Articles") and
between the New Belk Bylaws and the Bylaws of the Company (the "Company
Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk is
420,000,000 shares, consisting of: (i) 200,000,000 shares, par value $.01 per
share, of New Belk Class A Common Stock; (ii) 200,000,000 shares, par value $.01
per share, of New Belk Class B Common Stock; and (iii) 20,000,000 shares, par
value $.01 per share, of New Belk Preferred Stock. There are no current plans to
issue New Belk Preferred Stock. The authorized capital stock of the Company
consists of 2,500 shares of Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer
3
<PAGE> 1277
restrictions in respect of New Belk Class A Common Stock. The holders of New
Belk Class A Common Stock are entitled to 10 votes per share. The holders of New
Belk Class B Common Stock are entitled to one vote per share. Shares of New Belk
Class A Common Stock may be owned only by Class A Permitted Holders. If a share
of New Belk Class A Common Stock is transferred to any person other than a Class
A Permitted Holder, whether by sale, assignment, gift, bequest, appointment or
otherwise, such share will be converted automatically into a share of New Belk
Class B Common Stock. Shares of New Belk Class A Common Stock are convertible
into New Belk Class B Common Stock, in whole or in part, at any time and from
time to time at the option of the holder, on the basis of one share of New Belk
Class B Common Stock for each share of New Belk Class A Common Stock converted.
Shares of New Belk Class A Common Stock held by a New Belk Stockholder who is a
Class A Permitted Holder will also automatically convert into New Belk Class B
Common Stock in the event that such New Belk Stockholder no longer meets the
requirements of a Class A Permitted Holder. New Belk Class B Common Stock has no
conversion rights. The Company Articles provide for only one class of common
stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution, as the case may be,
New Belk makes the same dividend or distribution with respect to each other
class of outstanding New Belk Common Stock. In the case of dividends or other
distributions payable in shares of a class of New Belk Common Stock, including
distributions pursuant to stock splits or divisions of a class of New Belk
Common Stock which occur after the first issuance of a class of New Belk Common
Stock, only shares of New Belk Class A Common Stock may be distributed with
respect to New Belk Class A Common Stock and only shares of New Belk Class B
Common Stock may be distributed with respect to New Belk Class B Common Stock.
Whenever a dividend or distribution, including distributions pursuant to stock
splits or divisions of New Belk Common Stock, is payable in shares of New Belk
Class A Common Stock or New Belk Class B Common Stock, the number of shares of
each class of New Belk Common Stock payable per share of such class of New Belk
Common Stock must be equal in number. In the case of dividends or other
distributions consisting of other voting securities of New Belk or of voting
securities of any corporation which is a wholly-owned subsidiary of New Belk,
New Belk must declare and pay such dividends in two separate classes of such
voting securities, identical in all respects, except that (i) the voting rights
of each such security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each such security paid to the holders of
New Belk Class A Common Stock and (ii) such security paid to the holders of New
Belk Class A Common Stock must convert into the security paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock. In the case
of dividends or other distributions consisting of securities convertible into,
or exchangeable for, voting securities of New Belk or voting securities of
another corporation which is a wholly-owned subsidiary of New Belk, such
convertible or exchangeable securities and the underlying securities must be
identical in all respects (including, without limitation, the conversion or
exchange rate), except that (i) the voting rights of each security underlying
the convertible or exchangeable security paid to the holders of New Belk Class B
Common Stock must be one-tenth of the voting rights of each security underlying
the convertible or exchangeable security paid to the holders of the New Belk
Class A Common Stock and (ii) such underlying securities paid to the holders of
New Belk Class A Common Stock must convert into the underlying securities paid
to the holders of New Belk Class B Common Stock upon the same terms and
conditions applicable to the conversion of New Belk Class A Common Stock into
New Belk Class B
4
<PAGE> 1278
Common Stock and must have the same restrictions on transfer and ownership
applicable to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the KBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as the
effect of such distribution does not cause (i) the corporation to be unable to
pay its debts as they come due in the usual course of business or (ii) the
corporation's total assets to be less than the sum of its total liabilities plus
(unless the articles of incorporation permit otherwise) the amount that would be
needed, if the corporation dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The KBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 33 1/3% (or
such higher or lower percentage as is contained in the articles of
incorporation) of all votes entitled to be cast on the proposed corporate action
to call a special meeting. The Company Bylaws authorize the Chairman, President,
Secretary, the Company Board and any shareholder pursuant to the written request
of the holders of not less than 10% of all the shares entitled to vote at the
meeting to call a special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the KBCA, unless the articles of incorporation or the KBCA
specifies a different voting requirement, if the votes cast within the voting
group in favor of the corporate action exceed the votes cast in opposition to
the corporate action at a duly held meeting at which a quorum is present, the
corporate action is deemed to be approved by the shareholders. The Company
Articles do not specify a different voting requirement.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or
5
<PAGE> 1279
alter or change the powers, preferences or special rights of the shares of such
class so as to affect them adversely. If any proposed amendment would alter or
change the powers, preferences or special rights of one or more series of any
class so as to affect them adversely, but would not so affect the entire class,
then only the shares of the series so affected by the amendment will be
considered a separate class for purposes of voting by classes. The New Belk
Certificate is consistent with the foregoing provisions of the DGCL.
Under the KBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the KBCA
requires an amendment to the articles of incorporation to be recommended by the
board of directors to the shareholders and approved (i) by a majority (unless
the articles of incorporation or the board of directors requires a greater vote
or a vote by voting groups) of the votes entitled to be cast on the amendment by
any voting group with respect to which the amendment would create dissenters'
rights and (ii) when a quorum is present, by all other voting groups entitled to
vote on the amendment through casting more affirmative than opposing votes. As
under the DGCL, the holders of the outstanding shares of a class or one or more
series are entitled to vote as a separate voting group (if shareholder voting is
otherwise required by the KBCA) on a proposed amendment if the amendment would
change certain fundamental rights and preferences of that class or series. The
Company Articles do not specify a greater vote or a vote by voting group to
amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval of the
stockholders to amend the bylaws of the corporation, unless the certificate of
incorporation confers the power to amend such bylaws to the board of directors.
Conferring such power to the board of directors of the corporation does not
divest or limit the stockholders' power, to adopt, amend or repeal the bylaws of
the corporation. The New Belk Certificate confers upon the New Belk Board the
power to adopt, amend or repeal the New Belk Bylaws.
Under the KBCA, the board of directors of a corporation may amend or repeal
the bylaws of the corporation unless (i) the articles of incorporation or the
KBCA reserves this power exclusively to the shareholders in whole or part or
(ii) the shareholders in amending or repealing a particular bylaw provide
expressly that the board of directors may not amend or repeal that bylaw. The
shareholders of the corporation may amend or repeal the bylaws of the
corporation even though such bylaws may be amended or repealed by the board of
directors of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board, or by the affirmative vote of a majority of the shares
outstanding and entitled to vote at any regular or special meeting of the
Shareholders. Furthermore, the Company Bylaws provide that the Company Board has
no power to adopt a bylaw: (i) requiring more than a majority of the voting
shares for a quorum at a meeting of the Shareholders, except where higher
percentages are required by law; (ii) providing for the management of the
Company otherwise than by the Company Board or its executive committees; (iii)
increasing or decreasing the number of directors; or (iv) classifying and
staggering the election of directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
The KBCA provides that, except as provided in the articles of
incorporation, action to be taken at a shareholders' meeting may be taken
without a meeting and without prior notice, if the action is taken by all the
shareholders entitled to vote on the action.
6
<PAGE> 1280
If the articles of incorporation so provide, any action except the election
of directors, may be taken without a meeting and without prior notice of the
holders of at least 80% (or such higher percentage required by the KBCA or the
articles of incorporation) of the votes entitled to be cast on such action sign
the written consent(s) describing such action. The Company Articles do not
provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the KBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum of the board and if the vacancy is one that the directors are
authorized to fill, then the directors may fill the vacancy by the affirmative
vote of a majority of all the directors remaining in office. If the vacant
office was held by a director elected by a voting group of shareholders, only
the holders of shares of that voting group are entitled to vote to fill the
vacancy if it is filled by the shareholders.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The KBCA requires a corporation to have at least one director. The number
of directors is set by the articles of incorporation or the bylaws. If a board
of directors has power to fix or change the number of directors, the board of
directors may increase or decrease by 30% or less the number of directors last
approved by the shareholders, but only the shareholders may increase or decrease
by more than 30% the number of directors last approved by the shareholders. If
the articles of incorporation or bylaws establish a variable range for the size
of the board of directors, the number of directors may be changed, within the
prescribed range, by the shareholders or by the board of directors. After shares
are issued, only the shareholders may change the
7
<PAGE> 1281
range for the size of the board or change from a fixed to a variable range size
board or vice versa. The Company Bylaws require the Company Board to consist of
at least three, but no more than 15, members. The Company Articles provides that
the Company Board shall consist of nine directors.
Qualifications of Directors. The DGCL allows the articles of incorporation
or the bylaws to provide for the qualifications of directors. A director does
not have to be a stockholder in the corporation unless otherwise provided in the
certificate of incorporation or the bylaws. The New Belk Bylaws and the New Belk
Certificate do not provide for any qualifications for directors of the New Belk
Board.
The KBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of Kentucky
or a shareholder of the corporation unless otherwise provided for in the
articles of incorporation or the bylaws. The Company Articles and Company Bylaws
do not require directors of the Company to be residents of Kentucky or
shareholders of the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each class expiring at the
annual meeting in successive years beginning with the first class and
progressing to the third class, if any. Thereafter, directors are chosen for a
full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The KBCA provides that the articles of incorporation may allow for
staggering the terms of directors by dividing the total number of directors into
two or three groups, with each group containing one-half or one-third of the
total. The term of each group expires in each successive year beginning with the
first group and progressing to the third group, if any. Thereafter, directors
are chosen for a term of two or three years to succeed those whose terms expire.
The Company does not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
According to the KBCA, the shareholders may remove one or more directors
with or without cause, unless the articles of incorporation provide that
directors may be removed only for cause. If a director is elected by a voting
group of shareholders, only the shareholders of that voting group may
participate in the vote to remove him. A director may not be removed if the
number of votes sufficient to elect him under cumulative voting is voted against
his removal.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under the KBCA and the Constitution of the Commonwealth
of Kentucky, shareholders of Kentucky corporations are entitled to cumulative
voting in the election of directors. In an election of directors, each
shareholder has a number of votes equal to the product of (i) the number of
shares each shareholder is entitled to vote in such election, multiplied by (ii)
the number of positions on the board of directors to be filled in such election.
The shareholder may divide such votes among two or more nominees in
8
<PAGE> 1282
such manner as the shareholder shall determine or the shareholder may
cumulatively vote all of them for one nominee. Under the DGCL, cumulative voting
of stock applies only when so provided in the certificate of incorporation. The
New Belk Certificate does not provide for cumulative voting. The New Belk
Stockholders, therefore, will not be entitled to cumulative voting in the
election of directors.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the KBCA generally permits transactions involving a
Kentucky corporation and an interested director of that corporation if: (i) the
material facts of the transaction and the director's interest were disclosed or
known to the board of directors or a committee of the board of directors and the
board of directors or committee authorized, approved or ratified the
transaction; (ii) the material facts of the transaction and the director's
interest were disclosed or known to the shareholders entitled to vote and they
authorized, approved or ratified the transaction; or (iii) the transaction was
fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the KBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the KBCA (i) in
9
<PAGE> 1283
connection with a proceeding by or in the right of the corporation, except for
reasonable expenses incurred in connection with the proceeding if it is
determined that the director or officer has met the relevant standard of conduct
under the KBCA or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
capacity. Unless limited by its article of incorporation, a corporation must
indemnify a director or officer who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party because he
was a director or officer of the corporation against reasonable expenses
incurred by the director or officer in connection with the proceeding. The KBCA
concerning prohibiting the elimination or limitation of a director's personal,
monetary liability is equivalent to the DGCL.
The Company Bylaws authorize indemnification as provided in the KBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The KBCA concerning the approval of mergers or share exchanges is similar
in all material respects to the DGCL, except that under the KBCA the surviving
company's shareholders must approve a merger or share exchange if, after giving
effect to the transaction, their interest in the participating shares is reduced
by more than 20%. "Participating shares" are those shares that are entitled to
participate without limitation in distributions. The KBCA and DGCL provisions
concerning the approval of the sale of all or substantially all of the assets of
a corporation are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the KBCA contain business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL and
KBCA, "business combinations" generally encompass the following: (i) any merger
or consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder,
except in certain circumstances; (iv) any transaction involving the corporation
which has the
10
<PAGE> 1284
effect of increasing the proportionate share of the stock of any class or
series, or securities convertible into the stock of any class or series, of the
corporation which is owned by the interested stockholder, except in certain
circumstances; or (v) any receipt by the interested stockholder of the benefit
of any loans, advances, guarantees, pledges or other financial benefits (other
than those expressly permitted in (i) through (iv) above) provided by or through
the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) an
affiliate or associate of the corporation and within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation.
The KBCA defines an "interested shareholder" as any person who (i) is the
direct or indirect beneficial owner of at least 10% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate of the corporation and within five years of the date in question was
the direct or indirect owner of at least 10% of the voting power of any class or
series of the then outstanding stock of such corporation. The KBCA defines a
"continuing director" as any member of the board of directors that is not an
affiliate or associate of an interested shareholder or any of its affiliates,
other than the corporation, and who was a director of the corporation prior to
the time the interested shareholder became an interested shareholder.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
The KBCA provides that in addition to any vote otherwise required by the
KBCA or the articles of incorporation, a business combination must be approved
by a majority of independent members of the board of directors who are also
continuing directors, or the business combination must be approved by 80% of the
votes entitled to be cast by outstanding shares of voting stock and two-thirds
of the votes entitled to be cast by holders of voting stock other than voting
stock beneficially owned by an interested shareholder or an associate or
affiliate of an interested shareholder. Furthermore, under the KBCA no business
combination may occur between the corporation and an interested shareholder for
five years after the date on which such person became an interested shareholder
unless such person became an interested shareholder before March 28, 1986 or
unless a majority of the independent directors approved the business combination
before the date on which such person became an interested shareholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the KBCA provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
11
<PAGE> 1285
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The KBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company has not granted preemptive rights to any Shareholder.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the KBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose; (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) excerpts from minutes of any
meeting of the board of directors, records of any action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Sections 271B.13-200 to 271B.13-280 of
the KBCA of the Kentucky Revised Statutes has the right to receive in cash the
fair value of such Shareholders' shares of Common Stock determined immediately
prior to the Merger, excluding any appreciation or depreciation in value in
anticipation of the Merger. The following is a summary of Section 271B.13-010,
et seq., of the KBCA ("Subtitle 13") and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Subtitle 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN SUBTITLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
A Shareholder may dissent as to less than all the shares registered in his
name, but must dissent as to all shares beneficially owned by any one person. In
that event, his rights shall be determined as if the shares to which he has
dissented and the other shares registered in his name were registered in the
names of different Shareholders.
A Shareholder desiring to pursue rights of appraisal must fulfill each of
the following requirements:
(1) The dissenting Shareholder must file a written objection to the
Reorganization Agreement with the Company at or prior to the Special
Meeting. Such objection must be delivered to the Company at
12
<PAGE> 1286
2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, Attention:
Ralph A. Pitts, General Counsel.
(2) The dissenting Shareholder must not vote in favor of the
Reorganization Agreement at the Special Meeting. A failure to vote against
the Reorganization Agreement will not constitute a waiver of a dissenting
Shareholder's appraisal rights under Subtitle 13.
(3) The dissenting Shareholder must make written demand upon the
Company for payment of the fair value of the dissenting Shareholder's
shares. The Company will deliver a written dissenters' notice (the
"Dissenters' Notice") to the dissenting Shareholder within 10 days after
the Special Meeting at which the Reorganization Agreement was approved
which will (i) state where dissenting Shareholders must (a) send the
Payment Demand (as defined below) and where and when they must (b) deposit
their common stock certificates (the "Certificates"), (ii) inform holders
of uncertificated shares of the extent of any restrictions on the
transferability of such shares, (iii) be accompanied by a form for
demanding payment that includes the date of the first announcement to the
news media or to Shareholders of the terms of the proposed Merger and
requires that the dissenting Shareholder certify whether he acquired
beneficial ownership of the shares before that date, (iv) set a date by
which the Company must receive the Payment Demand, which may not be fewer
than 30 nor more than 60 days after the date the Dissenters' Notice is
delivered, and (v) be accompanied by a copy of Subtitle 13.
(4) A dissenting Shareholder who is sent the Dissenters' Notice must
(i) certify whether he acquired beneficial ownership of the shares before
the date of the first announcement to the news media or to Shareholders of
the terms of the proposed Merger, and (ii) demand payment and deposit the
Certificates by the date specified in the Dissenters' Notice. Any
dissenting Shareholder who makes a demand for payment and deposits the
Certificates as required by Subtitle 13 of the KRS will retain all other
rights of a Shareholder until such rights are canceled or modified by the
Merger. Any Shareholder failing to make demand for payment by the date
specified in the Dissenters' Notice will not be entitled to payment under
Subtitle 13.
Any dissenting Shareholder who has fulfilled the foregoing requirement of
Subtitle 13 will be paid by the Company, upon surrender of the Certificate or
Certificates representing the dissenting shares, the fair value of the
dissenting shares as of the day prior to the date of the Special Meeting at
which the Reorganization Agreement was approved, excluding any appreciation or
depreciation in anticipation of the Merger plus accrued interest. Subtitle 13
requires the payment to be accompanied by (i) certain of the Company's financial
statements, (ii) a statement of the Company's estimate of fair value of the
shares and explanation of how the interest was calculated, (iii) notification of
rights to demand payment and (iv) a copy of Subtitle 13. The Company may delay
any payments with respect to any shares (the "after-acquired shares") held by a
dissenting Shareholder which were not held by such Shareholder on November 25,
1997, the date of the first public announcement of the terms of the
Reorganization Agreement. When payments are so withheld, the Company must send
to the holder of the after-acquired shares after the Merger an offer to pay the
holder an amount equal to Company's estimate of their fair value plus accrued
interest, together with an explanation of the calculation of interest and a
statement of the holder's right to demand payment.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing Certificates, the Company must return the
deposited Certificates. If, after returning deposited Certificates, the Merger
is consummated, the Company must send a new Dissenters' Notice and repeat the
payment demand procedure.
If the dissenting Shareholder believes that the amount paid by the Company
or offered by the Company is less than the fair value of his shares or that the
interest due is calculated incorrectly, or if the Company fails to make payment
(or, if the Merger has not consummated, the Company does not return the
deposited Certificates) within 60 days after the date set in the Dissenters'
Notice, then the dissenting Shareholder may, within 30 days after the Company
made or offered payment for the shares or failed to pay for the shares, notify
the Company in writing of his own estimate of the fair value of such shares
(including interest due) and demand payment of such estimate (less any payment
previously received). Failure to notify the Company in
13
<PAGE> 1287
writing of a demand for payment within 30 days after the Company made or offered
payment for such shares will constitute a waiver of the right to demand payment.
If the Company and the dissenting Shareholder cannot agree on a fair price
within 60 days after the Company receives such a demand for payment, Subtitle 13
provides that the Company will institute judicial proceedings in the appropriate
court, as specified in Subtitle 13 (the "Court"), to fix (i) the fair value of
the shares immediately before consummation of the Merger, excluding any
appreciation or depreciation in anticipation of the Merger, and (ii) the accrued
interest. The "fair value" of the Common Stock could be more than, the same as,
or less than that produced by the Exchange Ratio. The Company must make all
dissenters whose demands remain unsettled parties to the proceeding and all such
parties must be served with a copy of the petition. The Court may, in its
discretion, appoint an appraiser to receive evidence and recommend a decision on
the question of fair value. The Court is required to issue a judgment for the
amount, if any, by which the fair value of the shares, as determined by the
Court, plus accrued interest, exceeds the amount paid by the Company or for the
fair value, plus accrued interest, of his after-acquired shares for which the
Company elected to withhold payment. If the Company does not institute such
proceeding within such 60-day period, the Company must pay each dissenting
Shareholder whose demand remains unsettled the respective amount demanded by
each Shareholder.
The Court will assess the costs and expenses of such proceeding (including
reasonable compensation for and the expenses of the appraiser appointed by the
Court) against the Company, except that the Court may assess such costs and
expenses as it deems appropriate against any or all of the dissenting
Shareholders if it finds that their demand for additional payment was arbitrary,
vexatious or otherwise not in good faith in demanding payment from the Company.
The Court may also assess the fees and expenses of counsel and experts for the
respective parties against (i) the Company, if the Court finds that the Company
did not comply with the material requirements of Subtitle 13, or (ii) either the
Company or the dissenting Shareholders, if either acted arbitrarily, vexatiously
or otherwise not in good faith. If the Court finds that the services of counsel
for any dissenting Shareholders were of substantial benefit to other dissenting
Shareholders, the court may award these counsel reasonable attorneys fees to be
paid out of the amounts awarded to the dissenting Shareholders who were
benefitted.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
14
<PAGE> 1288
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales.................... $7,324,820 $7,324,820 0.6 $(879,938) $5,274,830
EBITDA....................... 324,820 258,104 7 (879,938) 2,686,666
EBIT......................... 168,235 221,236 10 (879,938) 3,092,298
Net Income................... 149,572 194,526 15 -- 2,917,890
Book Equity.................. 3,682,552 3,682,440 1 -- 3,682,440
</TABLE>
15
<PAGE> 1289
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
N/A N/A% X $ N/A = $ N/A
----------
Total $ N/A
==========
Relative Operating Value of Company $5,274,830
Relative Operating Value of Other Companies Owned by Company + $ --
----------
Total Relative Value of Company = $5,274,830
==========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Enterprises,
Inc. 10.5263% X $5,274,830 = $ 555,244
Belk's Department
Store of Florence,
S.C., Incorporated 15.8129% X 5,274,830 = 834,104
----------
Total $1,389,348
==========
Total Relative Value of Company $5,274,830
Total Relative Value of Company Owned by Other Belk Companies - 1,389,348
----------
Net Relative Value of Company = $3,885,482
==========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$3,885,482 / 1,156,226,577 = .3360%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.3360% X 59,998,834) / 1,574.5 = 128.0566
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 1290
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share, dividends per
share and book value per share data of the Company, unaudited pro forma combined
per share data of New Belk and unaudited pro forma equivalent per share data of
New Belk giving effect to the Reorganization. The data set forth below should be
read in conjunction with the historical financial statements of the Company,
including the condensed notes thereto, contained elsewhere in this Prospectus
Supplement and unaudited pro forma combined financial statements of New Belk,
including the notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 69.98
Dividends(2).............................................. 20.00
Book value per share(3)................................... 1,722.83
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 122.93
Dividends(2).............................................. 33.29
Book value per share...................................... 1,603.27
</TABLE>
- ---------------
(1) Based on 2,137.50 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share numbers above
are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 2,137.50 shares
of Common Stock, the number of shares of Common Stock outstanding at the end
of the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share, New Belk pro
forma combined dividends per share and New Belk pro forma combined earnings
per share from continuing operations by the Exchange Ratio for the Merger.
17
<PAGE> 1291
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 7,668 $ 7,582 $ 7,325
Net income.................................................. 218 158 150
Per common share
Net Income (loss)(1)...................................... 102.14 73.87 69.98
Dividends................................................. 10.00 15.00 20.00
Book value(2)............................................. 1,613.99 1,672.86 1,722.83
Total assets................................................ 4,090 4,167 4,150
Shareholders' equity........................................ 3,450 3,576 3,683
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $4,933 $4,909
Income from operations...................................... (9) 177
</TABLE>
- ---------------
(1) Based on 2,137.50 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding for the years ended January 31, 1995,
February 3, 1996 and February 1, 1997.
(2) Based on 2,137.50 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 1292
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates two retail department stores in the
following locations in Kentucky: Village Center in Harlan and Middlesboro Mall
in Middlesboro. The Company's stores operate in a manner consistent with the
business of the Belk Companies described in the Proxy Statement/Prospectus. The
stores are managed out of the Kunhe/Greiner group office in Greenville, South
Carolina.
Facilities. The Company operates two stores, both of which are leased
under long-term leases. The store leases have termination dates of 2007 and
2009, respectively. The floor space of each of the leased buildings is 58,000
square feet. The Company believes these facilities are adequate to meet its
current needs.
Competition. Specific competitors in the Company's market include
Wal-Mart, Goody's and Penney.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 1293
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer) (a)(b)........ 868.0 40.6%
Thomas M. Belk, Jr. (Executive Officer) (a)(b)(c)........... 753.0 35.2%
H. W. McKay Belk (Executive Officer) (a)(b)(d).............. 758.0 35.5%
John R. Belk (Director and Executive Officer) (a)(b)(e)..... 748.0 35.0%
Sarah Belk Gambrell (Director).............................. 680.0 31.8%
Leroy Robinson (a).......................................... 180.0 8.4%
Katherine McKay Belk (a).................................... 180.0 8.4%
Katherine Belk Morris (a)(f)................................ 195.0 9.1%
John A. Kuhne (Director and Executive Officer) (h).......... 112.5 5.3%
Kate Simpson (g)............................................ 162.5 7.6%
Lucy Simpson Kuhne (g)...................................... 162.5 7.6%
Mary E. S. Hanahan.......................................... 112.5 5.3%
R. E. Greiner (Executive Officer)........................... 0 *
Welch Bostick, Jr. (Executive Officer)...................... 0 *
Thomas M. Belk, Trustee U/A dated September 15, 1993........ 180 8.4%
Belk's Department Store of Florence, S.C., Incorporated..... 338 15.8%
Belk Enterprises, Inc. ..................................... 225 10.5%
All Directors and Executive Officers as a group (7
persons).................................................. 1,690.5 79.1%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Leroy Robinson, Katherine McKay Belk and Katherine Belk Morris -- 2801 West
Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk Gambrell -- 300 Cherokee
Road, Charlotte, N.C. 28207; John A. Kuhne, Lucy S. Kuhne, R. E. Greiner and
Welch Bostick, Jr. -- 14 S. Main Street, Greenville, S.C. 29601; Kate
Simpson -- P.O. Box 17433, Greenville, S.C. 29606; Mary E. S. Hanahan -- P.O.
Box 1294, Charleston, S.C. 29402; Belk's Department Store of Florence, S.C.,
Incorporated, Belk Enterprises, Inc. -- 2801 West Tyvola Road, Charlotte, N.C.
28217-4500; Thomas M. Belk, Trustee U/A dated September 15, 1993 -- 2801 West
Tyvola, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 180 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(b) Includes 338 shares held by Belk's Department Store of Florence, S.C.,
Incorporated and 225 shares held by Belk Enterprises, Inc., which shares
are voted by the members of the Executive Committee of the Board of
Directors of each such Corporation, under authority given by the directors
of each such
20
<PAGE> 1294
corporation at the annual meeting of directors held in March, 1997. The
Executive Committee of each such Corporation consists of John M. Belk,
Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(c) Includes 10 shares held by Thomas M. Belk, Jr. as custodian for his minor
children.
(d) Includes 15 shares held by H. W. McKay Belk as custodian for his minor
children.
(e) Includes 5 shares held by John R. Belk as custodian for his minor children.
(f) Includes 15 shares held by Katherine Belk Morris as custodian for her minor
children.
(g) Includes 50 shares held by the Estate of William Henry Belk Simpson. Voting
and investment power is shared by the Personal Representatives, who are
Kate Simpson, Lucy Kuhne and Claire Russo.
(h) Includes 112.5 shares held by John A. Kuhne's wife, Lucy S. Kuhne.
21
<PAGE> 1295
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 1296
BELK-SIMPSON COMPANY OF HARLAN, KENTUCKY, INCORPORATED
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 413,636 $ 97,256
Accounts receivable, net.................................. 1,206,910 1,400,358
Merchandise inventory..................................... 1,814,515 1,610,640
Receivable from affiliates, net........................... 406,837 777,122
Refundable income taxes................................... 9,697 5,411
Deferred income taxes..................................... 30,329 24,888
Other..................................................... 66,621 88,797
---------- ----------
Total current assets........................................ 3,948,545 4,004,472
Loans receivable from affiliates, net....................... 5,560 5,560
Investments................................................. 112 112
Property, plant and equipment, net.......................... 152,814 72,430
Deferred income taxes....................................... -- 12,850
Other noncurrent assets..................................... 59,657 54,570
---------- ----------
$4,166,688 $4,149,994
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 468,495 $ 352,145
Accrued income taxes...................................... 47,272 47,524
---------- ----------
Total current liabilities................................... 515,767 399,669
Deferred income taxes....................................... 10,094 --
Other noncurrent liabilities................................ 65,097 67,773
---------- ----------
Total liabilities........................................... 590,958 467,442
Shareholders' equity:
Common stock.............................................. 213,750 213,750
Retained earnings......................................... 3,361,980 3,468,802
---------- ----------
Total Shareholders' equity.................................. 3,575,730 3,682,552
---------- ----------
$4,166,688 $4,149,994
========== ==========
</TABLE>
F-2
<PAGE> 1297
BELK-SIMPSON COMPANY OF HARLAN, KENTUCKY, INCORPORATED
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $7,668,351 $7,581,525 $7,324,819
Operating costs and expenses............................... 7,293,048 7,342,949 7,084,183
Impairment loss............................................ -- -- 52,494
---------- ---------- ----------
Income from operations..................................... 375,303 238,576 188,142
---------- ---------- ----------
Other income (expense):
Interest, net............................................ (3,088) 10,310 8,113
Gain (loss) on disposal of property, plant and
equipment............................................. -- -- (507)
Miscellaneous, net....................................... (1,930) 5,087 (19,400)
---------- ---------- ----------
Total other expense, net................................... (5,018) 15,397 (11,794)
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 370,285 253,973 176,348
Income tax expense (benefit)............................... 151,952 96,085 26,776
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 218,333 157,888 149,572
---------- ---------- ----------
Net earnings............................................... 218,333 157,888 149,572
Retained earnings at beginning of period................... 3,039,197 3,236,155 3,361,980
Dividends paid............................................. (21,375) (32,063) (42,750)
---------- ---------- ----------
Retained earnings at end of period......................... $3,236,155 $3,361,980 $3,468,802
========== ========== ==========
</TABLE>
F-3
<PAGE> 1298
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 1299
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 1300
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 23, CHAPTER 271B
BUSINESS CORPORATIONS
STATE OF KENTUCKY
SUBTITLE 13. DISSENTERS' RIGHTS
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
271B.13-010. DEFINITIONS.
As used in this subtitle:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer;
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Kentucky Revised Statutes ("KRS") 271B.13-020 and who
exercises that right when and in the manner required by KRS 271B.13-200 to KRS
271B.13-280;
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable. In
any transaction subject to the requirements of KRS 271B.12- 210 or exempted by
KRS 271B.12-220(2), "fair value" shall be at least an amount required to be paid
under KRS 271B.12-220(2) in order to be exempt from the requirements of KRS
271B.12- 210;
(4) "Interest" means interest from the effective date of the corporate
until the date of payment, at the average rate currently paid by the corporation
on its principal bank loans or, if none, at a rate that is fair and equitable
under all the circumstances;
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation;
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
271B.13-020. RIGHT TO DISSENT.
(1) A shareholder is entitled to dissent from, and obtain payment of the
fair value of the shareholder's shares in the event of, any of the following
corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party;
1. If shareholder approval is required for the merger by KRS
271B.11-040 or the charter and the shareholder is entitled to vote on
the merger; or
2. If the corporation is a subsidiary that is merged with its
parent under KRS 271B.11-040;
(b) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(c) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a
A-1
<PAGE> 1301
sale for cash pursuant to a plan by which all or substantially all of the
net proceeds of the sale will be distributed to the shareholders within one
(1) year after the date of sale;
(d) An amendment of the charter that materially and adversely affects
rights in respect of a dissenter's shares because it:
1. Alters or abolishes a preferential right of the shares to a
distribution or in dissolution;
2. Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
3. Excludes or limits the right of the shares to vote on any matter
other than a limitation by dilution through issuance of shares or other
securities with similar voting rights; or
4. Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under KRS 271B.6-040; or
(e) Any transaction subject to the requirements of KRS 271B.12-210 or
exempted by KRS 271B.12-220(2); or
(f) Any corporate action taken pursuant to a shareholder vote to the
extent the charter, bylaws, or a resolution of the board of directors
provides that voting or nonvoting shareholders are entitled to dissent and
obtain payment for their shares.
(2) A shareholder entitled to dissent and obtain payment for his shares
under this subchapter may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
271B.13-030. DISSENT BY NOMINEE AND BENEFICIAL OWNERS.
(1) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one (1) person and notifies the corporation in writing
of the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(a) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(b) He does so with respect to all shares of which he is the
beneficial shareholder or over which he has power to direct the vote.
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
271B.13-200. NOTICE OF DISSENTERS' RIGHTS.
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this subtitle and the corporation shall undertake to provide a copy
of this subtitle to any shareholder entitled to vote at the shareholders'
meeting upon request of that shareholder.
(2) If corporate action creating dissenters' rights under KRS 271B.13-020
is taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in KRS 271B.13-220.
A-2
<PAGE> 1302
271B.13-210. NOTICE OF INTENT TO DEMAND PAYMENT.
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(a) Shall deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(b) Shall not vote his shares in favor of the proposed action.
(2) A shareholder who does not satisfy the requirements of subsection (1)
of this section is not entitled to payment for the shareholder's shares under
this chapter.
271B.13-220. DISSENTERS' NOTICE.
(1) If proposed corporate action creating dissenters' rights under KRS
271B.13-020 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of KRS 271B.13-210.
(2) The dissenters' notice must be sent no later than ten (10) days after
the corporate action was authorized by the shareholders or effectuated,
whichever is the first to occur, and must:
(a) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(b) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(c) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not he acquired beneficial ownership
of the shares before that date;
(d) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty (30) nor more than sixty
(60) days after the date the notice required by subsection (1) of this
section is delivered; and
(e) Be accompanied by a copy of this subtitle.
271B.13-230. DUTY TO DEMAND PAYMENT.
(1) A shareholder sent a dissenters' notice described in KRS 271B.13-220
must demand payment, certify whether he acquired beneficial ownership of the
shares before the date required to be set forth in the dissenters' notice
pursuant to subsection (2)(c) of KRS 271B.13-220, and deposit his certificates
in accordance with the terms of the notice.
(2) The shareholder who demands payment and deposits his share certificates
under subsection (1) of this section shall retain all other rights of a
shareholder until these rights are canceled or modified by the taking of the
proposed corporate action.
(3) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this subtitle.
271B.13-240. SHARE RESTRICTIONS.
(1) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under KRS 271B.13-260.
A-3
<PAGE> 1303
(2) The person for whom dissenters' rights are asserted as to
uncertificated shares shall retain all other rights of a shareholder until these
rights are canceled or modified by the effectuation of the proposed corporate
action.
271B.13-250. PAYMENT.
(1) Except as provided in KRS 271B.13-270, as soon as the proposed
corporate action is effectuated, or upon receipt of a payment demand, which ever
is later, the corporation shall pay each dissenter who complied with KRS
271B.13-230 the amount the corporation estimates to be the fair value of his
shares, plus accrued interest.
(2) The payment must be accompanied by:
(a) The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen (16) months before the date of payment, an
income statement for that year, a statement of changes in shareholders'
equity for that year, and the latest available interim financial
statements, if any;
(b) A statement of a corporations' estimate of the fair value of the
shares;
(c) An explanation of how the interest was calculated; and
(d) A statement of the dissenter's right to demand payment under KRS
271B.13-280.
271B.13-260. FAILURE TO TAKE ACTION.
(1) If the corporation does not effectuate the proposed action that gave
rise to the dissenters' rights within sixty (60) days after the date set for
demanding payment and depositing share certificates, the corporation shall
return the deposited certificates and release the transfer restrictions imposed
on uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporate effectuates the proposed action, it must send a new
dissenters' notice under KRS 271B.13-220 and repeat the payment demand
procedure.
271B.13-270. AFTER-ACQUIRED SHARES.
(1) A corporation may elect to withhold payment required by KRS 271B.13-250
from a dissenter unless he was the beneficial owner of the shares before the
date set forth in the dissenters' notice as the date of the first announcements
to news media or to shareholders of the terms of the proposed corporate action.
(2) To the extent the corporation elects to withhold payment under
subsection (1) of this section, after effectuating the proposed corporate
action, it shall estimate the fair value of the shares, plus accrued interest,
and shall pay this amount to each dissenter who agrees to accept it in full
satisfaction of his demand. The corporation shall send with its offer a
statement of its estimate of the fair value of the shares, an explanation of how
the interest was calculated, and a statement of the dissenter's right to demand
payment under KRS 271B.13-280.
271B.13-280. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(1) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate (less any payment under KRS 271B.13-250), or reject the
corporation's offer under KRS 271B.13-270 and demand payment of the fair value
of his shares and interest due, if:
(a) The dissenter believes that the amount paid under KRS 271B.13-250
or offered under KRS 271B.13-270 is less than the fair value of his shares
or that the interest due is incorrectly calculated;
(b) The corporation fails to make payment under KRS 271B.13-250 within
sixty (60) days after the date set for demanding payment; or
A-4
<PAGE> 1304
(c) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty (60) days after the date set
for demanding payment.
(2) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection (1)
of this section within thirty (30) days after the corporation made or offered
payment for his shares.
JUDICIAL APPRAISAL OF SHARES
271B.13-300. COURT ACTION.
(1) If a demand for payment under KRS 271B.13-280 remains unsettled, the
corporation shall commence a proceeding within sixty (60) days after receiving
the payment demand and petition the court to determine the fair value of the
shares and accrued interest. If the corporation does not commence the proceeding
within the sixty-day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
(2) The corporation shall commence the proceeding in the circuit court of
the county where the corporation's principal office (or, if none in this state,
its registered office) is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding the
county in this state where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign corporation was
located.
(3) The corporation shall make all dissenters (whether or not residents of
this state) whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section is plenary and exclusive. The court may
appoint one (1) or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to it. The dissenters are
entitled to the same discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding is entitled to judgment:
(a) For the amount, if any, by which the court finds the fair value of
his shares, plus interest, exceeds the amount paid by the corporation; or
(b) For the fair value, plus accrued interest, of his after-acquired
shares for which the corporation elected to withhold payment under KRS
271B.13-270.
271B.13-310. COURT COSTS AND COUNSEL FEES.
(1) The court in an appraisal proceeding commenced under KRS 271B.13-300
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under KRS 271B.13-280.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of KRS 271B.13-200 or KRS 271B.13-280; or
A-5
<PAGE> 1305
(b) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this subtitle.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 1306
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
---------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement.................... $7,324,820 $149,572 $168,235 $205,103 $3,682,552
Adjustments to eliminate less than wholly-owned
subsidiaries................................. -- -- -- -- --
---------- -------- -------- -------- ----------
Adjusted Shareholders' Statement............... $7,324,820 149,572 168,235 205,103 3,682,552
========== -------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E................ 430 507 507
Gain/loss on sale of securities.............. -- -- --
Impairment loss.............................. 44,524 52,494 52,494
Equity in earnings of unconsolidated
subsidiaries............................... -- -- --
Gain/loss on discontinued operations......... -- -- --
Adjustment to tax expense.................... -- -- -- --
-------- -------- --------
Total non-operating items...................... 44,954 53,001 53,001
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities.............................. -- -- --
Adjustment for ownership in other Belk
entities................................... (112)
-------- -------- -------- ----------
Per Model...................................... $194,526 $221,236 $258,104 $3,682,440
======== ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER SHAREHOLDERS'
STATEMENT
Assets
Cash & cash equivalents.................... $ (97,256)
Negative cash balances reclassified to
accounts payable......................... --
Receivables from affiliates, net........... (777,122)
Loans receivable from affiliates, net...... (5,560)
Liabilities
Notes payable.............................. --
Current installments of long-term debt..... --
Current portion of obligations under
capital leases........................... --
Payables to affiliates, net................ --
Long-term debt, excluding current
installments............................. --
Obligations under capital leases, excluding
current portion.......................... --
Loans payable to affiliates, net........... --
----------
Net debt (cash)................................ (879,938)
Adjustments to eliminate less than wholly-owned
subsidiaries................................. --
----------
Per Model...................................... $ (879,938)
==========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 1307
SUPPLEMENT NO. 30
<PAGE> 1308
BELK-SIMPSON COMPANY OF HARLAN, KENTUCKY, INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 4:30 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
-------------------
-------------------------------
Signature
-------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 30
<PAGE> 1309
BELK OF MISS., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk of Miss., Inc. (the "Company"), to be held
on April 16, 1998, at 11:20 a.m., local time, at the offices of Belk Stores
Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under Mississippi law and other than shares of
Company Common Stock owned by other Belk Companies, which will be canceled) will
be converted, without any action on the part of the holder thereof, into the
right to receive 9.2238 shares (the "Exchange Ratio") of Class A Common Stock,
par value $.01 per share, of New Belk ("New Belk Class A Common Stock"). It is
expected that the shareholders of the Company will receive in the aggregate
approximately 776,201 shares of New Belk Class A Common Stock which will
represent approximately 1.2937% of the New Belk Class A Common Stock outstanding
after the Reorganization. All of the shares of New Belk Class A Common Stock to
be received by each shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage paid
(31)
<PAGE> 1310
envelope. If you plan to attend the Special Meeting, you may vote in person if
you wish, even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 1311
BELK OF MISS., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK OF MISS., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk of Miss., Inc. (the "Company") will be held on April 16, 1998,
at 11:20 a.m., local time, at the offices of Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, for the following
purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under
Mississippi law and other than shares of Company Common Stock owned by
other Belk Companies, which will be canceled) will be converted into the
right to receive 9.2238 shares of Class A Common Stock, par value $.01 per
share, of New Belk (the "New Belk Class A Common Stock"). All of the shares
of New Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 1312
BELK OF MISS., INC.
SUPPLEMENT NO. 31
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 31 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK OF MISS., INC.
(THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE DISCUSSION IN THE PROXY
STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED HEREIN ASSUMES THAT ALL
OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION. IF ANY ONE OR MORE BELK
COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE INFORMATION CONTAINED
HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE REORGANIZATION ON THE
COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE "RISK FACTORS" IN THE
PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED HEREIN WHICH ARE NOT
OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE PROXY
STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 13
COMPARATIVE PER SHARE DATA.................................. 16
SELECTED HISTORICAL FINANCIAL INFORMATION................... 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 18
General................................................... 18
Comparison of Nine Months Ended November 1, 1997 and
November 2, 1996....................................... 18
Comparison of Fiscal Years Ended February 1, 1997 and
February 3, 1996....................................... 19
Comparison of Fiscal Years Ended February 3, 1996 and
January 31, 1995....................................... 19
Seasonality and Quarterly Fluctuations.................... 20
Liquidity and Capital Resources........................... 20
Impact of Inflation....................................... 21
BUSINESS OF THE COMPANY..................................... 21
SECURITY OWNERSHIP OF THE COMPANY........................... 22
INDEX TO HISTORICAL FINANCIAL STATEMENTS.................... F-1
Report of KPMG Peat Marwick LLP, Independent Auditors..... F-2
Balance Sheets............................................ F-3
Statements of Operations.................................. F-4
Statements of Shareholders' Equity........................ F-5
Statements of Cash Flows.................................. F-6
Notes to Financial Statements............................. F-7
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 1313
THE COMPANY
The Company was incorporated as a Mississippi corporation in 1946 as
Belk-Hudson Company of Corinth, Mississippi, Incorporated. The Company changed
its name to Belk of Miss., Inc. on July 9, 1997. The mailing address of the
Company's principal executive offices is 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500, and its telephone number at that address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 11:20 a.m., local
time, at the offices Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola Road,
Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of Class A Common
Stock, $100 par value per share (the "Class A Common Stock"), and Class B Common
Stock, $100 par value per share (the "Class B Common Stock"; together with the
Class A Common Stock, the "Common Stock"), of the Company (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under Mississippi
law), will be converted, without any action on the part of the Shareholder, into
the right to receive 9.2238 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk (the "New Belk Class A Common
Stock"). All of the shares of New Belk Class A Common Stock received by each
Existing Belk Shareholder in the Reorganization will be aggregated and the total
will be rounded to the nearest whole share. No fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 108,923 shares of Common Stock
outstanding held of record by 89 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 70.0% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock
2
<PAGE> 1314
vote in favor of the Merger, the vote of such persons, corporations and trusts
in favor of the Merger would be sufficient to approve the Merger under the
governing documents of the Company and applicable state law.
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
' -- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. In addition, the Reorganization is expected to have
certain other benefits for the Company and the Shareholders, including the
ability to share the risks associated with the Company's new store in
Prattville, Alabama and recent store renovations in Gadsden and Cullman,
Alabama. The Company recently opened the new store in Prattville, where Belk has
no history of store operations, and renovated its stores in Gadsden and Cullman.
The Company borrowed funds to finance these projects. There is no assurance that
the operating results of these new and renovated stores will meet projections.
If these new and renovated stores do not meet projections, the Company may have
difficulty repaying its borrowings for these projects. The Merger would enable
the Company to rely upon New Belk to repay these borrowings.
There can be no assurance, however, that any of these benefits will be
achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization
-- Interest of Certain Persons in the Reorganization" in the Proxy
Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
Mississippi Business Corporation Act (the "MBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital
3
<PAGE> 1315
stock of the Company consists of (i) 300,000 shares of Class A Common Stock and
(ii) 6,000 shares of Class B Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock held by a New Belk Stockholder who is a Class A Permitted
Holder will also automatically convert into New Belk Class B Common Stock in the
event that such New Belk Stockholder no longer meets the requirements of a Class
A Permitted Holder. New Belk Class B Common Stock has no conversion rights. The
Company Articles provide for two classes of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution, as the case may be,
New Belk makes the same dividend or distribution with respect to each other
class of outstanding New Belk Common Stock. In the case of dividends or other
distributions payable in shares of a class of New Belk Common Stock, including
distributions pursuant to stock splits or divisions of a class of New Belk
Common Stock which occur after the first issuance of a class of New Belk Common
Stock, only shares of New Belk Class A Common Stock may be distributed with
respect to New Belk Class A Common Stock and only shares of New Belk Class B
Common Stock may be distributed with respect to New Belk Class B Common Stock.
Whenever a dividend or distribution, including distributions pursuant to stock
splits or divisions of New Belk Common Stock, is payable in shares of New Belk
Class A Common Stock or New Belk Class B Common Stock, the number of shares of
each class of New Belk Common Stock payable per share of such class of New Belk
Common Stock must be equal in number. In the case of dividends or other
distributions consisting of other voting securities of New Belk or of voting
securities of any corporation which is a wholly-owned subsidiary of New Belk,
New Belk must declare and pay such dividends in two separate classes of such
voting securities, identical in all respects, except that (i) the voting rights
of each such security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each such security paid to the holders of
New Belk Class A Common Stock and (ii) such security paid to the holders of New
Belk Class A Common Stock must convert into the security paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock. In the case
of dividends or other distributions consisting of securities convertible into,
or exchangeable for, voting securities of New Belk or voting securities of
another corporation which is a wholly-owned subsidiary of New Belk, such
convertible or exchangeable securities and the underlying securities must be
identical in all respects (including, without limitation, the conversion or
exchange rate), except that (i) the voting rights of each security underlying
the convertible or exchangeable security paid to the holders of New
4
<PAGE> 1316
Belk Class B Common Stock must be one-tenth of the voting rights of each
security underlying the convertible or exchangeable security paid to the holders
of the New Belk Class A Common Stock and (ii) such underlying securities paid to
the holders of New Belk Class A Common Stock must convert into the underlying
securities paid to the holders of New Belk Class B Common Stock upon the same
terms and conditions applicable to the conversion of New Belk Class A Common
Stock into New Belk Class B Common Stock and must have the same restrictions on
transfer and ownership applicable to the transfer and ownership of the New Belk
Class A Common Stock.
Pursuant to the MBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The MBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and holders of at least 10% of all votes
entitled to be cast on the proposed corporate action to call a special meeting.
The Company Bylaws authorize the Chairman, President, Secretary, the Company
Board and any shareholder pursuant to the written request of the holders of not
less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the MBCA, unless the articles of incorporation or the MBCA
specifies a different voting requirement, if the votes cast within the voting
group in favor of the corporate action exceed the votes cast in opposition to
the corporate action at a duly held meeting at which a quorum is present, the
corporate action is deemed to be approved by the shareholders. The Company
Articles do not specify a different voting requirement.
5
<PAGE> 1317
Amendment of Certificate or Articles of Incorporation. DGCL requires that
an amendment of the certificate of incorporation of a corporation be adopted by
the board of directors and the holders of a majority of the outstanding shares
of stock entitled to vote thereon. The holders of the outstanding shares of a
class are entitled to vote as a separate class on a proposed amendment that
would increase or decrease the aggregate number of authorized shares of such
class, increase or decrease the par value of the shares of such class or alter
or change the powers, preferences or special rights of the shares of such class
so as to affect them adversely. If any proposed amendment would alter or change
the powers, preferences or special rights of one or more series of any class so
as to affect them adversely, but would not so affect the entire class, then only
the shares of the series so affected by the amendment will be considered a
separate class for purposes of voting by classes. The New Belk Certificate is
consistent with the foregoing provisions of the DGCL.
Under the MBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the MBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the shareholders and approved (i) by a majority
(unless the articles of incorporation or the board of directors require a
greater vote or a vote by voting groups) of the votes entitled to be cast on the
amendment by any voting group with respect to which the amendment would create
dissenters' rights and (ii) when a quorum is present, by all other voting groups
entitled to vote on the amendment through casting more affirmative than opposing
votes. As under the DGCL, the holders of the outstanding shares of a class or
series are entitled to vote as a separate voting group (if shareholder voting is
otherwise required by the MBCA) on a proposed amendment if the amendment would
change certain fundamental rights and preferences of that class or series. The
Company Articles do not specify a greater voting requirement to amend the
Company Articles.
Amendment of Bylaws. The DGCL requires the stockholder approval to amend
the bylaws of the corporation, unless the certificate of incorporation confers
the power to amend such bylaws to the board of directors. Conferring such power
to the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
Under the MBCA, a corporation's board of directors may amend or repeal the
corporation's bylaws unless: (i) the articles of incorporation or the MBCA
reserve this power exclusively to the shareholders in whole or part; or (ii) the
shareholders in amending or repealing a particular bylaw provide expressly that
the board of directors may not amend or repeal that bylaw. A corporation's
shareholders may amend or repeal the corporation's bylaws even though the bylaws
may also be amended or repealed by its board of directors.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
6
<PAGE> 1318
Pursuant to the MBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without prior notice, if all
holders of outstanding shares entitled to vote on such action sign the written
consent(s) describing such action. The Company Bylaws and Company Articles do
not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the MBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum of the board and if the vacancy is one that the directors are
authorized to fill, then the directors may fill the vacancy by the affirmative
vote of a majority of all the directors remaining in office. If the vacant
office was held by a director elected by a voting group of shareholders, only
the holders of shares of that voting group are entitled to fill the vacancy if
it is filled by the shareholders.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The MBCA requires a corporation to have at least one director. The number
of directors is set by the articles of incorporation or the bylaws. If the board
of directors has power to fix or change the number of directors, the board of
directors may increase or decrease by 30% or less the number of directors last
approved by the shareholders, but only the shareholders may increase or decrease
by more than 30% the number of directors last approved by the shareholders. If
the articles of incorporation or bylaws establish a variable range for the size
of the board of directors, the number of directors may be changed, within the
prescribed range, by the shareholders or by the board of directors. After shares
are issued, only the shareholders may change the
7
<PAGE> 1319
range for the size of the board or change from a fixed to a variable-range size
board or vice versa. The Company Bylaws require the Company Board to consist of
at least three, but no more than 15, members.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The MBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of
Mississippi or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of Mississippi or shareholders of the
Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board of
directors into one to three classes, with the term of each class expiring at the
annual meeting in successive years beginning with the first class and
progressing to the third class, if any. Thereafter, directors are chosen for a
full term to succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The MBCA provides that if there are nine or more directors, the articles of
incorporation may allow for staggering their terms by dividing the total number
of directors into two or three groups, with each group containing one-half or
one-third of the total. The term of each group expires in each successive year
beginning with the first group and progressing to the third group, if any.
Thereafter, directors are chosen for a term of two or three years to succeed
those whose terms expire. The Company Articles do not provide for the staggering
of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under to the MBCA, the shareholders may remove one or more directors with
or without cause unless the articles of incorporation provide that directors may
be removed only for cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him.
The Company Bylaws provide that directors of the Company may be removed
from office with or without cause by a vote of the Shareholders holding a
majority of the shares entitled to vote at an election of directors. However,
unless the entire board is removed, an individual director may not be removed if
the number of shares voting against the removal would be sufficient to elect a
director if such shares were voted cumulatively at an annual election. If any
directors are so removed, new directors may be elected at the same meeting.
Cumulative Voting. Under the DGCL, cumulative voting of stock applies only
when so provided in the certificate of incorporation. The New Belk Certificate
does not provide for cumulative voting. The MBCA provides that shareholders have
the right to cumulate their votes for directors unless the articles of
incorporation provide otherwise. The Company articles do not provide otherwise.
8
<PAGE> 1320
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the MBCA generally permits transactions involving a
Mississippi corporation and an interested director of that corporation if: (i)
the transaction received the affirmative vote of a majority (but not less than
two) of those qualified directors on the board of directors or on a duly
empowered committee thereof who voted on the transaction after either required
disclosure to them, provided that action by a committee is so effective only if
(a) all its members are qualified directors, and (b) its members are either all
the qualified directors on the board or are appointed by the affirmative vote of
a majority of the qualified directors on the board; (ii) if a majority of the
votes entitled to be cast by the holders of all qualified shares were cast in
favor of the transaction after (a) notice to shareholders describing the
director's conflicting interest transaction, (b) provision of the information
with regard to unqualified shares and (c) required disclosure to the
shareholders who voted on the transaction (to the extent the information was not
known by them); or (iii) the transaction, judged in the circumstances at the
time of commitment, is established to have been fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the MBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and
9
<PAGE> 1321
(iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director or officer under the MBCA (i) in connection with a
proceeding by or in the right of the corporation, except for reasonable expenses
incurred in connection with the proceeding if it is determined that the director
or officer has met the relevant standard of conduct under the MBCA or (ii) in
connection with any proceeding with respect to conduct for which he was adjudged
liable on the basis that personal benefit was improperly received by him,
whether or not involving action in his official capacity. A corporation will
indemnify a director or officer who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which he was a party because he
was a director or officer of the corporation against reasonable expenses
incurred by the director or officer in connection with the proceeding. The MBCA
describes the categories prohibited from being limited or eliminated from a
director's scope of personal, monetary liability as follows: (i) the amount of a
financial benefit received by a director to which he is not entitled; (ii) an
intentional infliction of harm on the corporation or the shareholders; (iii) a
violation involving an unlawful distribution; or (iv) an intentional violation
of criminal law.
The Company Bylaws authorize indemnification as provided in the MBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The MBCA concerning the approval of merger or share exchange is similar in
all material respects to the DGCL, except that under the MBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in the participating shares is reduced by more
than 20%. "Participating shares" are those shares that are entitled to
participate without limitation in distributions. The DGCL and the MBCA
provisions on sales of all or substantially all of the assets of a corporation
other than in the regular course of business are similar in all material
respects.
Anti-Takeover Provisions. The DGCL and the MBCA contain business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL and
the MBCA, "business combinations" generally encompass the following: (i) any
merger or consolidation of the corporation or any direct or indirect
majority-owned subsidiary of the corporation with an
10
<PAGE> 1322
interested shareholder; (ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition to or with the interested stockholder of a
substantial percentage of assets of the corporation; (iii) any transaction which
results in the issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder, except in certain circumstances; (iv)
any transaction involving the corporation which has the effect of increasing the
proportionate share of the stock of any class or series, or securities
convertible into the stock of any class or series, of the corporation which is
owned by the interested stockholder, except in certain circumstances; or (v) any
receipt by the interested stockholder of the benefit of any loans, advances,
guarantees, pledges or other financial benefits (other than those expressly
permitted in (i) through (iv) above) provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) is an
affiliate or associate of the corporation who within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation. The MBCA
defines an "interested shareholder" as any person who owns 20% of the
outstanding voting shares or an affiliate of the corporation owning 20% of the
outstanding voting shares within the prior two years.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
The MBCA requires that, in addition to any vote otherwise required by the
MBCA, by the articles of incorporation or by the bylaws, a business combination
be approved by 80% of the votes entitled to be cast of outstanding shares and
66 2/3% of the votes entitled to be cast by noninterested holders of voting
shares voting together as a single class.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the MBCA provides that a shareholder may appoint a proxy
to vote or otherwise act for the shareholder. However, the proxy is valid for
only 11 months unless a longer period is expressly provided in the appointment
form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate
11
<PAGE> 1323
class, determine that such offering need not be made to such class. Further, New
Belk may grant by contract a preemptive right to purchase, subscribe for or
otherwise acquire stock of any class or series of New Belk or any security
convertible into or exchangeable for, or any warrant, option or right to
purchase, subscribe for or otherwise acquire, stock of any class or series of
New Belk, whether now or hereafter authorized.
The MBCA concerning preemptive rights is equivalent to the DGCL. The
Company Articles do not contain a provision with regard to preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the MBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) excerpts from minutes of any
meeting of the board of directors, records of any action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the MBCA ("Article 13") has
the right to receive in cash the fair value of such Shareholder's shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to assert statutory dissenters'
rights. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN ARTICLE 13
WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Shareholders who wish to exercise dissenters' rights (i) must deliver to
the Company, before the vote on the Reorganization Agreement is taken, written
notice (the "Dissenter's Notice") of their intent to demand payment for their
shares if the Reorganization Agreement is approved and (ii) must NOT vote their
shares in favor of the Reorganization Agreement. A Shareholder who does not
satisfy these requirements is not entitled to payment for shares under Article
13.
A Shareholder electing to exercise dissenters' rights under Article 13 must
not vote for approval of the Reorganization Agreement. Under Article 13, a vote
against approval of the Reorganization Agreement is not required in order for a
Shareholder to exercise dissenters' rights. However, if a Shareholder returns a
signed proxy but does not specify a vote against approval of the Reorganization
Agreement or an election to abstain, the proxy will be voted for the proposal
which will have the effect of waiving that Shareholder's dissenters' rights.
If the Merger is consummated, the Company must send a notice to that effect
(the "Company Notice") no later than 10 days after the closing date to all
Shareholders that have perfected their right to assert dissenters' rights under
Article 13. Upon receipt of the Company Notice, dissenters must demand payment
for their shares by the date set forth in the Company Notice (a "Payment
Demand"). A Shareholder who elects to exercise dissenters' rights must mail or
deliver his or her written Payment Demand to: Belk Stores Services,
12
<PAGE> 1324
Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, attention:
Mr. Ralph A. Pitts. The written Payment Demand for payment must comply with the
provisions of Article 13 and must specify the Shareholder's name and mailing
address, the number of shares of Common Stock owned, and state that the
Shareholder is demanding payment of his or her shares. The Shareholder must also
certify that the Shareholder had beneficial ownership of the shares before the
date set forth in the Company Notice, which is November 25, 1997, the date of
the first announcement of the proposed sale to the news media. The Shareholder
must also deposit his or her share certificates in accordance with the terms of
the Company Notice. Failure to make a Payment Demand or deposit the share
certificates where required, each by the dates for such action set forth in the
Company Notice, will forfeit the Shareholder's right to receive payment for his
or her shares.
Upon receipt of a Payment Demand, the Company shall pay Shareholders who
complied with Article 13 the amount the Company estimates to be fair value of
the shares submitted by such Shareholder plus accrued interest. Certain
financial information concerning the Company, its estimate of the value of the
shares, an explanation of how interest was calculated, and a statement of rights
to demand payment along with a copy of Article 13, must accompany such offer or
payment.
A dissenter may reject the Company's payment and demand in writing payment
of the fair value of his shares and interest due based on his own estimate of
the fair value of his shares and amount of interest due. To be entitled to such
rights, the dissenter must notify the Company of his demand in writing within 30
days after the Company made payment for the shares.
If a dissenter has rejected the Company's payment and demanded payment of
the fair value of the shares and interest due and the demand for such payment
remains unsettled, the Company will commence a judicial proceeding within 60
days after receiving the payment demand and petition an appropriate court, as
described in Article 13 (the "Court"), to determine the fair value of the shares
and accrued interest. If the Company does not commence such action with the
required 60-day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
The Court in an appraisal proceeding will determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the Court. Additionally, the Court may assess fees of legal counsel
and of experts for the respective parties. The Court will assess the costs
against the Company, except that the Court may assess costs against all or some
of the dissenters to the extent the Court finds the dissenters acted
arbitrarily, vexatiously or not in good faith in demanding payment under Article
13, or the Court may assess counsel fees against the dissenters who were
benefitted.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage
13
<PAGE> 1325
ownership in other Belk Companies held by the Company and (ii) the corresponding
Total Relative Value of the other Belk Companies in which the Company owns a
percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE NET DEBT (CASH) OPERATING VALUES
- ----------- ----------- ----------- -------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............... $28,604,139 $28,604,139 0.6 $(2,198,505) $19,360,988
EBITDA.................. 3,026,104 1,738,051 7 (2,198,505) 14,364,862
EBIT.................... 2,382,465 1,094,412 10 (2,198,505) 13,142,625
Net Income.............. 1,555,411 630,390 15 -- 9,455,850
Book Equity............. 11,274,532 11,267,862 1 -- 11,267,862
</TABLE>
14
<PAGE> 1326
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
N/A N/A % X $ N/A = $ N/A
-----------
Total $ N/A
===========
Relative Operating Value of Company $19,360,988
Relative Operating Value of Other Companies Owned by Company + --
-----------
Total Relative Value of Company = $19,360,988
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Brothers Company .3672% X $19,360,988 = $ 71,094
Belk Enterprises,
Inc. 22.2111% X 19,360,988 = 4,300,288
Hudson-Belk Company .1634% X 19,360,988 = 31,636
-----------
Total $ 4,403,018
===========
Total Relative Value of Company $19,360,988
Total Relative Value of Company Owned by Other Belk Companies - 4,403,018
-----------
Net Relative Value of Company = $14,957,970
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$14,957,970 / $1,156,226,577 = 1.2937%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(1.2937% X 59,998,834) / 84,152 = 9.2238
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
15
<PAGE> 1327
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share, and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the notes thereto, contained elsewhere in this Prospectus Supplement and
unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS
ENDED FEBRUARY 1, ENDED NOVEMBER 1,
1997 1997
----------------- -----------------
<S> <C> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 14.24 $ 4.43
Dividends(2).............................................. 0.00 0.00
Book value per share(3)................................... 103.51 107.94
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96 0.29
Dividends(2).............................................. 0.26 0.22
Book value per share(5)................................... 12.52 12.65
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 8.85 2.63
Dividends(2).............................................. 2.40 2.05
Book value per share...................................... 115.48 116.66
</TABLE>
- ---------------
(1) Based on 109,245 and 108,923 shares of Common Stock, the weighted average
number of shares of Common Stock outstanding during the year ended February
1, 1997 and the nine-month period ended November 1, 1997, respectively.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 108,923 shares
of Common Stock, the number of shares of Common Stock outstanding at the end
of the periods presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent, per share information for the Company is computed by
multiplying the New Belk pro forma combined book value per share and New
Belk pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
16
<PAGE> 1328
SELECTED HISTORICAL FINANCIAL INFORMATION
The following selected historical financial information of the Company
presented below under the captions "Selected Statement of Income Data" and
"Selected Balance Sheet Data" for, and as of the end of, each of the years in
the five-year period ended February 1, 1997, are derived from the financial
statements of the Company. The financial statements as of February 1, 1997 and
for the then year ended have been audited by KPMG Peat Marwick LLP, independent
certified public accountants. Such financial statements, and the report thereon,
are included elsewhere in this Prospectus Supplement. The selected data
presented below for, and as of the end of, each of the years in the four-year
period ended February 3, 1996 and for the nine-month periods ended November 2,
1996 and November 1, 1997, and as of November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited data reflects, in the
judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
The information presented below under the caption "Selected Operating Data" is
unaudited.
Selected historical combined and pro forma financial data for the Belk
Companies is included in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
------------------------------------------------------------------- -------------------------
FEBRUARY 2, FEBRUARY 1, JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1993 1994 1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED STATEMENT OF INCOME
DATA:
Revenues...................... 28,349,643 31,616,313 30,765,044 30,286,164 28,604,139 19,784,642 14,777,209
Cost of goods sold............ 19,389,923 22,484,142 21,517,951 21,040,504 19,653,443 13,544,219 9,884,820
Depreciation and
amortization................ 1,279,887 1,285,880 1,284,508 1,293,496 643,639 604,598 150,351
Income (loss) from continuing
operations.................. (956,168) (497,423) (94,261) (424,246) 1,555,411 47,461 482,247
Net income (loss)............. (956,168) 224,140 (94,261) (424,246) 1,555,411 47,461 482,247
Net income (loss) per
share(1).................... (8.58) 2.01 (0.85) (3.80) 14.24 0.44 4.43
Weighted average number of
shares outstanding.......... 111,499 111,499 111,449 111,449 109,245 109,352 108,923
SELECTED BALANCE SHEET DATA:
Accounts receivable -- net.... 4,785,365 5,258,516 5,090,533 5,190,920 5,440,289 5,206,150 4,632,144
Merchandise inventories....... 7,142,595 6,853,489 6,571,562 6,574,923 3,893,210 6,431,777 7,555,486
Working capital............... 10,760,816 10,488,113 7,527,451 7,222,215 10,438,939 7,613,497 9,840,230
Total assets.................. 22,453,831 19,494,967 17,075,187 15,774,450 13,037,259 14,738,458 19,548,177
Short-term debt............... -- -- -- -- -- -- --
Long-term debt................ 6,202,016 5,444,846 1,725,000 1,025,000 -- -- 5,000,000
Capitalized lease
obligations................. -- -- -- -- -- -- --
Shareholders' equity.......... 11,393,829 10,450,736 10,356,475 9,932,229 11,274,532 9,766,583 11,756,779
Book value per share(2)....... 102.19 93.73 92.88 89.08 103.51 89.67 107.94
SELECTED OPERATING DATA:
Number of stores at end of
period...................... 8 8 6 6 3 3 4
Comparable store net revenue
increases (decreases)....... 2.9% 13.6% 5.9% (2.4)% 3.6% 3.8% (0.3)%
</TABLE>
- ---------------
(1) Based on the weighted average number of shares of Common Stock outstanding
for each period presented.
(2) Based on the number of outstanding shares of Common Stock at the end of each
period presented.
17
<PAGE> 1329
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the historical financial condition and
results of operations of the Company for each of the fiscal years ended January
31, 1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 which should be read in
conjunction with the historical financial statements, including the notes
thereto, included elsewhere in this Proxy Statement/Prospectus.
GENERAL
Certain Components of Net Income. Revenues include sales from retail
operations and leased departments. Cost of goods sold include cost of
merchandise, buying, and occupancy expense. Selling, general, and administrative
expense("SG&A") includes payroll, advertising, credit and depreciation expense.
RESULTS OF OPERATIONS
The following tables sets forth, for the periods indicated, the percentage
relationship to revenues of certain items in the Company's statements of income
and other pertinent financial data.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
--------------------------------------- -------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995(A) 1996(A) 1997(A) 1996 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold....................... 69.9 69.5 68.7 68.5 66.9
Selling, general and administrative
expenses............................... 30.2 30.8 27.4 30.4 27.6
Income (loss) from operations............ (0.2) (0.3) 3.9 1.2 5.5
Interest expense, net.................... 1.3 1.2 0.8 0.9 0.3
Income tax expense (benefit)............. (1.1) (0.1) 2.1 0.1 1.9
Net income (loss)........................ (0.3) (1.4) 5.4 0.2 3.3
Comparable stores revenues increase
(decrease)............................. 5.9 (2.4) 3.6 3.8 (0.3)
Number of stores
Opened................................. 0 0 0 0 1
Closed................................. 1 0 3 3 0
Total -- end of period................... 6 6 3 3 4
</TABLE>
- ---------------
(a) The fiscal years ended February 1, 1997 and January 31, 1995 consisted of 52
weeks. The fiscal year ended February 3, 1996 consisted of 368 days.
COMPARISON OF NINE MONTHS ENDED NOVEMBER 1, 1997 AND NOVEMBER 2, 1996
Revenues. The Company's revenues for the nine months ended November 1,
1997 decreased 25.3%, or $5.0 million, from the same period in 1996 from $19.8
million to $14.8 million. The decrease was attributable to a revenues decrease
of $7.0 million associated with the closing of 3 stores, which were sold to an
unrelated third party, partially offset by revenues of a new store in
Prattville, Alabama. Comparable store revenues for the nine months ended
November 1, 1997 were even with the nine months ended November 2, 1996.
Cost of Goods Sold. As a percentage of revenues, cost of goods sold
decreased from 68.5% for the nine months ended November 2, 1996 to 66.9% for the
nine months ended November 1, 1997. Cost of goods sold decreased 27.0%, or $3.6
million, from $13.5 million for the nine months ended November 2, 1996 to $9.9
million for the nine months ended November 1, 1997 primarily due to decreased
revenues. Cost of merchandise decreases were experienced due to better inventory
management and lower markdowns. A decrease was also experienced in occupancy
expense.
18
<PAGE> 1330
Selling, General, and Administrative Expenses. SG&A decreased from 30.4%
of revenues for the nine months ended November 2, 1996 to 27.6% of revenues for
the nine months ended November 1, 1997. Such decrease, which amounted to $1.9
million, was primarily attributable to decreases in payroll, depreciation, and
advertising expense.
Interest Expense, Net. As a percentage of revenues, interest expense, net
decreased from 0.9% for the nine months ended November 2, 1996 to 0.3% for the
nine months ended November 1, 1997. Interest expense, net was $38 thousand for
the nine months ended November 1, 1997 as compared to $0.2 million for the nine
months ended November 2, 1996. The reduction in interest expense resulted from
decreased average outstanding borrowings.
Income Taxes. The effective income tax rate increased to 36.7% for the
nine months ended November 1, 1997 from 25.2% for the nine months ended November
2, 1996. The 25.2% effective rate for the nine months ended November 2, 1996
differs from the federal statutory rate primarily due to permanent differences
related to deferred compensation insurance.
Net Income. Net income increased $0.4 million to 3.3% of revenues for the
nine months ended November 1, 1997 compared to 0.2% of revenues for the nine
months ended November 2, 1996. This increase was primarily attributable to the
decrease in SG&A of 2.8%, as a percentage of revenues.
COMPARISON OF FISCAL YEARS ENDED FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
Revenues. The Company's revenues in fiscal year 1997 decreased 5.6%, or
$1.7 million, from fiscal year 1996 from $30.3 million to $28.6 million. The
decrease was primarily attributable to the closing of the Talladega and
Alexander City locations, which contributed a decrease in revenues of $2.5
million in fiscal year 1997. On a comparable store basis, revenues increased
3.6% compared to the first 52 weeks of fiscal year 1996. This increase was
primarily due to an increase in revenues at the Cullman, Alabama store.
Cost of Goods Sold. As a percentage of revenues, cost of goods sold
decreased from 69.5% in fiscal year 1996 to 68.7% in fiscal year 1997 due to
improved inventory management, especially in the Gadsden and Cullman stores.
Cost of goods sold decreased 6.6%, or $1.3 million, from $21.0 million in fiscal
year 1996 to $19.7 million in fiscal year 1997 primarily as a result of the
decrease in revenues.
Selling, General, and Administrative Expenses. As a percentage of
revenues, SG&A decreased from 30.8% in fiscal year 1996 to 27.4% in fiscal year
1997. SG&A decreased 16.1%, or $1.5 million, primarily due to decreases in
payroll expense realized through efficiencies implemented in the retail
department stores, advertising, and depreciation expense. Although bad debt
expense increased $0.1 million due to increased Belk propriety credit card sales
volume and industry-wide increases in personal bankruptcies, the increase was
substantially offset by an increase in finance charge revenue of $0.1 million,
which caused bad debt expense to have an immaterial impact on SG&A.
Interest Expense, Net. Interest expense, net was $0.4 million in fiscal
year 1996 and $0.2 million in fiscal year 1997. The decrease in interest expense
was due to a decrease in the average borrowings outstanding which resulted from
the repayment of the $1.0 million term loan in October, 1996.
Income Taxes. The effective income tax rate increased to 28.2% in fiscal
year 1997 from 8.6% in fiscal year 1996. The 8.6% effective rate in fiscal year
1996 differs from the federal statutory rate primarily due to a revaluation of
deferred tax assets assuming future realization of those assets would be at a
higher effective tax rate.
Net Income. Net income increased $2.0 million to 5.4% of revenues in
fiscal year 1997 compared to (1.4%) of revenues in fiscal year 1996. The
increase is primarily attributable to the gain on the sale of property and
fixtures of the Tupelo, Mississippi store, which was closed, of $1.3 million in
fiscal year 1997.
COMPARISON OF FISCAL YEARS ENDED FEBRUARY 3, 1996 AND JANUARY 31, 1995
Revenues. The Company's revenues in fiscal year 1996 decreased by 1.6%, or
$0.5 million, from $30.8 million in fiscal year 1995 to $30.3 million in fiscal
year 1996. Adjusting for the impact of the additional days
19
<PAGE> 1331
in fiscal year 1996, comparable store revenues decreased 2.4%. These decreases
were experienced equally in the Spring and Fall selling seasons by most of the
stores. The Cullman, Alabama store, however, experienced a very strong increase
in revenues of 5.6% or $0.3 million.
Cost of Goods Sold. As a percentage of revenues, cost of goods sold
decreased from 69.9% in fiscal year 1995 to 69.5% in fiscal year 1996 due to
improved inventory management, especially in the Gadsden and Cullman stores.
Cost of goods sold decreased 2.2%, or $0.5 million, from $21.5 million in fiscal
year 1995 to $21.0 million in fiscal year 1996 primarily due to a decrease in
revenues. Decreases were also experienced in occupancy and distribution expense.
Selling, General, and Administrative Expenses. SG&A increased slightly by
0.3%, or $25.0 thousand, from 30.2% of revenues in fiscal year 1995 to 30.8% of
revenues in fiscal year 1996.
Interest Expense, Net. Interest expense, net was unchanged at $0.4 million
for fiscal years 1995 and 1996.
Income Taxes. The effective income tax rate decreased to 8.6% in fiscal
year 1996 from 78.6% in fiscal year 1995. The 8.6% effective rate in fiscal year
1996 differs from the federal statutory rate primarily due to a revaluation of
deferred tax assets. In fiscal year 1995, a deferred tax asset for net operating
loss carryforwards was recognized assuming future realization of that asset.
Net Loss. Net loss increased $0.3 million to 1.4% of revenues in fiscal
year 1996 from 0.3% of revenues in fiscal year 1995. This increase in net loss
was primarily due to the adjustment made in fiscal year 1996 to revalue the
deferred tax assets discussed above.
SEASONALITY AND QUARTERLY FLUCTUATIONS
The Company has historically experienced and expects to continue to
experience seasonal fluctuations in its revenues, operating income, and net
income. The highest revenue period for the Company is the fourth quarter which
includes the Christmas selling season. A disproportionate amount of the
Company's revenues and a substantial amount of the Company's operating and net
income are realized during the fourth quarter. If for any reason the Company's
revenues were below seasonal norms during the fourth quarter, the Company's
annual results of operations could be adversely affected. The Company's
inventory levels generally reach their highest in anticipation of increased
revenues during these months.
The following table illustrates the seasonality of revenues by quarter as a
percentage of the full year for the fiscal years indicated.
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
First quarter............................................... 22.3% 22.5% 25.2%
Second quarter.............................................. 21.2 20.5 21.4
Third quarter............................................... 23.5 23.4 22.6
Fourth quarter.............................................. 33.0 33.6 30.8
</TABLE>
The Company's quarterly results of operations could also fluctuate
significantly as a result of a variety of factors, including the timing of new
store openings and remodelings.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash on hand, cash flow from
operations, and borrowings under credit facilities.
In fiscal year 1997, the Company had sufficient cash flows from operations
and credit facilities to fund its working capital needs, capital expenditures,
and equity purchases. Net cash provided (used) by operations was $3.9 million,
$0.7 million, and ($0.8) million for the 1995, 1996, and 1997 fiscal years,
respectively. The decrease in cash flow in fiscal year 1996 was primarily
attributable to reduced net income and the change in affiliate payables and
receivables. In fiscal year 1995, the Company received cash from an affiliate in
the net amount of $3.3 million.
Investing activities included capital expenditures, primarily for remodeled
stores and the purchases and sales of property and equipment related to store
openings and closings. Capital expenditures, primarily for new
20
<PAGE> 1332
and remodeled stores, amounted to $5.5 million in the first nine months of
fiscal 1998 and $15 thousand in the comparable period in fiscal year 1997.
Capital expenditures amounted to $153.9 thousand, $52.6 thousand, and $54.5
thousand for the 1995, 1996 and 1997 fiscal years, respectively. In fiscal year
1995, the Company closed the Huntsville, Alabama store. In fiscal year 1997,
three stores were closed. Proceeds from the sale of the Tupelo, Mississippi
store, which was closed, amounted to $2.0 million. The Company operated 6, 6,
and 3 department stores, respectively, for the 1995, 1996, and 1997 fiscal
years. A new store in Prattville, Alabama was opened during fiscal year 1998
adding 51,000 square feet.
Financing activities included purchase of common stock and payments or
additional borrowings on credit facilities. The Company's total indebtedness at
November 1, 1997 was $5.0 million, comprised of $0.6 million of current
maturities of long-term debt and $4.4 million of long-term debt. The interest
rate on the $5.0 million of total indebtedness is variable based on LIBOR. The
Company has entered into interest rate swap agreements with various financial
institutions to manage the exposure to changes in interest rates on its LIBOR
based indebtedness.
During fiscal year 1997, the Company repurchased common stock from several
major shareholders for $0.2 million.
IMPACT OF INFLATION
While it is difficult to determine the precise effects of inflation,
management does not believe inflation had a material impact on the financial
statements for the periods presented.
BUSINESS OF THE COMPANY
General. The Company operates four retail department stores in Cullman
Shopping Center in Cullman, Gadsden Mall in Gadsden and Premiere Place in
Prattville, Alabama and in Southgate Plaza in Corinth, Mississippi. The
Company's stores operate in a manner consistent with the business of the Belk
Companies described in the Proxy Statement/Prospectus. The stores are managed
out of the Kuhne/Greiner group office in Greenville, South Carolina.
In 1996, the Company sold the leases, fixed assets and inventory of its
stores in Talladega and Alexander City, Alabama to Peebles, Inc. The net
proceeds to the Company from the sale of these stores were $1,551,237. In 1997,
the Company closed its store in Tupelo, Mississippi and sold the lease and fixed
assets to Proffitts, Inc. The net proceeds to the Company from the sale of this
store were $1,749,076.
Facilities. Three of the Company's four store buildings are leased under
long-term leases and the Prattville store building was built on land leased by
the Company under a long-term lease. The leases have termination dates ranging
from 2002 through 2017. The floor area of the leased buildings ranges from
26,000 to 74,000 square feet and the Prattville building contains 51,000 square
feet of floor area. The stores at Cullman Shopping Center and Gadsden Mall were
expanded in 1997. The Company believes these facilities are adequate to meet its
current needs.
Competition. Specific competitors in the Company's market include McRae's,
Penney, Goody's and Wal-Mart.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
21
<PAGE> 1333
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)(f)(g)..................................... 47,176 43.3%
Thomas M. Belk, Jr. (Director and Executive Officer)
(c)(f)(g)(h).............................................. 34,234 31.4%
H. W. McKay Belk (Director and Executive Officer)
(c)(f)(g)(i).............................................. 34,433 31.6%
John R. Belk (Director and Executive Officer)
(c)(f)(g)(j).............................................. 34,189 31.4%
Sarah Belk Gambrell (Director) (d)(e)....................... 17,757 16.3%
Leroy Robinson (c).......................................... 7,864 7.2%
Katherine McKay Belk (c).................................... 9,349 8.6%
Katherine Belk Morris (c)(k)................................ 9,615 8.8%
Karl G. Hudson, Jr. (Director).............................. 291 *
Karl G. Hudson, III (Director).............................. 3,778 3.5%
John A. Kuhne (Director and Executive Officer) (l).......... 3,817 3.5%
R. E. Greiner (Director and Executive Officer).............. 0 *
Welch Bostick, Jr. (Executive Officer)...................... 0 *
Lucy S. Kuhne (m)(n)........................................ 11,041 10.1%
Kate Simpson (m)(n)......................................... 8,325 7.6%
Claire M. Russo (m)(n)...................................... 7,247 6.7%
Thomas M. Belk, Trustee U/A dated September 15, 1993........ 7,864 7.2%
Belk Enterprises, Inc....................................... 24,193 22.2%
All Directors and Executive Officers as a group (9
persons).................................................. 76,298 70.0%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Leroy Robinson, Katherine McKay Belk and Katherine Belk Morris -- 2801 West
Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk Gambrell -- 300 Cherokee
Road, Charlotte, N.C. 28207; Karl G. Hudson, Jr. -- 2416 White Oak Road,
Raleigh, N.C. 26709; Karl G. Hudson, III -- 5025 Edwards Mill Road, Raleigh,
N.C. 27612; John A. Kuhne, Lucy S. Kuhne, Claire E. Russo, R. E. Greiner and
Welch Bostick, Jr. -- 14 S. Main Street, Greenville, S.C. 29601; Kate
Simpson -- P.O. Box 17433, Greenville, S.C. 29606; Belk Enterprises, Inc. and
Thomas M. Belk, Trustee U/A dated September 15, 1993 -- 2801 West Tyvola Road,
Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 2,869 shares held by Montgomery Investment Company, of which John
M. Belk is the majority shareholder.
(b) Includes 1 share held by Mary Claudia Belk Irrevocable Trust dated 1/4/94.
Claudia W. Belk, the Trustee, is John M. Belk's wife.
22
<PAGE> 1334
(c) Includes 7,864 shares held by Thomas M. Belk, Trustee U/A dated September
15, 1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(d) Includes 855 shares held in several Trusts established by the Will of W. H.
Belk for the benefit of his children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(e) Includes 617 shares held in several Trusts established by the Will of Mary
I. Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(f) Includes 24,193 shares held by Belk Enterprises, Inc., and 178 shares held
by Hudson-Belk Company, which shares are voted by the members of the
Executive Committee of the Board of Directors of such Corporation, under
authority given by the directors of each such Corporation at the annual
meeting of directors held in March, 1997. The Executive Committee of each
such Corporation consists of John M. Belk, Thomas M. Belk, Jr., H. W. McKay
Belk and John R. Belk.
(g) Includes 400 shares held by J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
(h) Includes 304 shares held by Thomas M. Belk, Jr. as custodian for his minor
children.
(i) Includes 456 shares held by H. W. McKay Belk as custodian for his minor
children.
(j) Includes 152 shares held by John R. Belk as custodian for his minor
children.
(k) Includes 456 shares held by Katherine Belk Morris as custodian for her
minor children.
(l) Includes 3,817 shares held by John A. Kuhne's wife, Lucy S. Kuhne.
(m) Includes 3,782 shares held by the Estate of William Henry Belk Simpson.
Voting and investment power is shared by the Personal Representatives, who
are Kate Simpson, Lucy Kuhne and Claire Russo.
(n) Includes 3,442 shares held by Simpson Enterprises, Inc. Voting and
investment power is shared by the Personal Representatives of the Estate of
William Henry Belk Simpson, who are Kate Simpson, Lucy Kuhne and Claire
Russo.
23
<PAGE> 1335
INDEX TO HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of KPMG Peat Marwick LLP, Independent Auditors....... F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statements of Shareholders' Equity.......................... F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 1336
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
Belk of Miss., Inc.:
We have audited the accompanying balance sheet of Belk of Miss., Inc. as of
February 1, 1997, and the related statements of operations, shareholders' equity
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Belk of Miss., Inc. at
February 1, 1997, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Charlotte, North Carolina
November 14, 1997
F-2
<PAGE> 1337
BELK OF MISS., INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 469,120 $ 351,529 $ 245,816
Accounts receivable, net.............................. 5,190,920 5,440,289 4,632,144
Merchandise inventory................................. 6,574,923 3,893,210 7,555,486
Prepaid income taxes.................................. -- -- 85,234
Receivables from affiliates........................... -- 1,839,609 179,212
Deferred income taxes................................. 89,206 144,294 177,377
Prepaid expenses and other current assets............. 393,890 223,323 151,328
----------- ----------- -----------
Total current assets.................................... 12,718,059 11,892,254 13,026,597
Deferred income taxes................................... 695,682 134,851 165,768
Property and equipment, net............................. 2,269,298 955,802 6,273,603
Other noncurrent assets................................. 91,411 54,352 82,209
----------- ----------- -----------
Total assets............................................ $15,774,450 $13,037,259 $19,548,177
=========== =========== ===========
LIABILITIES, DEFERRED INCOME AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................... $ 1,632,799 $ 986,764 $ 1,975,289
Accrued expenses...................................... 412,647 371,368 611,078
Accrued income taxes.................................. -- 95,183 --
Payables to affiliates................................ 2,425,398 -- --
Current installments of long-term debt................ 1,025,000 -- 600,000
----------- ----------- -----------
Total current liabilities............................... 5,495,844 1,453,315 3,186,367
Long-term debt, excluding current installments.......... -- -- 4,400,000
Deferred compensation................................... 244,577 245,445 141,064
Other noncurrent liabilities............................ 63,758 63,967 63,967
----------- ----------- -----------
Total liabilities....................................... 5,804,179 1,762,727 7,791,398
----------- ----------- -----------
Deferred income......................................... 38,042 -- --
----------- ----------- -----------
Shareholders' equity:
Common stock; $1 par value; Class A authorized 300,000
shares; issued and outstanding 111,499 at February
3, 1996 and 108,923 at February 1, 1997 and
November 1, 1997; Class B authorized 6,000 shares;
issued and outstanding 0 shares.................... 111,499 108,923 108,923
Retained earnings..................................... 9,820,730 11,165,609 11,647,856
----------- ----------- -----------
Total shareholders' equity.............................. 9,932,229 11,274,532 11,756,779
----------- ----------- -----------
Total liabilities, deferred income and shareholders'
equity................................................ $15,774,450 $13,037,259 $19,548,177
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 1338
BELK OF MISS., INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
--------------------------------------- -------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues........................ $30,765,044 $30,286,164 $28,604,139 $19,784,642 $14,777,209
Cost of goods sold (including
occupancy and buying
expenses)..................... 21,517,951 21,040,504 19,653,443 13,544,219 9,884,820
Selling, general and
administrative expenses....... 9,297,146 9,322,184 7,825,952 6,008,796 4,077,555
----------- ----------- ----------- ----------- -----------
Income (loss) from operations... (50,053) (76,524) 1,124,744 231,627 814,834
Interest expense, net........... (407,929) (374,603) (216,621) (170,855) (38,287)
Gain on sale of property and
equipment..................... 39,775 34,073 1,288,053 -- --
Other income (expense), net..... (22,441) (46,992) (30,332) 2,689 (14,300)
----------- ----------- ----------- ----------- -----------
Income (loss) before income
taxes......................... (440,648) (464,046) 2,165,844 63,461 762,247
Income taxes.................... (346,387) (39,800) 610,433 16,000 280,000
----------- ----------- ----------- ----------- -----------
Net income (loss)............... $ (94,261) $ (424,246) $ 1,555,411 $ 47,461 $ 482,247
=========== =========== =========== =========== ===========
Earnings (loss) per share....... $ (0.85) $ (3.80) $ 14.24 $ 0.44 $ 4.43
=========== =========== =========== =========== ===========
Weighted average shares......... 111,499 111,499 109,245 109,352 108,923
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 1339
BELK OF MISS., INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
-------- ----------- -----------
<S> <C> <C> <C>
Balance at February 1, 1994 (unaudited)................... $111,499 $10,339,237 $10,450,736
Net loss (unaudited)...................................... -- (94,261) (94,261)
-------- ----------- -----------
Balance at January 31, 1995 (unaudited)................... 111,499 10,244,976 10,356,475
Net loss (unaudited)...................................... -- (424,246) (424,246)
-------- ----------- -----------
Balance at February 3, 1996............................... 111,499 9,820,730 9,932,229
Net income................................................ -- 1,555,411 1,555,411
Repurchase of stock (2,576 shares)........................ (2,576) (210,532) (213,108)
-------- ----------- -----------
Balance at February 1, 1997............................... 108,923 11,165,609 11,274,532
Net income (unaudited).................................... -- 482,247 482,247
-------- ----------- -----------
Balance at November 1, 1997 (unaudited)................... $108,923 $11,647,856 $11,756,779
======== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 1340
BELK OF MISS., INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
----------------------------------------- ---------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
------------ ------------ ----------- ------------ ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)..................... $ (94,261) $ (424,246) $ 1,555,411 $ 47,461 $ 482,247
Adjustments to reconcile net income
(loss) to net cash provided (used) by
operating activities:
Deferred income taxes................. (339,623) (86,375) 505,743 16,000 (64,000)
Deferred income....................... (41,338) (39,737) (38,042) (28,377) --
Depreciation and amortization......... 1,284,508 1,293,496 643,639 604,598 150,351
Gain on sale of property and
equipment........................... (39,775) (34,073) (1,288,053) -- --
(Increase) decrease in:
Accounts receivable................. 167,983 (100,387) (249,369) (15,230) 808,145
Merchandise inventory............... 281,927 (3,361) 2,681,713 143,146 (3,662,276)
Receivables from affiliates......... 7,800,005 -- (1,839,609) -- 1,660,397
Prepaid income taxes................ -- -- -- (9,507) (85,234)
Other assets........................ 184,653 280,294 207,626 155,920 44,138
Increase (decrease) in:
Accounts payable and accrued
expenses.......................... (815,463) (392,660) (687,314) 399,455 1,228,235
Payables to affiliates.............. (4,505,547) 213,872 (2,425,398) (710,441) --
Accrued income taxes................ (2,633) -- 95,183 -- (95,183)
Deferred compensation and other
liabilities....................... 42,234 40,017 1,077 (5,983) (104,381)
------------ ----------- ----------- ----------- -----------
Net cash provided (used) by operating
activities............................ 3,922,670 746,840 (837,393) 597,042 362,439
------------ ----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchases of property and equipment... (153,915) (52,614) (54,466) (15,429) (5,468,152)
Proceeds from sale of property and
equipment........................... 39,719 5,890 2,012,376 -- --
------------ ----------- ----------- ----------- -----------
Net cash provided (used) by investing
activities............................ (114,196) (46,724) 1,957,910 (15,429) (5,468,152)
------------ ----------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of long-term
debt................................ -- -- -- -- 5,000,000
Principal payments on long-term
debt................................ (3,719,846) (700,000) (1,025,000) (525,000) --
Repurchase of stock................... -- -- (213,108) (213,107) --
------------ ----------- ----------- ----------- -----------
Net cash provided (used) by financing
activities............................ (3,719,846) (700,000) (1,238,108) (738,107) 5,000,000
------------ ----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents........................... 88,628 116 (117,591) (156,494) (105,713)
Cash and cash equivalents at beginning
of period............................. 380,376 469,004 469,120 469,120 351,529
------------ ----------- ----------- ----------- -----------
Cash and cash equivalents at end of
period................................ $ 469,004 $ 469,120 $ 351,529 $ 312,626 $ 245,816
============ =========== =========== =========== ===========
Supplemental disclosures of cash flow
information:
Interest paid......................... $ 425,506 $ 393,566 $ 249,883 $ 178,130 $ 110,601
Income taxes paid..................... 26,723 2,285 6,400 1,250 592,700
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 1341
BELK OF MISS., INC.
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
COMPANY OPERATIONS
Belk of Miss., Inc. (the "Company") operates retail department stores in
Mississippi and Alabama.
FISCAL YEAR
Starting in fiscal year 1996, the Company's fiscal year ends on the
Saturday closest to each January 31. Fiscal years 1996 and 1997 ended on
February 3, 1996 and February 1, 1997 and included 368 and 365 days,
respectively. Fiscal year 1995 ended on Tuesday, January 31, 1995 and included
364 days.
UNAUDITED FINANCIAL STATEMENTS
The financial statements as of February 3, 1996 and for the years ended
January 31, 1995 and February 3, 1996, and as of and for the periods ended
November 2, 1996 and November 1, 1997 are unaudited. In the opinion of
management, such financial statements reflect all adjustments necessary to
present fairly the Company's financial position, results of operations and cash
flows. The financial statements for the interim periods ended November 2, 1996
and November 1, 1997 are not necessarily indicative of the results of operations
for a full fiscal year.
REVENUES
Revenues include sales from retail operations, net of returns.
COST OF GOODS SOLD
Cost of goods sold includes occupancy and buying expenses. Occupancy
expenses include rent, utilities and real estate taxes. Buying expenses include
payroll and travel expenses associated with the buying function.
MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market as
determined by the retail inventory method.
FINANCE CHARGES
Selling, general and administrative expenses in the statements of
operations are reduced by finance charge income arising from customer accounts
receivable. Finance charge revenue amounted to approximately $680,000, $641,000
and $735,000 in fiscal years 1995, 1996 and 1997, respectively.
PROPERTY AND EQUIPMENT, NET
Property and equipment owned by the Company is stated at cost less
accumulated depreciation. Depreciation is provided utilizing straight-line and
various accelerated methods over the shorter of estimated asset lives or related
lease terms.
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred income tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement bases
and the respective tax bases of the assets and liabilities and operating loss
and tax credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
F-7
<PAGE> 1342
BELK OF MISS., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized.
PRE-OPENING COSTS
Store pre-opening costs are expended as incurred.
CASH EQUIVALENTS
Cash equivalents include liquid investments with an original maturity of 90
days or less.
ADVERTISING
Advertising costs are expensed as incurred and amounted to $1,124,064,
$1,271,273 and $1,067,159 in fiscal years 1995, 1996 and 1997, respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(2) ACCOUNTS RECEIVABLE, NET
Customer receivables arise primarily under open-end revolving credit
accounts used to finance purchases of merchandise from the Company. These
accounts have various billing and payment structures, including varying minimum
payment levels and finance charge rates. Installments of deferred payment
accounts receivable maturing after one year are included in current assets in
accordance with industry practice.
The Company provides an allowance for doubtful accounts which is determined
based on a number of factors, including the risk characteristics of the
portfolio, historical charge-off patterns, and management judgment.
Accounts receivable, net consists of:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Customer receivables............................... $5,278,381 $5,591,164 $4,807,467
Other.............................................. 34,171 21,169 40,871
Less allowance for doubtful accounts............... (121,632) (172,044) (216,194)
---------- ---------- ----------
Accounts receivable, net........................... $5,190,920 $5,440,289 $4,632,144
========== ========== ==========
</TABLE>
F-8
<PAGE> 1343
BELK OF MISS., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Changes in allowance for doubtful accounts are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
--------------------------------------- -------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance, beginning of
period...................... $ 82,844 $ 83,181 $ 121,632 $ 121,632 $ 172,044
Charged to expense............ 153,876 170,672 274,214 153,797 278,586
Net uncollectible balances
written off................. (153,539) (132,221) (223,802) (153,797) (234,436)
--------- --------- --------- --------- ---------
Balance, end of period........ $ 83,181 $ 121,632 $ 172,044 $ 121,632 $ 216,194
========= ========= ========= ========= =========
</TABLE>
(3) PROPERTY AND EQUIPMENT, NET
Details of property and equipment are as follows:
<TABLE>
<CAPTION>
ESTIMATED FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
LIVES 1996 1997 1997
--------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Buildings.............................. 30-50 $ 1,742,108 $ 964,214 $ 3,739,802
Furniture, fixtures and equipment...... 5-7 7,085,314 4,335,701 6,569,351
Construction in progress............... N/A 4,369 62,471 521,121
----------- ----------- -----------
8,831,791 5,362,386 10,830,274
Less accumulated depreciation and
amortization......................... (6,562,493) (4,406,584) (4,556,671)
----------- ----------- -----------
Property and equipment, net............ $ 2,269,298 $ 955,802 $ 6,273,603
=========== =========== ===========
</TABLE>
(4) ACCRUED EXPENSES
Accrued expenses are comprised of the following:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Salaries, wages and employee benefits............... $118,470 $164,944 $232,950
Taxes, other than income............................ 99,850 89,069 132,931
Rent................................................ 66,978 49,574 29,271
Interest............................................ 2,177 2,522 13,965
Other............................................... 125,172 65,259 201,961
-------- -------- --------
$412,647 $371,368 $611,078
======== ======== ========
</TABLE>
F-9
<PAGE> 1344
BELK OF MISS., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(5) BORROWINGS
Long-term debt consists of the following:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Unsecured term loan agreement, due October 1996;
interest payable at 50 basis points above
LIBOR.......................................... $1,025,000 $ -- $ --
Unsecured term loan agreement, due January 2003;
interest payable at 80 basis points above LIBOR
(5.65% as of November 1, 1997)................. -- -- 5,000,000
---------- ---------- ----------
1,025,000 -- 5,000,000
Less current installments........................ (1,025,000) -- (600,000)
---------- ---------- ----------
Long-term debt excluding current installments.... $ -- $ -- $4,400,000
========== ========== ==========
</TABLE>
The Company's loan agreement places restrictions on mergers,
consolidations, acquisitions, sales of assets, and debt. It also contains
certain financial requirements including tangible net worth and cash flow
coverage. The Company was in compliance with such restrictions at November 1,
1997 except the tangible net worth and cash flow coverage provisions which are
not applicable until the fiscal year ending January 31, 1998.
(6) LEASES
The Company leases certain stores, warehouse facilities and equipment. The
majority of these leases will expire within the next 12 years. The leases
usually contain renewal options and provide for payment by the lessee of real
estate taxes and other expenses, and, in certain instances, increased rentals
based on percentage of sales.
Future minimum lease payments under noncancelable leases as of February 1,
1997 are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR OPERATING
----------- ----------
<S> <C>
1998........................................................ $ 389,274
1999........................................................ 389,274
2000........................................................ 389,274
2001........................................................ 389,274
2002........................................................ 389,274
After 2002.................................................. 2,039,543
----------
Total....................................................... $3,985,913
==========
</TABLE>
Rental expense for all operating leases consists of the following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Buildings:
Minimum rentals................................... $896,538 $820,806 $779,288
Contingent rentals................................ 73,569 69,717 55,670
Equipment........................................... 27,040 14,828 9,991
-------- -------- --------
Total rental expense................................ $997,147 $905,351 $844,949
======== ======== ========
</TABLE>
F-10
<PAGE> 1345
BELK OF MISS., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Contingent rentals are determined on the basis of a percentage of sales in
excess of stipulated minimums for certain store facilities.
(7) INCOME TAXES
Federal and state income tax expense (benefit) is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
---------------------------------------- -------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
------------ ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
Federal....................... $ 1,096 $ 43,334 $ 52,900 $ -- $298,000
State......................... (7,860) 3,241 51,790 -- 46,000
--------- -------- -------- ------- --------
(6,764) 46,575 104,690 -- 344,000
Deferred:
Federal....................... (193,910) (63,970) 426,576 16,000 (55,000)
State......................... (145,713) (22,405) 79,167 -- (9,000)
--------- -------- -------- ------- --------
(339,623) (86,375) 505,743 16,000 (64,000)
--------- -------- -------- ------- --------
Income taxes.................... $(346,387) $(39,800) $610,433 $16,000 $280,000
========= ======== ======== ======= ========
</TABLE>
A reconciliation between income taxes computed using the effective income
tax rate and the federal statutory income tax rate of 34% is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Income tax at the statutory federal rate............ $(149,820) $(157,776) $ 736,387
State income taxes, net of federal income tax
benefit........................................... (14,541) (16,067) 70,842
Permanent differences............................... (15,185) (5,584) (4,524)
Change in valuation allowance....................... (185,709) -- --
Graduated rate difference........................... 39,658 58,006 (129,951)
Revaluation of deferred taxes....................... (15,401) 68,277 (60,846)
Other............................................... (5,389) 13,344 (1,475)
--------- --------- ---------
Income taxes........................................ $(346,387) $ (39,800) $ 610,433
========= ========= =========
</TABLE>
F-11
<PAGE> 1346
BELK OF MISS., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Deferred taxes based upon differences between the financial statement and
tax bases of assets and liabilities and available tax carryforwards consist of:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1966 1997
----------- -----------
(UNAUDITED)
<S> <C> <C>
Deferred tax assets:
Tax carryovers............................................ $673,519 $100,416
Benefit plan costs........................................ 77,982 99,161
Allowance for doubtful accounts........................... 30,763 54,353
Inventory capitalization.................................. 39,925 30,507
Other..................................................... 9,621 17,114
-------- --------
Gross deferred tax assets................................... 831,810 301,551
-------- --------
Deferred tax liabilities:
Markdown allowance........................................ 25,894 22,406
Prepaid pension cost...................................... 8,628 --
Other..................................................... 12,400 --
-------- --------
Gross deferred tax liabilities.............................. 46,922 22,406
-------- --------
Net deferred tax assets..................................... $784,888 $279,145
======== ========
</TABLE>
At February 1, 1997, the Company has alternative minimum tax credit
carryforwards of approximately $100,000 which are available to reduce future
federal regular income taxes, if any, over an indefinite period.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the temporary differences becoming deductible. Management
considers the scheduled reversals of deferred tax liabilities, projected future
income, and tax planning strategies in making this assessment.
(8) BENEFIT PLANS
The Company participates in the Belk Pension Plan, a defined benefit
multi-employer plan that covers substantially all of the employees of the Belk
companies. Pension expense allocated to the Company was $23,017, $26,510 and
$13,770 for fiscal years 1995, 1996 and 1997, respectively. Because the Belk
Pension Plan is a multi-employer plan, allocation of plan assets to the Company
is not practical.
The Company also participates in the Belk Employees' Group Medical Plan
that provides medical benefits to substantially all employees of the Belk
companies. This Plan is "self-funded" for medical benefits through a 501(c)(9)
Trust. The Company also participates in the Group Life Insurance Plan that
provides life insurance to its employees, and is fully insured through a
contract issued by an insurance company. Contributions by the Company under the
Belk Employees' Group Medical Plan and the Group Life Insurance Plan amounted to
approximately $213,000, $205,000 and $167,000 in fiscal years 1995, 1996 and
1997, respectively.
The Company participates in the Belk Profit Sharing Plan, a contributory,
defined contribution multi-employer plan that provides benefits for
substantially all employees of the Belk companies. The cost of the plan
generally represents 10% of profits, as defined, and amounted to $0, $0 and
$105,421 in fiscal years 1995, 1996 and 1997, respectively.
Certain eligible employes also participate in a non-qualified Deferred
Compensation Plan (DCP). Participants in the plan have elected to defer a
portion of their compensation subject to certain limitations prescribed by the
DCP. The Company is required to pay interest on the employees' deferred
compensation at
F-12
<PAGE> 1347
BELK OF MISS., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
various rates between 9% and 15%. Total interest expense related to this plan
and charged to operations was $29,365, $31,889 and $31,146, in fiscal years
1995, 1996 and 1997, respectively.
The Company provides postretirement benefits to certain retired employees
in the form of medical and life insurance premiums. The Company recorded
approximately $23,000, $26,000 and $25,000 as selling, general and
administrative expense in the fiscal years 1995, 1996 and 1997 respectively.
(9) RELATED PARTY TRANSACTIONS
The Belk Center, Inc. services the Company's customer accounts receivable.
The Company paid The Belk Center, Inc. approximately $396,000, $450,000 and
$405,000 during fiscal years 1995, 1996 and 1997, respectively, for these
services.
Various other selling, general, administrative and transaction processing
services are provided by Belk Stores Services, Inc. ("BSS"). The Company paid
BSS approximately $595,000, $702,000 and $547,000 during fiscal years 1995, 1996
and 1997, respectively, for these services, not including the transaction
processing services. The Company paid approximately $437,000, $494,000 and
$435,000 during fiscal years 1995, 1996 and 1997, respectively for transaction
processing fees.
The Company had a demand deposit with an affiliated company at February 3,
1996 and February 1, 1997 of $209,000 and $37,000, respectively, which is
included in cash and cash equivalents in the accompanying balance sheets.
The Company may participate in operational, investing and financing
activities with other Belk companies.
(10) FAIR VALUE OF FINANCIAL INSTRUMENTS
For financial instruments which are short-term in nature, such as cash and
cash equivalents, accounts receivable, receivables from affiliates, accounts
payable, payables to affiliates and accrued expenses, carrying values
approximate fair values. The carrying values of the Company's variable rate
long-term debt are reasonable estimates of fair value.
F-13
<PAGE> 1348
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
TITLE 79, CHAPTER 4
MISSISSIPPI BUSINESS CORPORATIONS ACT
STATE OF MISSISSIPPI
ARTICLE 13
DISSENTERS' RIGHTS
<TABLE>
<CAPTION>
BEGINNING
SECTION
-----------
<S> <C> <C>
SUBARTICLE A. Right to Dissent and Obtain Payment for Shares.............. 79-4-13.01
SUBARTICLE B. Procedure for Exercise of Dissenters' Rights................ 79-4-31.20
SUBARTICLE C. Judicial Appraisal of Shares................................ 79-4-13.30
</TABLE>
SUBARTICLE A
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
<TABLE>
<CAPTION>
SECTION
- -------
<S> <C>
79-4-13.01. Definitions.
79-4-13.02. Right to dissent.
79-4-13.03. Dissent by nominees and beneficial owners.
</TABLE>
SEC. 79-4-13.01. DEFINITIONS.
In this article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Section 79-4-13.02 and who exercises that right when and
in the manner required by Sections 79-4-13.20 through 79-4-13.28.
(3) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
A-1
<PAGE> 1349
SEC. 79-4-13.02. RIGHT TO DISSENT.
(a) A Shareholder is entitled to dissent from, and obtain payment of the
fair value of his shares in the event of, any of the following corporate
actions:
(1) Consummation of a plan of merger to which the corporation is a
party (i) if shareholder approval is required for the merger by Section
79-4-11.03 or the articles of incorporation and the shareholder is entitled
to vote on the merger, or (ii) if the corporation is a subsidiary that is
merged with its parent under Section 79-4-11.04;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be distributed to
the shareholders within one (1) year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) Alters or abolishes a preferential right of the shares;
(ii) Creates, alters or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(iii) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(iv) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights; or
(v) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fraction share so created is to be acquired
for cash under Section 79-4-6.04; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) Nothing in subsection (a)(4) shall entitle a shareholder of a
corporation to dissent and obtain payment for his shares as a result of an
amendment of the articles of incorporation exclusively for the purpose of either
(i) making such corporation subject to application of the Mississippi Control
Share Act, or (ii) making such act inapplicable to a control share acquisition
of such corporation.
(c) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
SEC. 79-4-13.03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
A-2
<PAGE> 1350
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder or over which he has power to direct the vote.
SUBARTICLE B
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
<TABLE>
<CAPTION>
SECTION
- -------
<S> <C>
79-4-13.20. Notice of dissenters' rights.
79-4-13.21. Notice of intent to demand payment.
79-4-13.22. Dissenters' notice.
79-4-13.23. Duty to demand payment.
79-4-13.24. Share restrictions.
79-4-13.25. Payment.
79-4-13.26. Failure to take action.
79-4-13.27. After-acquired shares.
79-4-13.28. Procedure if shareholder dissatisfied with payment or offer.
</TABLE>
SEC. 79-4-13.20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Section
79-4-13.02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under Section
79-4-13.02 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Section
79-4-13.22.
SEC. 79-4-13.21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Section
79-4-13.02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights (1) must deliver to the corporation before
the vote is taken written notice of his intent to demand payment for his shares
if the proposed action is effectuated, and (2) must not vote his shares in favor
of the proposed action.
(b) A shareholder who does not satisfy the requirement of subsection (a) is
not entitled to payment for his shares under this article.
SEC. 79-4-13.22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Section
79-4-13.02 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Section 79-4-13.21.
(b) The dissenters' notice must be sent no later than ten (10) days after
the corporate action was taken, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
A-3
<PAGE> 1351
(3) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not he acquired beneficial ownership
of the shares before that date;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty (30) nor more than sixty
(60) days after the date the subsection (a) notice is delivered; and
(5) Be accompanied by a copy of this article.
SEC. 79-4-13.23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in Section 79-4-13.22
must demand payment, certify whether he acquired beneficial ownership of the
shares before the date required to be set forth in the dissenter's notice
pursuant to Section 79-4-13.22(b)(3), and deposit his certificate in accordance
with the terms of the notice.
(b) The shareholder who demands payment and deposits his shares under
subsection (a) retains all other rights of a shareholder until these rights are
canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
SEC. 79-4-13.24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertified shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Section 79-4-13.26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 79-4-13.25. PAYMENT.
(a) Except as provided in Section 79-4-13.27, as soon as the proposed
corporate action is taken, or upon receipt of a payment demand, the corporation
shall pay each dissenter who complied with Section 79-4-13.23 the amount the
corporation estimates to be the fair value of his shares, plus accrued interest.
(b) The payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen (16) months before the date of payment, an
income statement for that year, a statement of changes in shareholders'
equity for that year, and the latest available interim financial
statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenters' right to demand payment under
Section 79-4-13.28; and
(5) A copy of this article.
SEC. 79-4-13.26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within sixty (60)
days after the date set for demanding payment and depositing share certificates,
the corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
A-4
<PAGE> 1352
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Section 79-4-13.22 and repeat the payment demand
procedure.
SEC. 79-4-13.27. AFTER-ACQUIRED SHARES.
(a) A corporation may elect to withhold payment required by Section
79-4-13.25 from a dissenter unless he was the beneficial owner of the shares
before the date set forth in the dissenters' notice as the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a), after taking the proposed corporate action, it shall estimate
the fair value of the shares, plus accrued interest, and shall pay this amount
to each dissenter who agrees to accept in full satisfaction of his demand. The
corporation shall send with its offer a statement of its estimate of the fair
value of the shares, an explanation of how the interest was calculated and a
statement of the dissenter's right to demand payment under Section 79-4-13.28.
SEC. 79-4-13.28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate (less any payment under Section 79-4-13.25), or reject the
corporation's offer under Section 79-13.27 and demand payment of the fair value
of his shares and interest due, if:
(1) The dissenter believes that the amount paid under Section
79-4-13.25 or offered under Section 79-4-13.27 is less than the fair value
of his shares or that the interest due is incorrectly calculated;
(2) The corporation fails to make payment under Section 79-4-13.25
within sixty (60) days after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty (60) days after the date set
for demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection (a)
within thirty (30) days after the corporation made or offered payment for his
shares.
SUBARTICLE C
JUDICIAL APPRAISAL OF SHARES
<TABLE>
<CAPTION>
SECTION
- -------
<S> <C>
79-4-13.30. Court action.
79-4-13.31. Court costs and counsel fees.
</TABLE>
SEC. 79-4-13.30. COURT ACTION.
(a) If a demand for payment under Section 79-4-13.28 remains unsettled, the
corporation shall commence a proceeding within sixty (60) days after receiving
the payment demand and petition the court to determine the fair value of the
shares and accrued interest. If the corporation does not commence the proceeding
within the 60-day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the chancery court of
the county where a corporation's principal office (or, if none in this state,
its registered office) is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in
A-5
<PAGE> 1353
this state where the registered office of the domestic corporation merged with
or whose shares were acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters (whether or not residents of
this state) whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decision on the question
of fair value. The appraisers have the powers described in the order appointing
them, or in any amendment to it. The dissenters are entitled to the same
discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment
(1) for the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the corporation, or (2) for
the fair value, plus accrued interest, of his after-acquired shares for which
the corporation elected to withhold payment under Section 79-4-13.27.
SEC. 79-4-13.31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Section 79-4-13.30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously or not
in good faith in demanding payment under Section 79-4-13.28.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Sections 79-4-13.20 through 79-4-13.28; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 1354
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement........... $28,604,139 $1,555,411 $ 2,382,465 $ 3,026,104 $11,274,532
Adjustments to eliminate less than
wholly-owned subsidiaries........... -- -- -- -- --
----------- ---------- ----------- ----------- -----------
Adjusted Shareholders' Statement...... $28,604,139 1,555,411 2,382,465 3,026,104 11,274,532
=========== ---------- ----------- ----------- -----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E....... (925,021) (1,288,053) (1,288,053)
Gain/loss on sale of securities..... -- -- --
Impairment loss..................... -- -- --
Equity in earnings of unconsolidated
subsidiaries...................... -- -- --
Gain/loss on discontinued
operations........................ -- -- --
Adjustment to tax expense........... -- -- --
---------- ----------- -----------
Total non-operating items............. (925,021) (1,288,053) (1,288,053)
---------- ----------- -----------
Other Adjustments:
Adjustment for dividends received
from other Belk entities.......... -- -- -- --
Adjustment for ownership in other
Belk entities..................... -- -- -- (6,670)
---------- ----------- ----------- -----------
Per Model............................. $ 630,390 $ 1,094,412 $ 1,738,051 $11,267,862
========== =========== =========== ===========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents........... $ (371,302)
Negative cash balances
reclassified to accounts
payable........................ 19,773
Receivables from affiliates,
net............................ (1,839,609)
Loans receivable from affiliates,
net............................ (7,367)
Liabilities
Notes payable..................... --
Current installments of long-term
debt........................... --
Current portion of obligations
under capital leases........... --
Payables to affiliates, net....... --
Long-term debt, excluding current
installments................... --
Obligations under capital leases,
excluding current portion...... --
Loans payable to affiliates,
net............................ --
-----------
Net debt (cash)....................... (2,198,505)
Adjustments to eliminate less than
wholly-owned subsidiaries........... --
-----------
Per Model............................. $(2,198,505)
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 1355
SUPPLEMENT NO. 31
<PAGE> 1356
BELK OF MISS., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 11:20 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
-------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 31
<PAGE> 1357
BELK DEPARTMENT STORE OF AHOSKIE, N.C., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk Department Store of Ahoskie, N.C., Inc.
(the "Company"), to be held on April 15, 1998, at 5:00 p.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 52.3994 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 131,313 shares of New Belk Class A Common Stock which
will represent approximately 0.2189% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(32)
<PAGE> 1358
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 1359
BELK DEPARTMENT STORE OF AHOSKIE, N.C., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK DEPARTMENT STORE OF AHOSKIE, N.C., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk Department Store of Ahoskie, N.C., Inc. (the "Company") will
be held on April 15, 1998, at 5:00 p.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-
4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 52.3994 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 1360
BELK DEPARTMENT STORE OF AHOSKIE, N.C., INC.
SUPPLEMENT NO. 32
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 32 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK DEPARTMENT
STORE OF AHOSKIE, N.C., INC. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES
THE DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION
CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE IN THE
REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN THE
REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND
THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE
ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED
TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS
SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 16
SELECTED HISTORICAL FINANCIAL INFORMATION................... 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 18
BUSINESS OF THE COMPANY..................................... 18
SECURITY OWNERSHIP OF THE COMPANY........................... 19
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION.................................. B-1
</TABLE>
<PAGE> 1361
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1937. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 5:00 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 52.3994 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 3,762 shares of Common Stock
outstanding held of record by 16 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 88.7% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 1362
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
" -- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization
-- Interest of Certain Persons in the Reorganization" in the Proxy
Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 4,300 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock
3
<PAGE> 1363
held by a New Belk Stockholder who is a Class A Permitted Holder will also
automatically convert into New Belk Class B Common Stock in the event that such
New Belk Stockholder no longer meets the requirements of a Class A Permitted
Holder. New Belk Class B Common Stock has no conversion rights. The Company
Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving
4
<PAGE> 1364
the distribution. The Company Bylaws provide that the Board of Directors of the
Company (the "Company Board") may from time to time declare dividends on the
Company's outstanding shares in the manner and upon the terms and conditions
provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. DGCL requires that
an amendment of the certificate of incorporation of a corporation be adopted by
the board of directors and the holders of a majority of the outstanding shares
of stock entitled to vote thereon. The holders of the outstanding shares of a
class are entitled to vote as a separate class on a proposed amendment that
would increase or decrease the aggregate number of authorized shares of such
class, increase or decrease the par value of the shares of such class or alter
or change the powers, preferences or special rights of the shares of such class
so as to affect them adversely. If any proposed amendment would alter or change
the powers, preferences or special rights of one or more series of any class so
as to affect them adversely, but would not so affect the entire class, then only
the shares of the series so affected by the amendment will be considered a
separate class for purposes of voting by classes. The New Belk Certificate is
consistent with the foregoing provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the
5
<PAGE> 1365
shareholders and approved (i) by a majority (unless the articles of
incorporation, a bylaw adopted by the shareholders or the board of directors
require a greater vote or a vote by voting groups) of the votes entitled to be
cast on the amendment by any voting group with respect to which the amendment
would create dissenters' rights and (ii) when a quorum is present, by all other
voting groups entitled to vote on the amendment through casting more affirmative
than opposing votes. As under the DGCL, the holders of the outstanding shares of
a class or series are entitled to vote as a separate voting group (if
shareholder voting is otherwise required by the NCBCA) on a proposed amendment
if the amendment would change certain fundamental rights and preferences of that
class or series. The Company Articles do not specify a greater voting
requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power, nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has power, by
vote of a majority of all the directors and without the assent or vote of the
shareholders, to make, alter, amend and rescind the bylaws of the Company.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without prior notice, if all
holders of outstanding shares entitled to vote on such action sign the written
consent(s) describing such action. The Company Bylaws and Company Articles do
not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding
6
<PAGE> 1366
having the right to vote for such directors, order an election to be held to
fill any such vacancies or newly created directorships or to replace the
directors chosen by the directors then in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more than 30% during any 12-month period. The
articles of incorporation or bylaws may establish a variable range for the size
of the board of directors by fixing a minimum and maximum number of directors.
If a variable range is established, the number of directors may be fixed or
changed from time to time, within the minimum and maximum, by the shareholders
or (unless the articles of incorporation or a shareholders' agreement shall
otherwise provide) the board of directors. After shares are issued, only the
shareholders may change the range for the size of the board or change from a
fixed to a variable-range size board or vice versa. The Company Bylaws require
the Company Board to consist of at least three, but no more than 15, members.
7
<PAGE> 1367
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the
8
<PAGE> 1368
disinterested directors or committee authorized, approved or ratified the
transaction; (ii) the material facts of the transaction and the director's
interest were disclosed or known to the shareholders entitled to vote and the
disinterested shares authorized, approved or ratified the transaction; or (iii)
the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any transaction from which the director derived an improper
personal benefit or (iv) acts or omissions occurring prior to the date the
provisions became effective.
9
<PAGE> 1369
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested stockholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder,
except in certain circumstances; (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested stockholder, except
in certain circumstances; or (v) any receipt by the interested stockholder of
the benefit of any loans, advances, guarantees, pledges or other financial
benefits (other than those expressly permitted in (i) through (iv) above)
provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation
10
<PAGE> 1370
or (ii) an affiliate or associate of the corporation who within three years of
the date in question was the direct or indirect owner of at least 15% of the
voting power of any class or series of the then outstanding stock of the
corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other
11
<PAGE> 1371
books and records and to make copies or extracts therefrom. A proper purpose
means a purpose reasonably related to such person's interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any final action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates must be deposited,
(iii) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the Payment Demand is received, (iv) set a date
by which the Surviving Corporation must receive the Payment Demand, which date
may not be fewer than 30 nor more than 60 days after the date the
12
<PAGE> 1372
Dissenters' Notice is mailed and (v) be accompanied by a copy of Article 13. A
Shareholder who is sent a Dissenters' Notice and who wishes to assert
dissenters' rights must demand payment and deposit his certificates in
accordance with the terms of the Dissenters' Notice. A Shareholder who demands
payment and deposit his certificates in accordance with the terms of the
Dissenters' Notice retains all other rights of a Shareholder until these rights
are canceled or modified by the consummation and effectiveness of the Merger. A
Shareholder who does not demand payments or deposit his certificates in
accordance with the terms of the Dissenters' Notice will not be entitled to
payment for his shares under the NCBCA. If any such holder of Common Stock fails
to perfect or shall have effectively withdrawn or lost such right, each share of
such holder's Common Stock will thereupon be deemed to have been converted into
and to have become, as of the Effective Time, the right to receive, without any
interest thereon, the number of shares of New Belk Class A Common Stock such
Shareholder is otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such
13
<PAGE> 1373
Shareholder dissents and such Shareholder's other shares were registered in the
names of different shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period")multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on the November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $4,061,253 $4,061,253 0.6 $ (808,224) $3,244,976
EBITDA............... 142,699 142,699 7 (808,224) 1,807,117
EBIT................. 16,447 16,447 10 (808,224) 972,694
Net Income........... 39,365 39,365 15 -- 590,475
Book Equity.......... 2,958,875 2,793,648 1 -- 2,793,648
</TABLE>
14
<PAGE> 1374
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk Department Store
of Clinton, N.C.,
Inc. 3.5403% X $11,043,990 = $ 390,990
Belk of Jacksonville,
N.C., Inc. .5453% X 29,859,959 = 162,826
----------
Total $ 553,817
==========
Relative Operating Value of Company $3,244,977
Relative Operating Value of Other Companies Owned by Company + 553,817
----------
Total Relative Value of Company = $3,798,793
==========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Brothers Company 23.6576% X $3,798,793 = $ 898,703
Belk Enterprises,
Inc. 9.7289% X 3,798,793 = 369,581
----------
Total $1,268,284
==========
Total Relative Value of Company $3,798,793
Total Relative Value of Company Owned by Other Belk Companies - 1,268,284
----------
Net Relative Value of Company = $2,530,509
==========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$2,530,509 / $1,156,226,577 = .2189%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.2189% X 59,998,834) / 2,506 = 52.3994
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
15
<PAGE> 1375
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 10.36
Dividends(2).............................................. 5.05
Book value per share(3)................................... 786.52
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 50.30
Dividends(2).............................................. 13.62
Book value per share...................................... 656.04
</TABLE>
- ---------------
(1) Based on 3,798.67 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 3,762.00 shares
of Common Stock, the number of shares of Common Stock outstanding at the end
of the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
16
<PAGE> 1376
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $4,171 $4,163 $4,061
Net income.................................................. 140 22 39
Per common share
Net income (loss)(1)...................................... 36.77 5.78 10.36
Dividends................................................. 7.54 7.54 5.05
Book value(2)............................................. 783.06 781.30 786.52
Total assets................................................ 3,366 3,225 3,354
Shareholders' Equity........................................ 2,977 2,971 2,959
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $ 2,851 $ 2,833
Income from operations...................................... 86 96
</TABLE>
- ---------------
(1) Based on 3,812, 3,802 and 3,798.67 shares of Common Stock, the weighted
average number of shares of Common Stock outstanding for the years ended
January 31, 1995, February 3, 1996 and February 1, 1997, respectively.
(2) Based on 3,802, 3,802 and 3,762 shares of Common Stock outstanding as of
January 31, 1995, February 3, 1996 and February 1, 1997, respectively.
17
<PAGE> 1377
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
To the extent a discussion of the financial condition and results of
operations of the Company for any of the fiscal years ended January 31, 1995,
February 3, 1996 or February 1, 1997 or for either of the nine-month periods
ended November 2, 1996 or November 1, 1997 is necessary to identify certain
trends or conditions that differ from the combined Belk Companies and that are
material to Shareholders' understanding of the financial condition or results of
operations of the Company, such discussion is included below. The discussion
which follows is based upon and should be read in conjunction with the
historical financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus Supplement.
Other income (expense), net decreased in fiscal year 1997 compared to
fiscal year 1996 due to approximately $100,000 of legal fees and settlement
costs incurred regarding an underground fuel storage tank located on property
formerly owned by the Company. See further discussion under "Business of the
Company."
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in the Ahoskie
Commons Shopping Center in Ahoskie, North Carolina. The Company's store operates
in a manner consistent with the business of the Belk Companies described in the
Proxy Statement/Prospectus. The store is managed out of the Howard group office
in Fayetteville, North Carolina.
Facilities. The Company leases its store building, which contains
approximately 46,000 square feet of floor area. The current term of the lease
expires in 2008. The Company believes the facility is adequate for its current
needs.
Competition. The Company's principal competitor in the market is Wal-Mart.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations. The Company recently was a party to
litigation regarding an underground fuel oil storage tank located on property
formerly owned by the Company. The litigation was settled in January, 1997.
Under the settlement agreement, the Company agreed to pay approximately $36,000
in exchange for the release of all claims against the Company based on alleged
contamination from the underground tank. The Company also agreed to pay for half
of any future costs for monitoring, assessment or remediation work required by
any state or federal environmental authority.
18
<PAGE> 1378
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)(f)........................................ 2,644 70.3%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(c)(e)(f).............................................. 2,124 56.5%
H. W. McKay Belk (Director and Executive Officer)
(b)(c)(e)(f).............................................. 2,128 56.6%
John R. Belk (Director and Executive Officer)
(b)(c)(e)(f).............................................. 2,124 56.5%
Henderson Belk (Director) (d)............................... 4 *
Sarah Belk Gambrell (Director) (d).......................... 394 10.5%
Troy M. Howard (Director and Executive Officer)............. 0 *
Katherine McKay Belk (b)(c)................................. 832 22.1%
Katherine Belk Morris (b)(c)................................ 872 23.2%
Sarah Gambrell Knight....................................... 212 5.6%
Leroy Robinson (b)(c)....................................... 768 20.4%
William R. Young (Executive Officer)........................ 0 *
Belk Enterprises, Inc....................................... 366 9.7%
J.V. Properties............................................. 890 23.7%
All Directors and Executive Officers as a group (7
persons).................................................. 3,338 88.7%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business addresses for the beneficial owners, directors and/or officers
are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson, Katherine McKay Belk and Katherine Belk
Morris -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk
Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207; Sarah Gambrell
Knight -- 810 Colville Road, Charlotte, N.C. 28207; Troy M. Howard and William
R. Young -- 4525 Camp Ground Road, Fayetteville, N.C. 28314; Belk Enterprises,
Inc. and J.V. Properties -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 556 shares held by Montgomery Investment Company, of which John M.
Belk is the majority shareholder.
(b) Includes 624 shares held by Brothers Investment Company, which corporation
is equally owned by John M. Belk and the Estate of Thomas M. Belk. Voting
and investment power is shared by John M. Belk, Katherine McKay Belk,
Katherine Belk Morris, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk
and Leroy Robinson.
(c) Includes 144 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(d) Includes 4 shares held in several Trusts established by the Will of Mary I.
Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power
19
<PAGE> 1379
of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson Belk
is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H. Belk,
Jr. and Irwin Belk.
(e) Includes 366 shares held by Belk Enterprises, Inc., which shares are voted
by the members of the Executive Committee of the Board of Directors of such
Corporation, under authority given by the directors of such Corporation at
the annual meeting of directors held in March, 1997. The Executive
Committee of such Corporation consists of John M. Belk, Thomas M. Belk,
Jr., H. W. McKay Belk and John R. Belk.
(f) Includes 890 shares held by J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
20
<PAGE> 1380
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 1381
BELK DEPARTMENT STORE OF AHOSKIE, N.C., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 47,526 $ 55,144
Accounts receivable, net.................................. 703,509 822,349
Merchandise inventory..................................... 880,899 975,717
Receivable from affiliates, net........................... 138,851 248,860
Refundable income taxes................................... 27,805 --
Deferred income taxes..................................... 13,949 32,188
Other..................................................... 48,985 46,022
---------- ----------
Total current assets........................................ 1,861,524 2,180,280
Loans receivable from affiliates, net....................... 754,221 504,221
Investments................................................. 527 165,227
Property, plant and equipment, net.......................... 584,996 470,305
Deferred income taxes....................................... -- 12,891
Other noncurrent assets..................................... 23,772 20,687
---------- ----------
$3,225,040 $3,353,611
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 226,265 $ 314,999
Accrued income taxes...................................... -- 52,424
---------- ----------
Total current liabilities................................... 226,265 367,423
Deferred income taxes....................................... 6,076 --
Other noncurrent liabilities................................ 22,179 27,314
---------- ----------
Total liabilities........................................... 254,520 394,737
Shareholders' equity:
Common stock.............................................. 380,200 376,200
Retained earnings......................................... 2,590,320 2,582,674
---------- ----------
Total shareholders' equity.................................. 2,970,520 2,958,874
---------- ----------
$3,225,040 $3,353,611
========== ==========
</TABLE>
F-2
<PAGE> 1382
BELK DEPARTMENT STORE OF AHOSKIE N.C., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $4,171,448 $4,163,455 $4,061,252
Operating costs and expenses............................... 4,002,592 4,143,288 3,900,207
---------- ---------- ----------
Income from operations..................................... 168,856 20,167 161,045
---------- ---------- ----------
Other income (expense):
Interest, net............................................ 24,250 44,562 42,786
Gain (loss) on disposal of property, plant and
equipment............................................. -- 3,700 --
Miscellaneous, net....................................... (13,689) (39,706) (144,599)
---------- ---------- ----------
Total other expense, net................................... 10,561 8,556 (101,813)
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 179,417 28,723 59,232
Income tax expense (benefit)............................... 39,254 6,733 19,868
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 140,163 21,990 39,364
Net earnings............................................... 140,163 21,990 39,364
Retained earnings at beginning of period................... 2,498,423 2,596,997 2,590,320
Dividends paid............................................. (28,665) (28,667) (19,010)
Purchase of treasury stock................................. (12,924) -- (28,000)
---------- ---------- ----------
Retained earnings at end of period......................... $2,596,997 $2,590,320 $2,582,674
========== ========== ==========
</TABLE>
F-3
<PAGE> 1383
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 1384
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 1385
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13.
DISSENTERS' RIGHTS.
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
A-1
<PAGE> 1386
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares; (ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (iv) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes; (v)
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional shares so created is to be acquired by cash under
G.S. 55-6-04; (vi) changes the corporation into a nonprofit corporation or
cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 1387
SEC.SEC. 55-13-04 TO 55-13-19. Reserved for future codification purposes.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 1388
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 1389
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 1390
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 1391
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
---------- ---------- ------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement.................... $4,061,253 $39,365 $16,447 $142,699 $2,958,875
Adjustments to eliminate less than wholly-owned
subsidiaries................................. -- -- -- -- --
---------- ------- ------- -------- ----------
Adjusted Shareholders' Statement............... $4,061,253 39,365 16,447 142,699 2,958,875
========== ------- ------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E................ -- -- --
Gain/loss on sale of securities.............. -- -- --
Impairment loss.............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries............................... -- -- --
Gain/loss on discontinued operations......... -- -- --
Adjustment to tax expense.................... -- -- -- --
------- ------- --------
Total non-operating items...................... -- -- --
------- ------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities.............................. -- -- --
Adjustment for ownership in other Belk
entities................................... (165,227)
------- ------- -------- ----------
Per Model...................................... $39,365 $16,447 $142,699 $2,793,648
======= ======= ======== ==========
COMPONENTS OF NET DEBT (CASH) PER SHAREHOLDERS'
STATEMENT
Assets
Cash & cash equivalents.................... $ (55,143)
Negative cash balances reclassified to
accounts payable......................... --
Receivables from affiliates, net........... (248,860)
Loans receivable from affiliates, net...... (504,221)
Liabilities
Notes payable.............................. --
Current installments of long-term debt..... --
Current portion of obligations under
capital leases........................... --
Payables to affiliates, net................ --
Long-term debt, excluding current
installments............................. --
Obligations under capital leases, excluding
current portion.......................... --
Loans payable to affiliates, net........... --
----------
Net debt (cash)................................ (808,224)
Adjustments to eliminate less than wholly-owned
subsidiaries................................. --
----------
Per Model...................................... $ (808,224)
==========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 1392
SUPPLEMENT NO. 32
<PAGE> 1393
BELK DEPARTMENT STORE OF AHOSKIE, N.C., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 5:00 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 32
<PAGE> 1394
BELK'S DEPARTMENT STORE OF ALBEMARLE, NORTH CAROLINA, INCORPORATED
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk's Department Store of Albemarle, North
Carolina, Incorporated (the "Company"), to be held on April 16, 1998, at 3:00
p.m., local time, at the offices of Belk Stores Services, Inc., 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 37.8995 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 82,583 shares of New Belk Class A Common Stock which
will represent approximately 0.1376% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(33)
<PAGE> 1395
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 1396
BELK'S DEPARTMENT STORE OF ALBEMARLE, NORTH CAROLINA, INCORPORATED
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK'S DEPARTMENT STORE OF ALBEMARLE, NORTH CAROLINA,
INCORPORATED:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk's Department Store of Albemarle, North Carolina, Incorporated
(the "Company") will be held on April 16, 1998, at 3:00 p.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 37.8995 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 1397
BELK'S DEPARTMENT STORE OF ALBEMARLE,
NORTH CAROLINA, INCORPORATED
SUPPLEMENT NO. 33
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 33 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK'S DEPARTMENT
STORE OF ALBEMARLE, NORTH CAROLINA, INCORPORATED (THE "COMPANY"), THE DISCUSSION
HEREIN SUPERSEDES THE DISCUSSION IN THE PROXY STATEMENT/ PROSPECTUS. ALL OF THE
INFORMATION CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE
IN THE REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN
THE REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY
AND THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT
BE ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL
CAPITALIZED TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE
MEANINGS SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 16
SELECTED HISTORICAL FINANCIAL INFORMATION................... 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 18
BUSINESS OF THE COMPANY..................................... 18
SECURITY OWNERSHIP OF THE COMPANY........................... 19
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION.................................. B-1
</TABLE>
\
<PAGE> 1398
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1917. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 3:00 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 37.8995 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 4,548 shares of Common Stock
outstanding held of record by 45 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 79.2% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 1399
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
New Belk has entered into an agreement dated February 27, 1998 (the
"Hanahan Agreement") with Mary E.S. Hanahan ("Mrs. Hanahan"), who is the owner
of 10 shares of Common Stock of the Company (the "Hanahan Shares"). In the
Hanahan Agreement, Mrs. Hanahan granted to certain employees of BSS her
irrevocable proxy to vote the Hanahan Shares in favor of the Merger, agreed to
withdraw her appeal in certain litigation instituted by Belk of Spartanburg,
S.C., Inc. against Mrs. Hanahan and another party and released New Belk and the
Belk Companies from any and all claims which Mrs. Hanahan has or may have
against New Belk and the Belk Companies. New Belk agreed, among other things, to
purchase from Mrs. Hanahan, at her election at any time prior to December 31,
1999, all of the shares of New Belk Common Stock received by Mrs. Hanahan in
exchange for the Hanahan Shares and shares in other Belk Companies in the
Reorganization for an aggregate purchase price of $3.85 million.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 9,096 shares of
Common Stock.
3
<PAGE> 1400
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock held by a New Belk Stockholder who is a Class A Permitted
Holder will also automatically convert into New Belk Class B Common Stock in the
event that such New Belk Stockholder no longer meets the requirements of a Class
A Permitted Holder. New Belk Class B Common Stock has no conversion rights. The
Company Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the
4
<PAGE> 1401
holders of New Belk Class B Common Stock upon the same terms and conditions
applicable to the conversion of New Belk Class A Common Stock into New Belk
Class B Common Stock and must have the same restrictions on transfer and
ownership applicable to the transfer and ownership of the New Belk Class A
Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate
5
<PAGE> 1402
number of authorized shares of such class, increase or decrease the par value of
the shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the shareholders and approved (i) by a majority
(unless the articles of incorporation, a bylaw adopted by the shareholders or
the board of directors require a greater vote or a vote by voting groups) of the
votes entitled to be cast on the amendment by any voting group with respect to
which the amendment would create dissenters' rights and (ii) when a quorum is
present, by all other voting groups entitled to vote on the amendment through
casting more affirmative than opposing votes. As under the DGCL, the holders of
the outstanding shares of a class or series are entitled to vote as a separate
voting group (if shareholder voting is otherwise required by the NCBCA) on a
proposed amendment if the amendment would change certain fundamental rights and
preferences of that class or series. The Company Articles do not specify a
greater voting requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power, nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without
6
<PAGE> 1403
prior notice, if all holders of outstanding shares entitled to vote on such
action sign the written consent(s) describing such action. The Company Bylaws
and Company Articles do not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more
7
<PAGE> 1404
than 30% during any 12-month period. The articles of incorporation or bylaws may
establish a variable range for the size of the board of directors by fixing a
minimum and maximum number of directors. If a variable range is established, the
number of directors may be fixed or changed from time to time, within the
minimum and maximum, by the shareholders or (unless the articles of
incorporation or a shareholders' agreement shall otherwise provide) the board of
directors. After shares are issued, only the shareholders may change the range
for the size of the board or change from a fixed to a variable-range size board
or vice versa. The Company Bylaws require the Company Board to consist of at
least three, but no more than 15, members.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
8
<PAGE> 1405
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the disinterested directors or committee authorized, approved or
ratified the transaction; (ii) the material facts of the transaction and the
director's interest were disclosed or known to the shareholders entitled to vote
and the disinterested shares authorized, approved or ratified the transaction;
or (iii) the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
9
<PAGE> 1406
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any transaction from which the director derived an improper
personal benefit or (iv) acts or omissions occurring prior to the date the
provisions became effective.
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested stockholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which
10
<PAGE> 1407
results in the issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder, except in certain circumstances; (iv)
any transaction involving the corporation which has the effect of increasing the
proportionate share of the stock of any class or series, or securities
convertible into the stock of any class or series, of the corporation which is
owned by the interested stockholder, except in certain circumstances; or (v) any
receipt by the interested stockholder of the benefit of any loans, advances,
guarantees, pledges or other financial benefits (other than those expressly
permitted in (i) through (iv) above) provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) an
affiliate or associate of the corporation who within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a
11
<PAGE> 1408
preemptive right to purchase, subscribe for or otherwise acquire stock of any
class or series of New Belk or any security convertible into or exchangeable
for, or any warrant, option or right to purchase, subscribe for or otherwise
acquire, stock of any class or series of New Belk, whether now or hereafter
authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any final action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
12
<PAGE> 1409
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates must be deposited,
(iii) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the Payment Demand is received, (iv) set a date
by which the Surviving Corporation must receive the Payment Demand, which date
may not be fewer than 30 nor more than 60 days after the date the Dissenters'
Notice is mailed and (v) be accompanied by a copy of Article 13. A Shareholder
who is sent a Dissenters' Notice and who wishes to assert dissenters' rights
must demand payment and deposit his certificates in accordance with the terms of
the Dissenters' Notice. A Shareholder who demands payment and deposit his
certificates in accordance with the terms of the Dissenters' Notice retains all
other rights of a Shareholder until these rights are canceled or modified by the
consummation and effectiveness of the Merger. A Shareholder who does not demand
payments or deposit his certificates in accordance with the terms of the
Dissenters' Notice will not be entitled to payment for his shares under the
NCBCA. If any such holder of Common Stock fails to perfect or shall have
effectively withdrawn or lost such right, each share of such holder's Common
Stock will thereupon be deemed to have been converted into and to have become,
as of the Effective Time, the right to receive, without any interest thereon,
the number of shares of New Belk Class A Common Stock such Shareholder is
otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
13
<PAGE> 1410
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such Shareholder dissents and such
Shareholder's other shares were registered in the names of different
shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on the November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
14
<PAGE> 1411
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $4,837,723 $4,837,723 0.6 $ (419,017) $3,321,651
EBITDA............... 295,887 295,887 7 (419,017) 2,490,226
EBIT................. 200,413 200,413 10 (419,017) 2,423,147
Net Income........... 137,013 127,833 15 -- 1,917,495
Book Equity.......... 2,369,063 2,368,611 1 -- 2,368,611
</TABLE>
15
<PAGE> 1412
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
N/A N/A% X $N/A = $ N/A
----------
Total N/A
==========
Relative Operating Value of Company $3,321,651
Relative Operating Value of Other Companies Owned by Company + --
----------
Total Relative Value of Company = $3,321,651
==========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Brothers Company 43.4697% X $3,321,651 = $1,443,912
Belk Enterprises,
Inc. 3.8698 X 3,321,651 = 128,541
Belk-Beck Company of
Burlington, North
Carolina, Inc. 4.7493 X 3,321,651 = 157,755
----------
Total $1,730,208
==========
Total Relative Value of Company $3,321,651
Total Relative Value of Company Owned by Other Belk Companies - 1,730,208
----------
Net Relative Value of Company = $1,591,443
==========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$1,591,443 / $1,156,226,577 = .1376%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.1376% X 59,998,834) / 2,179 = 37.8995
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 1413
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 30.13
Dividends(2).............................................. 10.00
Book value per share(3)................................... 520.90
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 36.38
Dividends(2).............................................. 9.85
Book value per share...................................... 474.50
</TABLE>
- ---------------
(1) Based on 4,548 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 4,548 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
17
<PAGE> 1414
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $5,180 $4,848 $4,838
Net income.................................................. 139 90 137
Per common share
Net income (loss)(1)...................................... 30.48 19.72 30.13
Dividends................................................. 7.50 10.00 10.00
Book value(2)............................................. 491.06 500.78 520.90
Total assets................................................ 3,244 3,145 3,216
Shareholders' equity........................................ 2,233 2,278 2,369
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $3,316 $3,225
Income from operations...................................... 34 138
</TABLE>
- ---------------
(1) Based on 4,548 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 4,548 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 1415
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Albemarle Mall
in Albemarle, North Carolina. The Company's store operates in a manner
consistent with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is managed out of the Pennell group office in
Charlotte, North Carolina.
Facilities. The Company leases its store building, which contains
approximately 65,000 square feet of floor area. The current term of the lease
expires in 2000. The Company believes the building is adequate to meet its
current needs.
Competition. Specific competitors in the Company's market include
Wal-Mart, Penney and Goody's.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 1416
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d).............................................. 2,895 63.7%
Thomas M. Belk, Jr. (Director and Executive
Officer)(a)(c)(d)(e)...................................... 2,462 54.1%
H. W. McKay Belk (Director and Executive Officer)
(a)(c)(d)................................................. 2,452 53.9%
John R. Belk (Director and Executive Officer)
(a)(c)(d)(f).............................................. 2,492 54.8%
Henderson Belk (Director) (b)............................... 320 7.0%
Sarah Belk Gambrell (Director) (b).......................... 469 10.3%
David Belk Cannon (Director) (h)............................ 224 4.9%
James K. Glenn, Jr. (Director) (g).......................... 128 2.8%
Daisy D. Lange (Director) (i)............................... 96 2.1%
Leroy Robinson (Director) (a)............................... 63 1.4%
John H. Pennell (Executive Officer)......................... 0 *
NationsBank, N.A. (i)(j).................................... 328 7.2%
J.V. Properties............................................. 1,977 43.5%
All Directors and Executive Officers as a group (11
persons).................................................. 3,602 79.2%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business or mailing addresses for the beneficial owners, directors
and/or officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John
R. Belk, Henderson Belk and Leroy Robinson -- 2801 West Tyvola Road, Charlotte,
N.C. 28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road, Charlotte, N.C.
28207; David Belk Cannon -- 1607 W. Floyd Baker Blvd., Gaffney, S.C. 29341;
James K. Glenn, Jr. -- P.O. Box 2736, Winston-Salem, N.C. 27102; Daisy D.
Lange -- 7 Brickwall Lane, Ruislip, Middlesex, England HA48JS; John H.
Pennell -- 308 East Fifth Street, Charlotte, N.C. 28202; J.V. Properties -- 2801
West Tyvola Road, Charlotte, N.C. 28217-4500; NationsBank, N.A., c/o Sara
McDonnell (NC1-002-07-13), Charlotte, N.C. 28255.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 63 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(b) Includes 320 shares held in several trusts established by the will of Mary
I. Belk for the benefit of her children. Voting and investment power of the
trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(c) Includes 176 shares held by Belk Enterprises, Inc. and 216 shares held by
Belk-Beck Company of Burlington, North Carolina, Inc., which shares are
voted by the members of the Executive Committee of the Board of Directors
of such Corporation, under authority given by the directors of such
20
<PAGE> 1417
Corporation at the annual meeting of directors held in March, 1997. The
Executive Committee consists of John M. Belk, Thomas M. Belk, Jr., H. W.
McKay Belk and John R. Belk.
(d) Includes 1,977 shares held by J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
(e) Includes 10 shares held by Thomas M. Belk, Jr. as custodian for his minor
children.
(f) Includes 10 shares held by John R. Belk as custodian for his minor
children.
(g) Includes 16 shares held by James K. Glenn, Jr., Trustee under Will of Daisy
Belk Mattox, 22 shares held by John Belk Stevens Trust U/W ITEM III,
Section C f/b/o James Kirk Glenn, Jr., et al, 39 shares held by John Belk
Stevens Trust U/W ITEM III, Section B, f/b/o Mary S. Whelchel and 39 shares
held by John Belk Stevens Trust U/W ITEM III, Section A f/b/o Sara S.
Glenn. Voting and investment power is vested in James K. Glenn, Jr., the
Trustee of each trust.
(h) Includes 78 shares held by Residuary Trust U/W Mrs. Henry Belk Cannon. The
Trustees, David Belk Cannon and John C. Daughtridge, have voting and
investment power with respect to such shares.
(i) Includes 96 shares held by Daisy Doughton Lange and North Carolina National
Bank, Trustees for Robert L. Doughton II under Agreement dated July 21,
1965. The two Trustees named have voting and investment power with respect
to such shares.
(j) Includes 20 shares held by NationsBank as Trustee for Daisy Belk Doughton
Lange Revocable Trust dtd 3/25/97, 96 shares held by Sara Dew Misner and
North Carolina National Bank, Co-Trustees for Daisy Doughton Lange U/A
dated November 5, 1965 and 116 shares held by NCNB National Bank of North
Carolina, Trustee U/A 7/9/65 -- Sadie Belk Cummings, Grantor. NationsBank
has sole voting and investing power with respect to such shares.
21
<PAGE> 1418
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 1419
BELK'S DEPARTMENT STORE OF ALBEMARLE, NORTH CAROLINA, INCORPORATED
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 275,982 $ 106,747
Accounts receivable, net.................................. 702,050 803,164
Merchandise inventory..................................... 1,073,046 1,068,130
Receivable from affiliates, net........................... 550,513 735,468
Deferred income taxes..................................... 26,689 18,220
Other..................................................... 56,077 51,941
---------- ----------
Total current assets........................................ 2,684,357 2,783,670
Investments................................................. 452 452
Property, plant and equipment, net.......................... 85,263 106,810
Buildings under capital lease, net.......................... 275,091 212,806
Deferred income taxes....................................... 75,453 74,713
Other noncurrent assets..................................... 24,579 37,438
---------- ----------
$3,145,195 $3,215,889
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of obligations under capital leases....... $ 100,964 $ 110,572
Accounts payable and accrued expenses..................... 273,146 315,197
Accrued income taxes...................................... 32,767 39,354
---------- ----------
Total current liabilities................................... 406,877 465,123
Obligations under capital leases, excluding current
portion................................................... 423,197 312,625
Other noncurrent liabilities................................ 37,591 69,078
---------- ----------
Total liabilities........................................... 867,665 846,826
Shareholders' equity:
Common stock.............................................. 454,800 454,800
Retained earnings......................................... 1,822,730 1,914,263
---------- ----------
Total shareholders' equity.................................. 2,277,530 2,369,063
---------- ----------
$3,145,195 $3,215,889
========== ==========
</TABLE>
F-2
<PAGE> 1420
BELK'S DEPARTMENT STORE OF ALBEMARLE, NORTH CAROLINA, INCORPORATED
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $5,180,253 $4,848,133 $4,837,721
Operating costs and expenses............................... 4,913,070 4,684,642 4,627,289
---------- ---------- ----------
Income from operations..................................... 267,183 163,491 210,432
---------- ---------- ----------
Other income (expense):
Interest, net............................................ (48,233) (25,771) (23,962)
Miscellaneous, net....................................... (20,062) 12,544 (10,019)
---------- ---------- ----------
Total other expense, net................................... (68,295) (13,227) (33,981)
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 198,888 150,264 176,451
Income tax expense (benefit)............................... 60,274 60,591 39,438
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 138,614 89,673 137,013
---------- ---------- ----------
Net earnings............................................... 138,614 89,673 137,013
Retained earnings at beginning of period................... 1,674,033 1,778,537 1,822,730
Dividends paid............................................. (34,110) (45,480) (45,480)
---------- ---------- ----------
Retained earnings at end of period......................... $1,778,537 $1,822,730 $1,914,263
========== ========== ==========
</TABLE>
F-3
<PAGE> 1421
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholder equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 1422
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 1423
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
A-1
<PAGE> 1424
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares; (ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (iv) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes; (v)
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional shares so created is to be acquired by cash under
G.S. 55-6-04; (vi) changes the corporation into a nonprofit corporation or
cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 1425
SEC.SEC. 55-13-04 TO 55-13-19. Reserved for future codification purposes.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 1426
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 1427
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 1428
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 1429
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
---------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement.................... $4,837,723 $137,013 $200,413 $295,887 $2,369,063
Adjustments to eliminate less than wholly-owned
subsidiaries................................. -- -- -- -- --
---------- -------- -------- -------- ----------
Adjusted Shareholders' Statement............... $4,837,723 137,013 200,413 295,887 2,369,063
========== -------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E................ -- -- --
Gain/loss on sale of securities.............. -- -- --
Impairment loss.............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries............................... -- -- --
Gain/loss on discontinued operations......... -- -- --
Adjustment to tax expense.................... (9,180) -- -- --
-------- -------- --------
Total non-operating items...................... (9,180) -- --
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities.............................. -- -- --
Adjustment for ownership in other Belk
entities................................... (452)
-------- -------- -------- ----------
Per Model...................................... $127,833 $200,413 $295,887 $2,368,611
======== ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER SHAREHOLDERS'
STATEMENT
Assets
Cash & cash equivalents.................... $ (106,746)
Negative cash balances reclassified to
accounts payable......................... --
Receivables from affiliates, net........... (735,468)
Loans receivable from affiliates, net...... --
Liabilities
Notes payable.............................. --
Current installments of long-term debt..... --
Current portion of obligations under
capital leases........................... 110,572
Payables to affiliates, net................ --
Long-term debt, excluding current
installments............................. --
Obligations under capital leases, excluding
current portion.......................... 312,625
Loans payable to affiliates, net........... --
----------
Net debt (cash)................................ (419,017)
Adjustments to eliminate less than wholly-owned
subsidiaries................................. --
----------
Per Model...................................... $ (419,017)
==========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 1430
SUPPLEMENT NO. 33
<PAGE> 1431
BELK'S DEPARTMENT STORE OF ALBEMARLE, NORTH CAROLINA, INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 3:00 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 33
<PAGE> 1432
BELK OF ASHEBORO, N.C., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk of Asheboro, N.C., Inc. (the "Company"),
to be held on April 16, 1998, at 11:00 a.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 112.9320 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 391,874 shares of New Belk Class A Common Stock which
will represent approximately 0.6531% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage paid
(34)
<PAGE> 1433
envelope. If you plan to attend the Special Meeting, you may vote in person if
you wish, even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 1434
BELK OF ASHEBORO, N.C., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK OF ASHEBORO, N.C., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk of Asheboro, N.C., Inc. (the "Company") will be held on April
16, 1998, at 11:00 a.m., local time, at the offices of Belk Stores Services,
Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for the
following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 112.9320 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 1435
BELK OF ASHEBORO, N.C., INC.
SUPPLEMENT NO. 34
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 34 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK OF ASHEBORO,
N.C., INC. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE DISCUSSION IN
THE PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED HEREIN ASSUMES
THAT ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION. IF ANY ONE OR
MORE BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE INFORMATION
CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED CONSOLIDATED HISTORICAL FINANCIAL
STATEMENTS................................................ F-1
Unaudited Consolidated Balance Sheets..................... F-2
Unaudited Consolidated Statements of Earnings and Retained
Earnings............................................... F-3
Condensed Notes to Unaudited Consolidated Historical
Financial Statements................................... F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION.................................. B-1
</TABLE>
<PAGE> 1436
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1930 as
Hudson-Belk Company of Asheboro, North Carolina Incorporated. The Company
changed its name to Belk of Asheboro, N.C., Inc. on June 13, 1997. The mailing
address of the Company's principal executive offices is 2801 West Tyvola Road,
Charlotte, North Carolina 28217-4500, and its telephone number at that address
is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 11:00 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 112.9320 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 4,875 shares of Common Stock
outstanding held of record by 39 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 56.1% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock
2
<PAGE> 1437
vote in favor of the Merger, the vote of such persons, corporations and trusts
in favor of the Merger would be sufficient to approve the Merger under the
governing documents of the Company and applicable state law.
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 5,640 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be
3
<PAGE> 1438
converted automatically into a share of New Belk Class B Common Stock. Shares of
New Belk Class A Common Stock are convertible into New Belk Class B Common
Stock, in whole or in part, at any time and from time to time at the option of
the holder, on the basis of one share of New Belk Class B Common Stock for each
share of New Belk Class A Common Stock converted. Shares of New Belk Class A
Common Stock held by a New Belk Stockholder who is a Class A Permitted Holder
will also automatically convert into New Belk Class B Common Stock in the event
that such New Belk Stockholder no longer meets the requirements of a Class A
Permitted Holder. New Belk Class B Common Stock has no conversion rights. The
Company Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay
4
<PAGE> 1439
its debts as they come due in the usual course of business or (ii) the
corporation's total assets to be less than the sum of its total liabilities plus
(unless the articles of incorporation permit otherwise) the amount that would be
needed, if the corporation were to be dissolved at the time of the payment of
the dividend, to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to those receiving the
distribution. The Company Bylaws provide that the Board of Directors of the
Company (the "Company Board") may from time to time declare dividends on the
Company's outstanding shares in the manner and upon the terms and conditions
provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
5
<PAGE> 1440
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the shareholders and approved (i) by a majority
(unless the articles of incorporation, a bylaw adopted by the shareholders or
the board of directors require a greater vote or a vote by voting groups) of the
votes entitled to be cast on the amendment by any voting group with respect to
which the amendment would create dissenters' rights and (ii) when a quorum is
present, by all other voting groups entitled to vote on the amendment through
casting more affirmative than opposing votes. As under the DGCL, the holders of
the outstanding shares of a class or series are entitled to vote as a separate
voting group (if shareholder voting is otherwise required by the NCBCA) on a
proposed amendment if the amendment would change certain fundamental rights and
preferences of that class or series. The Company Articles do not specify a
greater voting requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has power, by
vote of a majority of all the directors, and without the assent or vote of the
shareholders, to make, alter, amend and rescind the bylaws of the Company.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without prior notice, if all
holders of outstanding shares entitled to vote on such action sign the written
consent(s) describing such action. The Company Bylaws and Company Articles do
not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be
6
<PAGE> 1441
filled by a majority of the directors then in office, although less than a
quorum, or by a sole remaining director. If at the time of filling any vacancy
or newly created directorship, the directors then in office constitute less than
a majority of the whole board as constituted immediately prior to such increase,
the Delaware Court of Chancery may, upon application of stockholders holding at
least 10% of the total number of shares outstanding having the right to vote for
such directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more than 30% during any 12-month period. The
articles of incorporation or bylaws may establish a variable range for the size
of the board of directors by fixing a minimum and maximum number of directors.
If a variable range is established, the number of directors may be fixed or
changed from time to time, within the minimum and maximum, by the shareholders
or (unless the articles of incorporation or a shareholders' agreement shall
7
<PAGE> 1442
otherwise provide) the board of directors. After shares are issued, only the
shareholders may change the range for the size of the board or change from a
fixed to a variable-range size board or vice versa. The Company Bylaws require
the Company Board to consist of at least three, but no more than 15, members.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
8
<PAGE> 1443
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the disinterested directors or committee authorized, approved or
ratified the transaction; (ii) the material facts of the transaction and the
director's interest were disclosed or known to the shareholders entitled to vote
and the disinterested shares authorized, approved or ratified the transaction;
or (iii) the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly
9
<PAGE> 1444
in conflict with the best interests of the corporation, (ii) any liability under
unlawful distributions, (iii) any transaction from which the director derived an
improper personal benefit or (iv) acts or omissions occurring prior to the date
the provisions became effective.
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested stockholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder,
except in certain circumstances; (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested stockholder, except
in certain circumstances; or (v) any receipt by the interested stockholder of
the benefit of any loans, advances,
10
<PAGE> 1445
guarantees, pledges or other financial benefits (other than those expressly
permitted in (i) through (iv) above) provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) an
affiliate or associate of the corporation that within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
11
<PAGE> 1446
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any final action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates
12
<PAGE> 1447
must be deposited, (iii) inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the Payment Demand is received,
(iv) set a date by which the Surviving Corporation must receive the Payment
Demand, which date may not be fewer than 30 nor more than 60 days after the date
the Dissenters' Notice is mailed and (v) be accompanied by a copy of Article 13.
A Shareholder who is sent a Dissenters' Notice and who wishes to assert
dissenters' rights must demand payment and deposit his certificates in
accordance with the terms of the Dissenters' Notice. A Shareholder who demands
payment and deposit his certificates in accordance with the terms of the
Dissenters' Notice retains all other rights of a Shareholder until these rights
are canceled or modified by the consummation and effectiveness of the Merger. A
Shareholder who does not demand payments or deposit his certificates in
accordance with the terms of the Dissenters' Notice will not be entitled to
payment for his shares under the NCBCA. If any such holder of Common Stock fails
to perfect or shall have effectively withdrawn or lost such right, each share of
such holder's Common Stock will thereupon be deemed to have been converted into
and to have become, as of the Effective Time, the right to receive, without any
interest thereon, the number of shares of New Belk Class A Common Stock such
Shareholder is otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
13
<PAGE> 1448
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such Shareholder dissents and such
Shareholder's other shares were registered in the names of different
shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period")multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
14
<PAGE> 1449
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ----------- ----------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $11,724,897 $10,113,599 0.6 $ (441,111) $ 6,509,270
EBITDA............... 1,411,802 1,181,054 7 (441,111) 8,708,489
EBIT................. 1,222,294 1,011,164 10 (441,111) 10,552,751
Net Income........... 464,083 612,409 15 -- 9,186,135
Book Equity.......... 3,872,747 3,993,380 1 -- 3,993,380
</TABLE>
15
<PAGE> 1450
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk of Siler City,
N.C., Inc. 52.5439% X $107,854 = $ 56,670
-----------
Total $ 56,670
===========
Relative Operating Value of Company $10,552,751
Relative Operating Value of Other Companies Owned by Company + 56,670
-----------
Total Relative Value of Company = $10,609,421
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Enterprises,
Inc. 9.6% X $10,609,421 = $ 1,018,504
Belk Finance Company .8615% X 10,609,421 = 91,400
Belk Department Store
of Greenville,
N.C., Inc. 18.359% X 10,609,421 = 1,947,784
-----------
Total $ 3,057,688
===========
Total Relative Value of Company $10,609,421
Total Relative Value of Company Owned by Other Belk Companies - 3,057,688
-----------
Net Relative Value of Company = $ 7,551,733
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$7,551,733 / $1,156,226,577 = .6531%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.6531% X 59,998,834) / 3,470 = 112.9320
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 1451
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 95.20
Dividends(2).............................................. 20.00
Book value per share(3)................................... 794.41
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 108.41
Dividends(2).............................................. 29.36
Book value per share...................................... 1,413.91
</TABLE>
- ---------------
(1) Based on 4,875 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 4,875 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
17
<PAGE> 1452
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $10,755 $11,021 $11,725
Net income.................................................. 334 322 464
Per common share
Net income (loss)(1)...................................... 68.50 66.03 95.20
Dividends................................................. 17.35 22.48 20.00
Book value(2)............................................. 788.39 729.52 794.41
Total assets................................................ 6,141 5,307 5,457
Shareholders' equity........................................ 3,843 3,556 3,873
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $7,944 $8,380
Income from operations...................................... 374 815
</TABLE>
- ---------------
(1) Based on 4,875 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 4,875 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 1453
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Randolph Mall
in Asheboro, North Carolina. The Company's store operates in a manner consistent
with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is managed out of the Huffstetler group office
in Greensboro, North Carolina.
Facilities. The Company owns the store property and building, which
contains approximately 74,000 square feet of floor area, together with an
adjacent parking area. The Company believes the facility is adequate to meet its
current needs.
Competition. Specific competitors in the Company's market include
Wal-Mart, Sears and Penney.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 1454
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d).............................................. 1,957 40.1%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(d).................................................... 1,607 33.0%
H. W. McKay Belk (Director and Executive Officer) (b)(d).... 1,604 32.9%
John R. Belk (Director and Executive Officer) (b)(d)........ 1,604 32.9%
Henderson Belk (Director) (c)............................... 6 *
Sarah Belk Gambrell (Director) (c).......................... 358 7.3%
Leroy Robinson (Director) (b)............................... 97 2.0%
Karl G. Hudson, Jr. (Director).............................. 8 *
Karl G. Hudson, III (Director).............................. 109 2.2%
F. O. Yates, Jr. (Director)................................. 0 *
Sarah Gambrell Knight....................................... 542 11.1%
Virginia Hudson Beaman (e).................................. 344 6.9%
Pete Huffstetler (Executive Officer)........................ 0 *
Gordon J. Tendler (Executive Officer)....................... 0 *
Darrell Murphy (Executive Officer).......................... 0 *
Belk Enterprises, Inc. ..................................... 468 9.6%
Belk Department Store of Greenville, N.C., Inc. ............ 895 18.4%
All Directors and Executive Officers as a group (11
persons).................................................. 2,735 56.1%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk and Leroy Robinson -- 2801 West Tyvola Road, Charlotte, N.C.
28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207;
Sarah Gambrell Knight -- 810 Colville Road, Charlotte, N.C. 28207; Virginia
Hudson Beaman -- 2412 Lake Drive, Raleigh, N.C. 27609; Karl G. Hudson,
Jr. -- 2416 White Oak Road, Raleigh, N.C. 27609; Karl G. Hudson, III -- 5025
Edwards Mill Road, Raleigh, N.C. 27612; F. O. Yates, Jr. -- 628 South Park
Street, Asheboro, N.C. 27203; Pete Huffstetler, Darrell Murphy and Gordon J.
Tendler -- 1-104 Carolina Circle Mall, Greensboro, N.C. 27405; Belk Enterprises,
Inc. and Belk Department Store of Greenville, N.C., Inc. -- 2801 West Tyvola
Road, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 240 shares held by Montgomery Investment Company, of which John M.
Belk is the majority shareholder.
(b) Includes 97 shares held by Milburn Investment Company, of which the Estate
of Thomas M. Belk is the sole shareholder. Voting and investment power is
shared by the Executors of the Estate of Thomas M. Belk, who are Katherine
McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W. McKay Belk,
John R. Belk, John M. Belk and Leroy Robinson.
20
<PAGE> 1455
(c) Includes 6 shares held in several Trusts established by the Will of Mary I.
Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(d) Includes 468 shares held by Belk Enterprises, Inc., 42 shares held by Belk
Finance Company, and 895 shares held by Belk Department Store of Greenville,
N.C., Inc., which shares are voted by the members of the Executive Committee
of the Board of Directors of each such Corporation, under authority given by
the directors of each such Corporation at the annual meeting of directors
held in March, 1997. The Executive Committee of each such Corporation
consists of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk and John R.
Belk.
(e) Included are 42 shares held by Marjorie L. Hudson Irrevocable Trust and 42
shares held by James R. Tripp, Jr. Irrevocable Trust. The Trustee, Virginia
Hudson Beaman has the voting and investment power with respect to such
shares.
21
<PAGE> 1456
INDEX TO UNAUDITED CONSOLIDATED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Consolidated Balance Sheets....................... F-2
Unaudited Consolidated Statements of Earnings and Retained
Earnings.................................................. F-3
Condensed Notes to Unaudited Consolidated Historical
Financial Statements...................................... F-4
</TABLE>
F-1
<PAGE> 1457
BELK OF ASHEBORO, N.C., INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 81,915 $ 155,130
Accounts receivable, net.................................. 1,839,640 2,164,372
Merchandise inventory..................................... 1,970,161 2,123,347
Deferred income taxes..................................... 55,172 114,012
Other..................................................... 89,151 83,926
---------- ----------
Total current assets........................................ 4,036,039 4,640,787
Loans receivable from affiliates, net....................... 21,345 21,345
Investments................................................. 1,306 1,306
Property, plant and equipment, net.......................... 1,084,035 731,958
Deferred income taxes....................................... 96,804 --
Other noncurrent assets..................................... 67,795 61,396
---------- ----------
$5,307,324 $5,456,792
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current installments of long-term debt.................... $ 214,644 $ 214,641
Accounts payable and accrued expenses..................... 628,226 782,316
Payables to affiliates, net............................... 518,199 379,650
Accrued income taxes...................................... 65,593 137,658
---------- ----------
Total current liabilities................................... 1,426,662 1,514,265
Deferred income taxes....................................... -- 61,023
Long-term debt, excluding current installments.............. 214,665 --
Other noncurrent liabilities................................ 109,565 120,901
---------- ----------
Total liabilities........................................... 1,750,892 1,696,189
Minority interest........................................... -- (112,144)
Shareholders' equity:
Common stock.............................................. 560,900 487,500
Retained earnings......................................... 2,995,532 3,385,247
---------- ----------
Total shareholders' equity.................................. 3,556,432 3,872,747
---------- ----------
$5,307,324 $5,456,792
========== ==========
</TABLE>
F-2
<PAGE> 1458
BELK OF ASHEBORO, N.C., INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales............................................... $10,754,805 $11,021,421 $11,724,897
Operating costs and expenses............................ 9,990,863 10,403,295 10,649,230
Impairment loss......................................... -- -- 168,159
----------- ----------- -----------
Income from operations.................................. 763,942 618,126 907,508
----------- ----------- -----------
Other income (expense):
Interest, net......................................... (92,701) (104,674) (72,255)
Gain (loss) on disposal of property, plant and
equipment.......................................... (27,329) 1,976 28
Miscellaneous, net.................................... 17,821 (22,591) (22,623)
----------- ----------- -----------
Total other expense, net................................ (102,209) (125,289) (94,850)
----------- ----------- -----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities..... 661,733 492,837 812,658
Income tax expense (benefit)............................ 327,819 170,943 484,720
----------- ----------- -----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities................... 333,914 321,894 327,938
Minority interest in (earnings) loss of unconsolidated
subsidiaries.......................................... -- -- (136,146)
----------- ----------- -----------
Net earnings............................................ 333,914 321,894 464,084
Retained earnings at beginning of period................ 3,017,022 3,206,992 2,995,532
Dividends paid.......................................... (84,600) (109,600) (97,500)
Retained earnings adjustments........................... -- -- 23,131
Retirement of common stock.............................. (59,344) (423,754) --
----------- ----------- -----------
Retained earnings at end of period...................... $ 3,206,992 $ 2,995,532 $ 3,385,247
=========== =========== ===========
</TABLE>
F-3
<PAGE> 1459
CONDENSED NOTES TO UNAUDITED CONSOLIDATED
HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996, AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 1460
CONDENSED NOTES TO UNAUDITED CONSOLIDATED
HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 1461
CONDENSED NOTES TO UNAUDITED CONSOLIDATED
HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(12) RETAINED EARNINGS ADJUSTMENT
At February 1, 1997, Asheboro owned approximately 53% of Belk-Yates Company
of Siler City, North Carolina, Incorporated (Siler City). The accompanying
February 1, 1997 financial statement presents the balance sheet and statement of
income of Asheboro and Siler City as a consolidated entity, with all
intercompany transactions eliminated in consolidation. At February 3, 1996, the
Company accounted for its investment in Siler City on the equity method;
however, the balance sheet and statement of income for the years ended February
3, 1996 and January 31, 1995 are presented as a combination of the Company and
Siler City, and are presented for comparative purposes only.
F-6
<PAGE> 1462
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13.
DISSENTERS' RIGHTS.
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
A-1
<PAGE> 1463
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares; (ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (iv) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes; (v)
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional shares so created is to be acquired by cash under
G.S. 55-6-04; (vi) changes the corporation into a nonprofit corporation or
cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 1464
SEC.SEC. 55-13-04 TO 55-13-19. Reserved for future codification purposes.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 1465
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 1466
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 1467
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 1468
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement............. $11,724,897 $464,083 $1,222,294 $1,411,802 $3,872,747
Adjustments to eliminate less than
wholly-owned subsidiaries............. (1,611,298) 148,326 (211,130) (230,748) 166,030
----------- -------- ---------- ---------- ----------
Adjusted Shareholders' Statement........ $10,113,599 612,409 1,011,164 1,181,054 4,038,777
=========== -------- ---------- ---------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E......... -- -- --
Gain/loss on sale of securities....... -- -- --
Impairment loss....................... -- -- --
Equity in earnings of unconsolidated
subsidiaries........................ -- -- --
Gain/loss on discontinued
operations.......................... -- -- --
Adjustment to tax expense............. -- -- -- --
-------- ---------- ----------
Total non-operating items............... -- -- --
-------- ---------- ----------
Other Adjustments:
Adjustment for dividends received from
other Belk entities................. -- -- --
Adjustment for ownership in other Belk
entities............................ (45,397)
-------- ---------- ---------- ----------
Per Model............................... $612,409 $1,011,164 $1,181,054 $3,993,380
======== ========== ========== ==========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents............. $ (155,131)
Negative cash balances reclassified
to accounts payable.............. --
Receivables from affiliates, net.... --
Loans receivable from affiliates,
net.............................. (21,345)
Liabilities
Notes payable....................... --
Current installments of long-term
debt............................. 214,641
Current portion of obligations under
capital leases................... --
Payables to affiliates, net......... 379,650
Long-term debt, excluding current
installments..................... --
Obligations under capital leases,
excluding current portion........ --
Loans payable to affiliates, net.... --
-----------
Net debt (cash)......................... 417,815
Adjustments to eliminate less than
wholly-owned subsidiaries............. (858,926)
-----------
Per Model............................... $ (441,111)
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 1469
SUPPLEMENT NO. 34
<PAGE> 1470
BELK OF ASHEBORO, N.C., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 11:00 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
-------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 34
<PAGE> 1471
BELK'S DEPARTMENT STORE OF ASHEVILLE, NORTH CAROLINA, INCORPORATED
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk's Department Store of Asheville, North
Carolina, Incorporated (the "Company"), to be held on April 16, 1998, at 10:20
a.m., local time, at the offices of Belk Stores Services, Inc., 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 19.5744 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 230,106 shares of New Belk Class A Common Stock which
will represent approximately 0.3835% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(35)
<PAGE> 1472
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 1473
BELK'S DEPARTMENT STORE OF ASHEVILLE, NORTH CAROLINA, INCORPORATED
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK'S DEPARTMENT STORE OF ASHEVILLE, NORTH
CAROLINA, INCORPORATED:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk's Department Store of Asheville, North Carolina, Incorporated
(the "Company") will be held on April 16, 1998, at 10:20 a.m., local time, at
the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 19.5744 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 1474
BELK'S DEPARTMENT STORE OF ASHEVILLE,
NORTH CAROLINA, INCORPORATED
SUPPLEMENT NO. 35
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 35 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK'S DEPARTMENT
STORE OF ASHEVILLE, NORTH CAROLINA, INCORPORATED (THE "COMPANY"), THE DISCUSSION
HEREIN SUPERSEDES THE DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE
INFORMATION CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE
IN THE REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN
THE REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY
AND THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT
BE ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL
CAPITALIZED TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE
MEANINGS SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION.................................. B-1
</TABLE>
<PAGE> 1475
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1931. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 10:20 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 19.5744 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 21,464 shares of Common Stock
outstanding held of record by 59 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 87.2% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 1476
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 22,200 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock
3
<PAGE> 1477
held by a New Belk Stockholder who is a Class A Permitted Holder will also
automatically convert into New Belk Class B Common Stock in the event that such
New Belk Stockholder no longer meets the requirements of a Class A Permitted
Holder. New Belk Class B Common Stock has no conversion rights. The Company
Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving
4
<PAGE> 1478
the distribution. The Company Bylaws provide that the Board of Directors of the
Company (the "Company Board") may from time to time declare dividends on the
Company's outstanding shares in the manner and upon the terms and conditions
provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the
5
<PAGE> 1479
shareholders and approved (i) by a majority (unless the articles of
incorporation, a bylaw adopted by the shareholders or the board of directors
require a greater vote or a vote by voting groups) of the votes entitled to be
cast on the amendment by any voting group with respect to which the amendment
would create dissenters' rights and (ii) when a quorum is present, by all other
voting groups entitled to vote on the amendment through casting more affirmative
than opposing votes. As under the DGCL, the holders of the outstanding shares of
a class or series are entitled to vote as a separate voting group (if
shareholder voting is otherwise required by the NCBCA) on a proposed amendment
if the amendment would change certain fundamental rights and preferences of that
class or series. The Company Articles do not specify a greater voting
requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power, nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has power, by
vote of a majority of all the directors, and without the assent or vote of the
shareholders, to make, alter, amend and rescind the bylaws of the Company.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without prior notice, if all
holders of outstanding shares entitled to vote on such action sign the written
consent(s) describing such action. The Company Bylaws and Company Articles do
not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding
6
<PAGE> 1480
having the right to vote for such directors, order an election to be held to
fill any such vacancies or newly created directorships or to replace the
directors chosen by the directors then in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more than 30% during any 12-month period. The
articles of incorporation or bylaws may establish a variable range for the size
of the board of directors by fixing a minimum and maximum number of directors.
If a variable range is established, the number of directors may be fixed or
changed from time to time, within the minimum and maximum, by the shareholders
or (unless the articles of incorporation or a shareholders' agreement shall
otherwise provide) the board of directors. After shares are issued, only the
shareholders may change the range for the size of the board or change from a
fixed to a variable-range size board or vice versa. The Company Bylaws require
the Company Board to consist of at least three, but no more than 15, members.
7
<PAGE> 1481
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the
8
<PAGE> 1482
disinterested directors or committee authorized, approved or ratified the
transaction; (ii) the material facts of the transaction and the director's
interest were disclosed or known to the shareholders entitled to vote and the
disinterested shares authorized, approved or ratified the transaction; or (iii)
the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any transaction from which the director derived an improper
personal benefit or (iv) acts or omissions occurring prior to the date the
provisions became effective.
9
<PAGE> 1483
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested stockholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder,
except in certain circumstances; (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested stockholder, except
in certain circumstances; or (v) any receipt by the interested stockholder of
the benefit of any loans, advances, guarantees, pledges or other financial
benefits (other than those expressly permitted in (i) through (iv) above)
provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation
10
<PAGE> 1484
or (ii) an affiliate or associate of the corporation who within three years of
the date in question was the direct or indirect owner of at least 15% of the
voting power of any class or series of the then outstanding stock of the
corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other
11
<PAGE> 1485
books and records and to make copies or extracts therefrom. A proper purpose
means a purpose reasonably related to such person's interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any final action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates must be deposited,
(iii) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the Payment Demand is received, (iv) set a date
by which the Surviving Corporation must receive the Payment Demand, which date
may not be fewer than 30 nor more than 60 days after the date the
12
<PAGE> 1486
Dissenters' Notice is mailed and (v) be accompanied by a copy of Article 13. A
Shareholder who is sent a Dissenters' Notice and who wishes to assert
dissenters' rights must demand payment and deposit his certificates in
accordance with the terms of the Dissenters' Notice. A Shareholder who demands
payment and deposit his certificates in accordance with the terms of the
Dissenters' Notice retains all other rights of a Shareholder until these rights
are canceled or modified by the consummation and effectiveness of the Merger. A
Shareholder who does not demand payments or deposit his certificates in
accordance with the terms of the Dissenters' Notice will not be entitled to
payment for his shares under the NCBCA. If any such holder of Common Stock fails
to perfect or shall have effectively withdrawn or lost such right, each share of
such holder's Common Stock will thereupon be deemed to have been converted into
and to have become, as of the Effective Time, the right to receive, without any
interest thereon, the number of shares of New Belk Class A Common Stock such
Shareholder is otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such
13
<PAGE> 1487
Shareholder dissents and such Shareholder's other shares were registered in the
names of different shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on the November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ----------- ----------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $23,249,957 $23,249,957 0.6 $8,220,993 $ 5,728,981
EBITDA............... 1,328,137 1,140,887 7 8,220,993 (234,784)
EBIT................. 719,122 531,873 10 8,220,993 (2,902,263)
Net Income (Loss).... 12,251 (105,075) 15 -- (1,576,125)
Book Equity.......... 4,116,784 3,971,571 1 -- 3,971,571
</TABLE>
14
<PAGE> 1488
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk Enterprises,
Inc. .2086% X $358,369,404 = $ 747,559
Belk Department Store
of Clinton, N.C.,
Inc. 1.2575 X 11,043,990 = 138,878
Belk Department Store
of Greenville,
N.C., Inc. 1.2179 X 25,446,622 = 309,914
Belk Department Store
of Hickory, N.C.,
Inc. 1.5499 X 26,225,818 = 406,474
Belk's Department
Store of Morehead
City, N.C., Inc. 5.2703 X 10,315,936 = 543,681
Belk's Department
Store of New Bern,
N.C., Incorporated 1.7221 X 7,893,728 = 135,938
Belk Department Store
of Waynesville,
N.C., Inc. 1.2369 X 6,879,640 = 85,094
----------
Total $2,367,538
==========
Relative Operating Value of Company $5,728,981
Relative Operating Value of Other Companies Owned by Company + 2,367,538
----------
Total Relative Value of Company = $8,096,519
==========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Brothers Company 11.9829% X $8,096,519 = $ 970,198
Belk Enterprises,
Inc. 18.2564 X 8,096,519 = 1,478,133
Belk Finance Company 1.8822 X 8,096,519 = 152,393
Belk Department Store
of Greenville,
N.C., Inc. 11.9502 X 8,096,519 = 967,550
Belk's Department
Store of New Bern,
N.C., Incorporated .5917 X 8,096,519 = 47,907
Belk of Spartanburg,
S.C., Inc. .5684 X 8,096,519 = 46,021
----------
Total $3,662,201
==========
Total Relative Value of Company $8,096,519
Total Relative Value of Company Owned by Other Belk Companies - 3,662,201
----------
Net Relative Value of Company = $4,434,318
==========
</TABLE>
15
<PAGE> 1489
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 4,434,318 / $1,156,226,577 = .3835%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.3835% X 59,998,834) / 11,755.43750 = 19.5744
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 1490
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 0.57
Dividends(2).............................................. 0.00
Book value per share(3)................................... 191.80
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 18.79
Dividends(2).............................................. 5.09
Book value per share...................................... 245.07
</TABLE>
- ---------------
(1) Based on 21,464 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 21,464 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
17
<PAGE> 1491
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $23,020 $22,457 $23,250
Net income (loss)........................................... (73) (729) 12
Per common share
Net income (loss)(1)...................................... (3.41) (33.95) 0.57
Dividends................................................. -- -- --
Book value(2)............................................. 225.18 119.23 191.80
Total assets................................................ 15,290 14,898 15,182
Shareholders' equity........................................ 4,833 4,105 4,117
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $15,289 $15,576
Income from operations...................................... 23 575
</TABLE>
- ---------------
(1) Based on 21,464 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding for the years ended January 31, 1995,
February 3, 1996 and February 1, 1997.
(2) Based on 21,464 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 1492
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
To the extent a discussion of the financial condition and results of
operations of the Company for any of the fiscal years ended January 31, 1995,
February 3, 1996 or February 1, 1997 or for either of the nine-month periods
ended November 2, 1996 or November 1, 1997 is necessary to identify certain
trends or conditions that differ from the combined Belk Companies and that are
material to Shareholders' understanding of the financial condition or results of
operations of the Company, such discussion is included below. The discussion
which follows is based upon and should be read in conjunction with the
historical financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus Supplement.
During fiscal year 1996, income from operations decreased due to a decline
in sales with no corresponding decline in expenses and due to increased
markdowns.
In May of fiscal year 1997 the Company closed an underperforming store in
Asheville, North Carolina.
Based on projected operating results, the Company would be unable to make
all scheduled loan payments without additional borrowing from related entities
or renegotiating the term repayment schedule.
BUSINESS OF THE COMPANY
General. The Company operates three retail department stores in the
following locations in North Carolina: Biltmore Square and Asheville Mall in
Asheville and downtown Sylva. The Company's stores operate in a manner
consistent with the business of the Belk Companies described in the Proxy
Statement/ Prospectus. The stores are managed out of the Kuhne/Greiner group
office in Greenville, South Carolina.
Facilities. The Company operates three stores, of which two are leased
under long-term leases (one of which was built by the Company on a ground leased
site at Asheville Mall) and one is owned by the Company. The store leases have
termination dates of 2001 and 2011. The floor area of the leased building at
Biltmore Square is 82,000 square feet and the building built by the Company at
Asheville Mall contains 114,000 square feet. The Sylva store, which is owned by
the Company, contains 15,000 square feet of floor area. The Company believes
these facilities are adequate to meet its current needs.
Competition. Specific competitors in the Company's market include
Proffitt's, Dillard, Sears, Penney, Goody's and Wal-Mart.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 1493
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Director)
(a)(b)(c)(d)(e)(f)........................................ 12,558.8750 58.5%
Thomas M. Belk, Jr. (Director and Executive Director)
(a)(c)(e)(f)(g)........................................... 10,568.8750 49.2%
H. W. McKay Belk (Director and Executive Director)
(a)(c)(e)(f)(h)........................................... 10,568.8750 49.2%
John R. Belk (Director and Executive Director)
(a)(c)(e)(f)(i)........................................... 10,586.8750 49.3%
Henderson Belk (Director) (d)............................... 182.0000 *
Sarah Belk Gambrell (Director) (d).......................... 3,485.0000 16.2%
Sarah Gambrell Knight (Director)............................ 1,766.3125 8.2%
John A. Kuhne (Executive Officer)........................... 0 *
Robert E. Greiner (Executive Officer)....................... 0 *
Belk Enterprises, Inc....................................... 3,918.5625 18.3%
J. V. Properties............................................ 2,572.0000 12.0%
Belk Department Stores of Greenville, N.C., Inc............. 2,565.0000 12.0%
All Directors and Executive Officers as a group (9
persons).................................................. 18,709.1250 87.2%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business addresses for the beneficial owners, directors and/or officers
are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk and
Henderson Belk -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk
Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207; Sarah Gambrell Knight --
810 Colville Road, Charlotte, N.C. 28207; John A. Kuhne and Robert E.
Greiner -- 14 S. Main Street, Greenville, S.C. 29601; Belk Enterprises, Inc.,
J.V. Properties and Belk Department Store of Greenville, N.C., Inc. -- 2801 West
Tyvola Road, Charlotte, N.C. 28217-4500.
All shares of common stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 36 shares held by Brothers Investment Company, which corporation is
equally owned by John M. Belk and the Estate of Thomas M. Belk. Voting and
investment power is shared by John M. Belk, Katherine McKay Belk, Katherine
Belk Morris, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk and Leroy
Robinson.
(b) Represented by .3125 shares held by Mary Claudia Belk Irrevocable Trust
dated January 4, 1994. The Trustee, Claudia W. Belk, is John M. Belk's wife.
(c) Includes 470 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(d) Includes 182 shares held in several trusts established by the Will of Mary
I. Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell and Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
20
<PAGE> 1494
(e) Includes 3918.5625 shares held by Belk Enterprises, Inc., 404 shares held by
Belk Finance Company, 2,565 shares held by Belk Department Store of
Greenville, N.C., Inc., 127 shares held by Belk's Department Store of New
Bern, N.C., Incorporated and 122 shares held by Belk of Spartanburg, S.C.,
Inc. which shares are voted by the members of the Executive Committee of the
Board of Directors of each such Corporation, under authority given by the
directors of each such Corporation at the annual meeting of directors held
in March, 1997. The Executive Committee of each such Corporations consists
of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(f) Includes 2,572 shares held by J. V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
(g) Includes 12 shares held by Thomas M. Belk, Jr., as custodian for his minor
children.
(g) Includes 18 shares held by H. W. McKay Belk as custodian for his minor
children.
(h) Includes 6 shares held by John R. Belk as custodian for his minor children.
21
<PAGE> 1495
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
</TABLE>
F-1
<PAGE> 1496
BELK'S DEPARTMENT STORE OF ASHEVILLE, NORTH CAROLINA, INCORPORATED
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 211,013 $ 217,417
Accounts receivable, net.................................. 3,404,436 4,033,243
Merchandise inventory..................................... 4,806,547 4,781,161
Receivable from affiliates, net........................... -- 160,107
Refundable income taxes................................... 3,329 1,572
Deferred income taxes..................................... 88,650 111,538
Other..................................................... 259,899 446,265
----------- -----------
Total current assets........................................ 8,773,874 9,751,303
Investments................................................. 147,213 147,213
Property, plant and equipment, net.......................... 5,017,226 4,390,674
Deferred income taxes....................................... 837,619 766,484
Other noncurrent assets..................................... 122,280 125,918
----------- -----------
$14,898,212 $15,181,592
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable............................................. $ 1,560,000 $ 5,070,000
Current installments of long-term debt.................... 885,000 475,000
Accounts payable and accrued expenses..................... 1,454,253 1,185,201
Payables to affiliates, net............................... 646,817 --
----------- -----------
Total current liabilities................................... 4,546,070 6,730,201
Long-term debt, excluding current installments.............. 4,902,500 2,137,500
Loans payable to affiliates, net............................ 10,600 916,017
Other noncurrent liabilities................................ 550,183 566,507
----------- -----------
Total liabilities........................................... 10,009,353 10,350,225
Deferred income............................................. 784,328 714,583
Shareholders' equity:
Common stock.............................................. 2,146,400 2,146,400
Additional paid in capital................................ 45,000 45,000
Retained earnings......................................... 1,913,131 1,925,384
----------- -----------
Total shareholders' equity.................................. 4,104,531 4,116,784
----------- -----------
$14,898,212 $15,181,592
=========== ===========
</TABLE>
F-2
<PAGE> 1497
BELK'S DEPARTMENT STORE OF ASHEVILLE, NORTH CAROLINA, INCORPORATED
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Total store sales....................................... $23,587,936 $23,123,232 $23,831,046
Less: Leased Sales...................................... 568,399 666,563 581,088
----------- ----------- -----------
Net sales............................................... 23,019,537 22,456,669 23,249,958
Operating costs and expenses............................ 22,670,321 22,923,159 22,584,043
----------- ----------- -----------
Income from operations.................................. 349,216 (466,490) 665,915
----------- ----------- -----------
Other income (expense):
Interest, net......................................... (616,958) (760,539) (657,425)
Dividend income....................................... 13,704 16,930 19,043
Gain (loss) on disposal of property, plant and
equipment.......................................... 36,045 1,688 168,206
Miscellaneous, net.................................... (9,042) 10,598 (134,041)
----------- ----------- -----------
Total other expense, net................................ (576,251) (731,323) (604,217)
----------- ----------- -----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities..... (227,035) (1,197,813) 61,698
Income tax expense (benefit)............................ (153,914) (469,077) 49,445
----------- ----------- -----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities................... (73,121) (728,736) 12,253
----------- ----------- -----------
Net earnings............................................ (73,121) (728,736) 12,253
Retained earnings at beginning of period................ 2,714,988 2,641,867 1,913,131
----------- ----------- -----------
Retained earnings at end of period...................... $ 2,641,867 $ 1,913,131 $ 1,925,384
=========== =========== ===========
</TABLE>
F-3
<PAGE> 1498
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 1499
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 1500
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares;
A-1
<PAGE> 1501
(ii) creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares; (iii) alters or abolishes a preemptive right of
the holder of the shares to acquire shares or other securities; (iv)
excludes or limits the right of the shares to vote on any matter, or to
cumulate votes; (v) reduces the number of shares owned by the shareholder
to a fraction of a share if the fractional shares so created is to be
acquired by cash under G.S. 55-6-04; (vi) changes the corporation into a
nonprofit corporation or cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 1502
SEC.SEC. 55-13-04 TO 55-13-19. Reserved for future codification purposes.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 1503
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 1504
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision (a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions (a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 1505
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 1506
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement.................. $23,249,957 $ 12,251 $ 719,122 $1,328,136 $4,116,784
Adjustments to eliminate less than
wholly-owned subsidiaries.................. -- -- -- -- --
----------- --------- --------- ---------- ----------
Adjusted Shareholders' Statement............. $23,249,957 12,251 719,122 1,328,136 4,116,784
=========== --------- --------- ---------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E.............. (140,771) (168,206) (168,206)
Gain/loss on sale of securities............ -- -- --
Impairment loss............................ -- -- --
Equity in earnings of unconsolidated
subsidiaries............................. -- -- --
Gain/loss on discontinued operations....... -- -- --
Adjustment to tax expense.................. 39,382 -- -- --
--------- --------- ----------
Total non-operating items.................... (101,389) (168,206) (168,206)
--------- --------- ----------
Other Adjustments:
Adjustment for dividends received from
other Belk entities...................... (15,937) (19,043) (19,043)
Adjustment for ownership in other Belk
entities................................. (145,213)
--------- --------- ---------- ----------
Per Model.................................... $(105,075) $ 531,873 $1,140,887 $3,971,571
========= ========= ========== ==========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents.................. $ (217,417)
Negative cash balances reclassified to
accounts payable....................... --
Receivables from affiliates, net......... (160,107)
Loans receivable from affiliates, net.... --
Liabilities
Notes payable............................ 5,070,000
Current installments of long-term debt... 475,000
Current portion of obligations under
capital leases......................... --
Payables to affiliates, net.............. --
Long-term debt, excluding current
installments........................... 2,137,500
Obligations under capital leases,
excluding current portion.............. --
Loans payable to affiliates, net......... 916,017
-----------
Net debt (cash).............................. 8,220,993
Adjustments to eliminate less than
wholly-owned subsidiaries.................. --
-----------
Per Model.................................... $ 8,220,993
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 1507
SUPPLEMENT NO. 35
<PAGE> 1508
BELK'S DEPARTMENT STORE OF ASHEVILLE, NORTH CAROLINA, INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 10:20 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 35
<PAGE> 1509
BELK-MATTHEWS COMPANY
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk-Matthews Company (the "Company"), to be
held on April 15, 1998, at 11:50 a.m., local time, at the offices of Belk Stores
Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 28.0294 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 32,234 shares of New Belk Class A Common Stock which
will represent approximately 0.0537% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage paid
(36)
<PAGE> 1510
envelope. If you plan to attend the Special Meeting, you may vote in person if
you wish, even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 1511
BELK-MATTHEWS COMPANY
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK-MATTHEWS COMPANY:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk-Matthews Company (the "Company") will be held on April 15,
1998, at 11:50 a.m., local time, at the offices of Belk Stores Services, Inc.,
2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for the following
purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 28.0294 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 1512
BELK-MATTHEWS COMPANY
SUPPLEMENT NO. 36
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 36 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BALK-MATTHEWS
COMPANY (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE DISCUSSION IN THE
PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED HEREIN ASSUMES THAT
ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION. IF ANY ONE OR MORE
BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE INFORMATION
CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION.................................. B-1
</TABLE>
<PAGE> 1513
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1923. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 11:50 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 28.0294 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 1,544 shares of Common Stock
outstanding held of record by 42 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 61.2% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 1514
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. In addition, the Reorganization is expected to have
certain other benefits for the Company and the Shareholders, including the
ability to share the risks of the Company's uncertain prospects in its market.
The Company's store is located in a market that faces stiff competition from
larger towns in the area. The management of the Company is considering whether
to recommend the relocation of the Company's store in connection with reviewing
its long term prospects in the market. The Merger would enable the Company to
rely on New Belk to provide the capital necessary to effect any such relocation.
If the Company does not participate in the Reorganization and is required to
finance the relocation of its store on its own, there can be no assurance that
the Company would be able to obtain the financing necessary to do so.
There can be no assurance, however, that any of these benefits will be
achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 2,000 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common
3
<PAGE> 1515
Stock are entitled to 10 votes per share. The holders of New Belk Class B Common
Stock are entitled to one vote per share. Shares of New Belk Class A Common
Stock may be owned only by Class A Permitted Holders. If a share of New Belk
Class A Common Stock is transferred to any person other than a Class A Permitted
Holder, whether by sale, assignment, gift, bequest, appointment or otherwise,
such share will be converted automatically into a share of New Belk Class B
Common Stock. Shares of New Belk Class A Common Stock are convertible into New
Belk Class B Common Stock, in whole or in part, at any time and from time to
time at the option of the holder, on the basis of one share of New Belk Class B
Common Stock for each share of New Belk Class A Common Stock converted. Shares
of New Belk Class A Common Stock held by a New Belk Stockholder who is a Class A
Permitted Holder will also automatically convert into New Belk Class B Common
Stock in the event that such New Belk Stockholder no longer meets the
requirements of a Class A Permitted Holder. New Belk Class B Common Stock has no
conversion rights. The Company Articles provide for only one class of common
stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same
4
<PAGE> 1516
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. DGCL requires that
an amendment of the certificate of incorporation of a corporation be adopted by
the board of directors and the holders of a majority of the outstanding shares
of stock entitled to vote thereon. The holders of the outstanding shares of a
class are entitled to vote as a separate class on a proposed amendment that
would increase or decrease the aggregate number of authorized shares of such
class, increase or decrease the par value of the shares of such class or alter
or change the powers, preferences or special rights of the shares of such class
so as to affect them
5
<PAGE> 1517
adversely. If any proposed amendment would alter or change the powers,
preferences or special rights of one or more series of any class so as to affect
them adversely, but would not so affect the entire class, then only the shares
of the series so affected by the amendment will be considered a separate class
for purposes of voting by classes. The New Belk Certificate is consistent with
the foregoing provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the shareholders and approved (i) by a majority
(unless the articles of incorporation, a bylaw adopted by the shareholders or
the board of directors require a greater vote or a vote by voting groups) of the
votes entitled to be cast on the amendment by any voting group with respect to
which the amendment would create dissenters' rights and (ii) when a quorum is
present, by all other voting groups entitled to vote on the amendment through
casting more affirmative than opposing votes. As under the DGCL, the holders of
the outstanding shares of a class or series are entitled to vote as a separate
voting group (if shareholder voting is otherwise required by the NCBCA) on a
proposed amendment if the amendment would change certain fundamental rights and
preferences of that class or series. The Company Articles do not specify a
greater voting requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power, nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has power, by
vote of a majority of all the directors, and without the assent or vote of the
shareholders, to make, alter, amend and rescind the bylaws of the Company.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without
6
<PAGE> 1518
prior notice, if all holders of outstanding shares entitled to vote on such
action sign the written consent(s) describing such action. The Company Bylaws
and Company Articles do not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more
7
<PAGE> 1519
than 30% during any 12-month period. The articles of incorporation or bylaws may
establish a variable range for the size of the board of directors by fixing a
minimum and maximum number of directors. If a variable range is established, the
number of directors may be fixed or changed from time to time, within the
minimum and maximum, by the shareholders or (unless the articles of
incorporation or a shareholders' agreement shall otherwise provide) the board of
directors. After shares are issued, only the shareholders may change the range
for the size of the board or change from a fixed to a variable-range size board
or vice versa. The Company Bylaws require the Company Board to consist of at
least three, but no more than 15, members.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
8
<PAGE> 1520
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the disinterested directors or committee authorized, approved or
ratified the transaction; (ii) the material facts of the transaction and the
director's interest were disclosed or known to the shareholders entitled to vote
and the disinterested shares authorized, approved or ratified the transaction;
or (iii) the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
9
<PAGE> 1521
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any transaction from which the director derived an improper
personal benefit or (iv) acts or omissions occurring prior to the date the
provisions became effective.
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or a share exchange is
similar in all material respects to the DGCL, except that under the NCBCA the
surviving company's shareholders must approve the transaction if, after giving
effect to the transaction, their interest in participating shares is reduced by
more than 20%. "Participating shares" are those shares that are entitled to
participate without limitation in distributions. The DGCL and the NCBCA
provisions on sales of all or substantially all of the assets of a corporation
other than in the regular course of business are similar in all material
respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested stockholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which
10
<PAGE> 1522
results in the issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder, except in certain circumstances; (iv)
any transaction involving the corporation which has the effect of increasing the
proportionate share of the stock of any class or series, or securities
convertible into the stock of any class or series, of the corporation which is
owned by the interested stockholder, except in certain circumstances; or (v) any
receipt by the interested stockholder of the benefit of any loans, advances,
guarantees, pledges or other financial benefits (other than those expressly
permitted in (i) through (iv) above) provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) an
affiliate or associate of the corporation who within three years of the time in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a
11
<PAGE> 1523
preemptive right to purchase, subscribe for or otherwise acquire stock of any
class or series of New Belk or any security convertible into or exchangeable
for, or any warrant, option or right to purchase, subscribe for or otherwise
acquire, stock of any class or series of New Belk, whether now or hereafter
authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any final action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholder's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholder's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
12
<PAGE> 1524
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates must be deposited,
(iii) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the Payment Demand is received, (iv) set a date
by which the Surviving Corporation must receive the Payment Demand, which date
may not be fewer than 30 nor more than 60 days after the date the Dissenters'
Notice is mailed and (v) be accompanied by a copy of Article 13. A Shareholder
who is sent a Dissenters' Notice and who wishes to assert dissenters' rights
must demand payment and deposit his certificates in accordance with the terms of
the Dissenters' Notice. A Shareholder who demands payment and deposit his
certificates in accordance with the terms of the Dissenters' Notice retains all
other rights of a Shareholder until these rights are canceled or modified by the
consummation and effectiveness of the Merger. A Shareholder who does not demand
payments or deposit his certificates in accordance with the terms of the
Dissenters' Notice will not be entitled to payment for his shares under the
NCBCA. If any such holder of Common Stock fails to perfect or shall have
effectively withdrawn or lost such right, each share of such holder's Common
Stock will thereupon be deemed to have been converted into and to have become,
as of the Effective Time, the right to receive, without any interest thereon,
the number of shares of New Belk Class A Common Stock such Shareholder is
otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
13
<PAGE> 1525
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such Shareholder dissents and such
Shareholder's other shares were registered in the names of different
shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
14
<PAGE> 1526
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $1,051,809 $1,051,809 0.6 $(202,905) $833,990
EBITDA............... 80,807 80,807 7 (202,905) 768,554
EBIT................. 58,963 58,963 10 (202,905) 792,535
Net Income........... 48,104 48,104 15 -- 721,560
Book Equity.......... 779,093 778,832 1 -- 778,832
</TABLE>
15
<PAGE> 1527
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
N/A N/A% X $ N/A = $ N/A
--------
Total N/A
========
Relative Operating Value of Company $833,990
Relative Operating Value of Other Companies Owned by Company + --
--------
Total Relative Value of Company = $833,990
========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Brothers Company 18.2642% X $833,990 = $152,322
Matthews-Belk Company 7.2539% X 833,990 = $ 60,497
--------
Total $212,818
========
Total Relative Value of Company $833,990
Total Relative Value of Company Owned by Other Belk Companies - 212,818
--------
Net Relative Value of Company = $621,172
========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 621,172 / $1,156,226,577 = .0537%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.0537% X 59,998,834) / 1,150 = 28.0294
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 1528
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 31.16
Dividends(2).............................................. 20.00
Book value per share(3)................................... 504.59
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 26.91
Dividends(2).............................................. 7.29
Book value per share...................................... 350.93
</TABLE>
- ---------------
(1) Based on 1,544 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 1,544 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
17
<PAGE> 1529
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 1,143 $1,149 $ 1,052
Net income.................................................. 47 37 48
Per common share
Net income (loss)(1)...................................... 30.37 23.87 31.16
Dividends................................................. 25.00 25.00 20.00
Book value(2)............................................. 494.57 493.44 504.59
Total assets................................................ 854 879 889
Shareholders' equity........................................ 764 762 779
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $708 $675
Income from operations...................................... 11 24
</TABLE>
- ---------------
(1) Based on 1,544 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 1,544 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 1530
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
To the extent a discussion of the financial condition and results of
operations of the Company for any of the fiscal years ended January 31, 1995,
February 3, 1996 or February 1, 1997 or for either of the nine-month periods
ended November 2, 1996 or November 1, 1997 is necessary to identify certain
trends or conditions that differ from the combined Belk Companies and that are
material to Shareholders' understanding of the financial condition or results of
operations of the Company, such discussion is included below. The discussion
which follows is based upon and should be read in conjunction with the
historical financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus Supplement.
Comparable store sales decreased in fiscal year 1997 as a result of a weak
local economy resulting from the closing of a large local corporation.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in downtown
Belmont, North Carolina. The Company's store operates in a manner consistent
with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is managed out of the Matthews group office in
Gastonia, North Carolina.
Facilities. The Company owns its store property and building, which
contains approximately 15,000 square feet of floor area. While the Company
believes the building is generally adequate for its current needs, the Company's
management is considering the possibility of relocating its store to a shopping
center site.
Competition. Specific competitors in the Company's market include the
Wal-Mart, Dillard, Sears, and Penney stores in nearby Gastonia, North Carolina.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 1531
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of November 1, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d).............................................. 518 33.5%
Thomas M. Belk, Jr. (Director and Executive Officer)
(c)(d).................................................... 403 26.1%
H. W. McKay Belk (Director and Executive Officer)
(c)(d)(e)................................................. 443 28.7%
John R. Belk (Director and Executive Officer) (c)(d)........ 403 26.1%
Henderson Belk (Director) (b)............................... 26 1.7%
Sarah Belk Gambrell (b)..................................... 149 9.7%
Leroy Robinson (Director)................................... 0 *
David Belk Cannon (Director) (g)............................ 148 9.6%
James K. Glenn, Jr. (Director) (f).......................... 52 3.4%
Mike Belk Hudson............................................ 80 5.2%
B. Frank Matthews, II (Director and Executive Officer)
(h)(i).................................................... 145 9.4%
Eugene Robinson Matthews (Director and Executive Officer)... 15 1.0%
Elizabeth Matthews Welton Family Limited Partnership Phase
II........................................................ 133 8.6%
J. V. Properties............................................ 282 18.3%
Matthews-Belk Company....................................... 112 7.3%
All Directors and Executive Officers as a group (10
persons).................................................. 945 61.2%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk and Leroy Robinson -- 2801 West Tyvola Road, Charlotte, N.C.
28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207;
David Belk Cannon -- 1607 W. Floyd Baker Blvd., Gaffney, S.C. 29341; James K.
Glenn, Jr. -- P.O. Box 2736, Winston-Salem, N.C. 27102; Mike Belk Hudson -- P.O.
Box 556, Narragansett, R.I. 02882; B. Frank Matthews, II, Eugene Robinson
Matthews and Elizabeth Matthews Welton Family Limited Partnership Phase
II -- 2240 Remount Road, Gastonia, N.C. 28054; J. V. Properties and
Matthews-Belk Company -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Represented by 51 shares held by Mary Claudia Belk Irrevocable Trust dated
1/4/94. Claudia W. Belk, the Trustee, is John M. Belk's wife.
(b) Includes 26 shares held in several Trusts established by the Will of Mary I.
Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(c) Includes 112 shares held by Matthews-Belk Company, which shares are voted by
the members of the Executive Committee of the Board of Directors of such
Corporation, under authority given by the
20
<PAGE> 1532
directors of such Corporation at the annual meeting of directors held in
March, 1997. The Executive Committee of such Corporation consists of John M.
Belk, Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(d) Includes 282 shares of J. V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
(e) Includes 40 shares held by H. W. McKay Belk as custodian for his minor
children.
(f) Represented by 32 shares held by James K. Glenn, Jr., Trustee under Will of
Daisy Belk Mattox and 20 shares held by John Belk Stevens Trust U/W ITEM
III, Section C f/b/o James Kirk Glenn, Jr., et al. Voting and investment
power is vested in James K. Glenn, Jr., the Trustee of each trust.
(g) Includes 44 shares held by Residuary Trust U/W Mrs. Henry Belk Cannon. The
Trustees, David Belk Cannon and John C. Daughtridge, have voting and
investment power with respect to such shares.
(h) Includes 8 shares held by B. Frank Matthew's wife, Betty Choate Matthews.
(i) Includes 60 shares held by First Union National Bank of N.C., B. Frank
Matthews, II and Annabelle Z. Royster, Co-Trustees under the Will of J. H.
Matthews, Jr. The named Trustees have voting and investment power with
respect to such shares.
21
<PAGE> 1533
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 1534
BELK-MATTHEWS COMPANY
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 14,183 $ 10,815
Accounts receivable, net.................................. 218,793 244,313
Merchandise inventory..................................... 285,104 276,343
Receivable from affiliates, net........................... 229,257 192,091
Deferred income taxes..................................... 1,883 --
Other..................................................... 11,873 10,832
-------- --------
Total current assets........................................ 761,093 734,394
Investments................................................. 261 261
Property, plant and equipment, net.......................... 107,234 144,590
Other noncurrent assets..................................... 10,664 9,883
-------- --------
$879,252 $889,128
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 91,863 $ 72,821
Deferred income taxes..................................... -- 1,070
Accrued income taxes...................................... 1,050 13,992
-------- --------
Total current liabilities................................... 92,913 87,883
Deferred income taxes....................................... 7,897 3,649
Other noncurrent liabilities................................ 16,573 18,503
-------- --------
Total liabilities........................................... 117,383 110,035
Shareholders' equity:
Common stock.............................................. 154,400 154,400
Retained earnings......................................... 607,469 624,693
-------- --------
Total shareholders' equity.................................. 761,869 779,093
-------- --------
$879,252 $889,128
======== ========
</TABLE>
F-2
<PAGE> 1535
BELK-MATTHEWS COMPANY
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $1,142,672 $1,148,795 $1,051,809
Operating costs and expenses............................... 1,086,220 1,110,657 993,969
---------- ---------- ----------
Income from operations..................................... 56,452 38,138 57,840
---------- ---------- ----------
Other income (expense):
Interest, net............................................ 4,956 9,030 6,975
Miscellaneous, net....................................... (1,836) (865) 1,123
---------- ---------- ----------
Total other expense, net................................... 3,120 8,165 8,098
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 59,572 46,303 65,938
Income tax expense (benefit)............................... 12,673 9,454 17,834
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 46,899 36,849 48,104
---------- ---------- ----------
Net earnings............................................... 46,899 36,849 48,104
Retained earnings at beginning of period................... 600,921 609,220 607,469
Dividends paid............................................. (38,600) (38,600) (30,880)
---------- ---------- ----------
Retained earnings at end of period......................... $ 609,220 $ 607,469 $ 624,693
========== ========== ==========
</TABLE>
F-3
<PAGE> 1536
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 1537
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 1538
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13.
DISSENTERS' RIGHTS.
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES.
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
A-1
<PAGE> 1539
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares; (ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (iv) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes; (v)
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional shares so created is to be acquired by cash under
G.S. 55-6-04; (vi) changes the corporation into a nonprofit corporation or
cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 1540
SEC.SEC. 55-13-04 TO 55-13-19. Reserved for future codification purposes.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS.
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 1541
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 1542
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES.
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 1543
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 1544
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
---------- ---------- ------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement.................... $1,051,809 $48,104 $58,963 $80,807 $779,093
Adjustments to eliminate less than wholly-owned
subsidiaries................................. -- -- -- -- --
---------- ------- ------- ------- --------
Adjusted Shareholders' Statement............... $1,051,809 48,104 58,963 80,807 779,093
========== ------- ------- ------- --------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E................ -- -- --
Gain/loss on sale of securities.............. -- -- --
Impairment loss.............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries............................... -- -- --
Gain/loss on discontinued operations......... -- -- --
Adjustment to tax expense.................... -- -- -- --
------- ------- -------
Total non-operating items...................... -- -- --
------- ------- -------
Other Adjustments:
Adjustment for dividends received from other
Belk entities.............................. -- -- --
Adjustment for ownership in other Belk
entities................................... (261)
------- ------- ------- --------
Per Model...................................... $48,104 $58,963 $80,807 $778,832
======= ======= ======= ========
COMPONENTS OF NET DEBT (CASH) PER SHAREHOLDERS'
STATEMENT
Assets
Cash & cash equivalents.................... $ (10,815)
Negative cash balances reclassified to
accounts payable......................... --
Receivables from affiliates, net........... (192,090)
Loans receivable from affiliates, net...... --
Liabilities
Notes payable.............................. --
Current installments of long-term debt..... --
Current portion of obligations under
capital leases........................... --
Payables to affiliates, net................ --
Long-term debt, excluding current
installments............................. --
Obligations under capital leases, excluding
current portion.......................... --
Loans payable to affiliates, net........... --
----------
Net debt (cash)................................ (202,905)
Adjustments to eliminate less than wholly-owned
subsidiaries................................. --
----------
Per Model...................................... $ (202,905)
==========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 1545
SUPPLEMENT NO. 36
<PAGE> 1546
BELK-MATTHEWS COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 11:50 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 36
<PAGE> 1547
BELK'S DEPARTMENT STORE OF BOONE, NORTH CAROLINA, INCORPORATED
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk's Department Store of Boone, North
Carolina, Incorporated (the "Company"), to be held on April 16, 1998, at 8:30
a.m., local time, at the offices of Belk Stores Services, Inc., 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 141.8032 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 393,646 shares of New Belk Class A Common Stock which
will represent approximately 0.6561% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(37)
<PAGE> 1548
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 1549
BELK'S DEPARTMENT STORE OF BOONE, NORTH CAROLINA, INCORPORATED
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK'S DEPARTMENT STORE OF BOONE,
NORTH CAROLINA, INCORPORATED:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk's Department Store of Boone, North Carolina, Incorporated (the
"Company") will be held on April 16, 1998, at 8:30 a.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 141.8032 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 1550
BELK'S DEPARTMENT STORE OF BOONE,
NORTH CAROLINA, INCORPORATED
SUPPLEMENT NO. 37
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 37 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK'S DEPARTMENT
STORE OF BOONE, NORTH CAROLINA, INCORPORATED (THE "COMPANY"), THE DISCUSSION
HEREIN SUPERSEDES THE DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE
INFORMATION CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE
IN THE REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN
THE REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY
AND THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT
BE ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL
CAPITALIZED TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE
MEANINGS SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 1551
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1939. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 8:30 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 141.8032 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 4,752 shares of Common Stock
outstanding held of record by 19 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 90.7% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 1552
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 4,844 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock
3
<PAGE> 1553
held by a New Belk Stockholder who is a Class A Permitted Holder will also
automatically convert into New Belk Class B Common Stock in the event that such
New Belk Stockholder no longer meets the requirements of a Class A Permitted
Holder. New Belk Class B Common Stock has no conversion rights. The Company
Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving
4
<PAGE> 1554
the distribution. The Company Bylaws provide that the Board of Directors of the
Company (the "Company Board") may from time to time declare dividends on the
Company's outstanding shares in the manner and upon the terms and conditions
provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. DGCL requires that
an amendment of the certificate of incorporation of a corporation be adopted by
the board of directors and the holders of a majority of the outstanding shares
of stock entitled to vote thereon. The holders of the outstanding shares of a
class are entitled to vote as a separate class on a proposed amendment that
would increase or decrease the aggregate number of authorized shares of such
class, increase or decrease the par value of the shares of such class or alter
or change the powers, preferences or special rights of the shares of such class
so as to affect them adversely. If any proposed amendment would alter or change
the powers, preferences or special rights of one or more series of any class so
as to affect them adversely, but would not so affect the entire class, then only
the shares of the series so affected by the amendment will be considered a
separate class for purposes of voting by classes. The New Belk Certificate is
consistent with the foregoing provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the
5
<PAGE> 1555
shareholders and approved (i) by a majority (unless the articles of
incorporation, a bylaw adopted by the shareholders or the board of directors
require a greater vote or a vote by voting groups) of the votes entitled to be
cast on the amendment by any voting group with respect to which the amendment
would create dissenters' rights and (ii) when a quorum is present, by all other
voting groups entitled to vote on the amendment through casting more affirmative
than opposing votes. As under the DGCL, the holders of the outstanding shares of
a class or series are entitled to vote as a separate voting group (if
shareholder voting is otherwise required by the NCBCA) on a proposed amendment
if the amendment would change certain fundamental rights and preferences of that
class or series. The Company Articles do not specify a greater voting
requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires the approval of the stockholders to
amend the bylaws of the corporation, unless the certificate of incorporation
confers the power to amend such bylaws to the board of directors. Conferring
such power to the board of directors of the corporation does not divest or limit
the stockholders' power to adopt, amend or repeal the bylaws of the corporation.
The New Belk Certificate confers upon the New Belk Board the power to adopt,
amend or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power, nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without prior notice, if all
holders of outstanding shares entitled to vote on such action sign the written
consent(s) describing such action. The Company Bylaws and Company Articles do
not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
6
<PAGE> 1556
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more than 30% during any 12-month period. The
articles of incorporation or bylaws may establish a variable range for the size
of the board of directors by fixing a minimum and maximum number of directors.
If a variable range is established, the number of directors may be fixed or
changed from time to time, within the minimum and maximum, by the shareholders
or (unless the articles of incorporation or a shareholders' agreement shall
otherwise provide) the board of directors. After shares are issued, only the
shareholders may change the range for the size of the board or change from a
fixed to a variable-range size board or vice versa. The Company Bylaws require
the Company Board to consist of at least three, but no more than 15, members.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless
7
<PAGE> 1557
otherwise provided in the certificate of incorporation or the bylaws. The New
Belk Bylaws and the New Belk Certificate do not provide for any qualifications
for directors of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the disinterested directors or committee authorized, approved or
ratified the transaction; (ii) the material facts of the transaction and the
director's interest were disclosed or known to the shareholders entitled to vote
and the
8
<PAGE> 1558
disinterested shares authorized, approved or ratified the transaction; or (iii)
the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation, or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him whether, or not involving action in his official
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any transaction from which the director derived an improper
personal benefit or (iv) acts or omissions occurring prior to the date the
provisions became effective.
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers
9
<PAGE> 1559
against any and all liability and litigation expense, including reasonable
attorneys' fees, arising out of their status as such or their activities in
either of such capacities; provided, however, that the Company will not
indemnify a director or officer against liability or litigation expense that he
may incur on account of his activities which were, at the time taken, known or
believed by him to be clearly in conflict with the best interest of the Company.
The Company will likewise and to the same extent indemnify any person who, at
the request of the Company, is or was serving as a director or as an officer of
another corporation, joint venture, trust or other enterprise, as a partner of a
partnership or as a trustee or administrator under an employee benefit plan. The
Company will also indemnify the director or officer for reasonable costs,
expenses and attorneys' fees in connection with the enforcement of rights to
indemnification granted therein, if it is so determined in accordance with the
Company Articles that the director or officer is entitled to indemnification
thereunder. The Company Articles provide that to the fullest extent permitted by
the NCBCA a director will not be personally liable to the Company, or any of its
Shareholders or otherwise for monetary damages for breach of duty of care or
other duty as a director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested stockholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder,
except in certain circumstances; (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested stockholder, except
in certain circumstances; or (v) any receipt by the interested stockholder of
the benefit of any loans, advances, guarantees, pledges or other financial
benefits (other than those expressly permitted in (i) through (iv) above)
provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) an
affiliate or associate of the corporation who within three years of the date in
question was the direct
10
<PAGE> 1560
or indirect owner of at least 15% of the voting power of any class or series of
the then outstanding stock of the corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
11
<PAGE> 1561
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any action of a committee of the board of
directors while acting in place of the board of directors on behalf of the
corporation, minutes of any meeting of the shareholders and records of action
taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates must be deposited,
(iii) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the Payment Demand is received, (iv) set a date
by which the Surviving Corporation must receive the Payment Demand, which date
may not be fewer than 30 nor more than 60 days after the date the Dissenters'
Notice is mailed and (v) be accompanied by a copy of Article 13. A Shareholder
who is sent a Dissenters' Notice and who wishes to assert dissenters' rights
must demand payment and deposit his certificates in accordance with the terms of
the Dissenters' Notice. A Shareholder who demands payment and
12
<PAGE> 1562
deposit his certificates in accordance with the terms of the Dissenters' Notice
retains all other rights of a Shareholder until these rights are canceled or
modified by the consummation and effectiveness of the Merger. A Shareholder who
does not demand payments or deposit his certificates in accordance with the
terms of the Dissenters' Notice will not be entitled to payment for his shares
under the NCBCA. If any such holder of Common Stock fails to perfect or shall
have effectively withdrawn or lost such right, each share of such holder's
Common Stock will thereupon be deemed to have been converted into and to have
become, as of the Effective Time, the right to receive, without any interest
thereon, the number of shares of New Belk Class A Common Stock such Shareholder
is otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such Shareholder dissents and such
Shareholder's other shares were registered in the names of different
shareholders.
13
<PAGE> 1563
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ----------- ----------- -------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $ 9,569,442 $ 9,569,442 0.6 $(169,680) $ 5,911,345
EBITDA............... 1,244,034 1,233,277 7 (169,680) 8,802,619
EBIT................. 941,966 931,209 10 (169,680) 9,481,770
Net Income........... 570,123 563,456 15 -- 8,451,840
Book Equity.......... 5,810,684 4,162,185 1 -- 4,162,185
</TABLE>
14
<PAGE> 1564
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Gallant-Belk Company 4.5702% X $31,711,921 = $ 1,449,298
Belk Department Store
of Forest City,
N.C., Inc. 11.6208 X 7,237,011 = 840,999
Belk's Department
Store of Lenoir,
North Carolina,
Incorporated 5.2766 X 6,891,593 = 363,642
Belk's Department
Store of Morehead
City, N.C., Inc. 5.0676 X 10,315,936 = 522,770
Belk's Department
Store of Mount
Airy, North
Carolina,
Incorporated 1.8703 X 3,686,607 = 68,951
Belk Department Store
of Wilkesboro,
N.C., Inc. 7.4797 X 3,451,898 = 258,192
-----------
Total $ 3,503,851
===========
Relative Operating Value of Company $ 9,481,770
Relative Operating Value of Other Companies Owned by Company + 3,503,851
-----------
Total Relative Value of Company = $12,985,621
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Enterprises,
Inc. 28.7879% X $12,985,621 = $ 3,738,288
Belk's Department
Store of Lenoir,
North Carolina,
Incorporated 12.7946% X 12,985,621 = 1,661,458
-----------
Total $ 5,399,746
===========
Total Relative Value of Company $12,985,621
Total Relative Value of Company Owned by Other Belk Companies - 5,399,746
-----------
Net Relative Value of Company = $ 7,585,875
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 7,585,875 / $1,156,226,577 = .6561%
</TABLE>
15
<PAGE> 1565
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.6561% X 59,998,834 / 2,776 = 141.8032
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 1566
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 119.98
Dividends(2).............................................. 27.50
Book value per share(3)................................... 1,222.79
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 136.13
Dividends(2).............................................. 36.87
Book value per share...................................... 1,775.38
</TABLE>
- ---------------
(1) Based on 4,752 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 4,752 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
17
<PAGE> 1567
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 8,929 $ 9,098 $ 9,569
Net income.................................................. 473 523 570
Per common share
Net income (loss)(1)...................................... 99.53 110.05 119.98
Dividends................................................. 20.00 25.00 27.50
Book value(2)............................................. 1,045.26 1,130.31 1,222.79
Total assets................................................ 5,686 6,262 6,849
Shareholders' equity........................................ 4,967 5,371 5,811
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $6,770 $7,054
Income from operations...................................... 619 698
</TABLE>
- ---------------
(1) Based on 4,752 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 4,752 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 1568
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Boone Mall in
Boone, North Carolina. The Company's store operates in a manner consistent with
the business of the Belk Companies described in the Proxy Statement/Prospectus.
The store conducts operations independent of any group office.
Facilities. The Company leases its store building, which contains
approximately 68,000 square feet of floor area. The current term of the store
lease expires in 2009. The Company believes the building is adequate to meet its
current needs.
Competition. Specific competitors in the Company's market include
Wal-Mart, Penney and Goody's.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 1569
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d).............................................. 3,016.0 63.5%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(c)(d)................................................. 2,319.4 48.8%
H. W. McKay Belk (Director and Executive Officer)
(b)(c)(d)................................................. 2,319.4 48.8%
John R. Belk (Director and Executive Officer) (b)(c)(d)..... 2,319.4 48.8%
Sarah Belk Gambrell (Director).............................. 1,136.0 23.9%
Leroy Robinson (b)(c)....................................... 291.4 6.1%
Katherine McKay Belk (b)(c)................................. 291.4 6.1%
Katherine Belk Morris (b)(c)................................ 343.4 7.2%
Thomas M. Belk, Trustee U/A dated September 15, 1993........ 251.4 5.3%
Montgomery Investment Company............................... 704 14.8%
Belk Enterprises, Inc....................................... 1,368 28.8%
Belk's Department Store of Lenoir, North Carolina
Incorporated.............................................. 608 12.8%
All Directors and Executive Officers as a group (5
persons).................................................. 4,308.0 90.7%
</TABLE>
- ---------------
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Leroy Robinson, Katherine McKay Belk, and Katherine Belk Morris -- 2801 West
Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk Gambrell -- 300 Cherokee
Road, Charlotte, N.C. 28207; Montgomery Investment Company, Belk Enterprises,
Inc. and Belk's Department Store of Lenoir, North Carolina, Incorporated -- 2801
West Tyvola Road, Charlotte, N.C. 28217-4500; Thomas M. Belk, Trustee U/A dated
September 15, 1993.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors, and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 704 shares held by Montgomery Investment Company, of which John M.
Belk is the majority shareholder.
(b) Includes 40 shares held by Brothers Investment Company, which corporation is
equally owned by John M. Belk and the Estate of Thomas M. Belk. Voting and
investment power is shared by John M. Belk, Katherine McKay Belk, Katherine
Belk Morris, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk and Leroy
Robinson.
(c) Includes 251.4 shares held by Thomas M. Belk, Trustee U/A dated September
15, 1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(d) Includes 1,368 shares held by Belk Enterprises, Inc. and 608 shares of
Belk's Department Store of Lenoir, North Carolina, Incorporated, which
shares are voted by the members of the Executive Committee of the Board of
Directors of each such Corporation, under authority given by the directors
of each such Corporation at the annual meeting of directors held in March,
1997. The Executive Committee of each such Corporation consists of John M.
Belk, Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
20
<PAGE> 1570
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 1571
BELK'S DEPARTMENT STORE OF BOONE,
NORTH CAROLINA, INCORPORATED
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $1,441,996 $ 339,629
Accounts receivable, net.................................. 1,070,275 1,202,950
Merchandise inventory..................................... 1,832,452 1,999,761
Receivable from affiliates, net........................... -- 23,256
Deferred income taxes..................................... 18,441 17,746
Other..................................................... 89,275 88,126
---------- ----------
Total current assets........................................ 4,452,439 3,671,468
Loans receivable from affiliates, net....................... 1,446 1,446
Investments................................................. 14,528 1,648,499
Property, plant and equipment, net.......................... 1,758,639 1,498,532
Other noncurrent assets..................................... 34,745 28,854
---------- ----------
$6,261,797 $6,848,799
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current installments of long-term debt.................... $ -- $ 72,243
Accounts payable and accrued expenses..................... 607,138 614,405
Payables to affiliates, net............................... 2,256 --
Accrued income taxes...................................... 98,399 71,638
---------- ----------
Total current liabilities................................... 707,793 758,286
Deferred income taxes....................................... 100,270 60,428
Long-term debt, excluding current installments.............. -- 122,408
Other noncurrent liabilities................................ 82,493 96,993
---------- ----------
Total liabilities........................................... 890,556 1,038,115
Shareholders' equity:
Common stock.............................................. 475,200 475,200
Retained earnings......................................... 4,896,041 5,335,484
---------- ----------
Total shareholders' equity.................................. 5,371,241 5,810,684
---------- ----------
$6,261,797 $6,848,799
========== ==========
</TABLE>
F-2
<PAGE> 1572
BELK'S DEPARTMENT STORE OF BOONE,
NORTH CAROLINA, INCORPORATED
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $8,929,087 $9,098,175 $9,569,442
Operating costs and expenses............................... 8,207,392 8,281,087 8,643,644
---------- ---------- ----------
Income from operations..................................... 721,695 817,088 925,798
---------- ---------- ----------
Other income (expense):
Interest, net............................................ (11,936) 24,473 (22,124)
Dividend income.......................................... 8,592 9,524 10,756
Gain (loss) on disposal of property, plant and
equipment............................................. 19 -- --
Miscellaneous, net....................................... 2,418 1,486 5,411
---------- ---------- ----------
Total other expense, net................................... (907) 35,483 (5,957)
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 720,788 852,571 919,841
Income tax expense (benefit)............................... 247,841 329,624 349,718
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 472,947 522,947 570,123
---------- ---------- ----------
Net earnings............................................... 472,947 522,947 570,123
Retained earnings at beginning of period................... 4,113,987 4,491,894 4,896,041
Dividends paid............................................. (95,040) (118,800) (130,680)
---------- ---------- ----------
Retained earnings at end of period......................... $4,491,894 $4,896,041 $5,335,484
========== ========== ==========
</TABLE>
F-3
<PAGE> 1573
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 1574
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 1575
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
A-1
<PAGE> 1576
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares; (ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (iv) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes; (v)
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional shares so created is to be acquired by cash under
G.S. 55-6-04; (vi) changes the corporation into a nonprofit corporation or
cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 1577
SEC.SEC. 55-13-04 TO 55-13-19. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 1578
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 1579
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 1580
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 1581
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................... $ 9,569,442 $570,123 $941,966 $1,244,034 $ 5,810,684
Adjustments to eliminate less than
wholly-owned subsidiaries................... -- -- -- -- --
----------- -------- -------- ---------- -----------
Adjusted Shareholders' Statement.............. $ 9,569,442 570,123 941,966 1,244,034 5,810,684
=========== -------- -------- ---------- -----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............... -- -- --
Gain/loss on sale of securities............. -- -- --
Impairment loss............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries.............................. -- -- --
Gain/loss on discontinued operations........ -- -- --
Adjustment to tax expense................... -- -- -- --
-------- -------- ----------
Total non-operating items..................... -- -- --
-------- -------- ----------
Other Adjustments:
Adjustment for dividends received from other
Belk entities............................. (6,667) (10,757) (10,757)
Adjustment for ownership in other Belk
entities.................................. (1,648,499)
-------- -------- ---------- -----------
Per Model..................................... $563,456 $931,209 $1,233,277 $ 4,162,185
======== ======== ========== ===========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................... $ (339,629)
Negative cash balances reclassified to
accounts payable........................ --
Receivables from affiliates, net.......... (23,256)
Loans receivable from affiliates, net..... (1,446)
Liabilities
Notes payable............................. --
Current installments of long-term debt.... 72,243
Current portion of obligations under
capital leases.......................... --
Payables to affiliates, net............... --
Long-term debt, excluding current
installments............................ 122,408
Obligations under capital leases,
excluding current portion............... --
Loans payable to affiliates, net.......... --
-----------
Net debt (cash)............................... (169,680)
Adjustments to eliminate less than
wholly-owned subsidiaries................... --
-----------
Per Model..................................... $ (169,680)
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 1582
SUPPLEMENT NO. 37
<PAGE> 1583
BELK'S DEPARTMENT STORE OF BOONE, NORTH CAROLINA, INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 8:30 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated:
, 1998
--------------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 37
<PAGE> 1584
BELK'S DEPARTMENT STORE OF BREVARD, N.C., INCORPORATED
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk's Department Store of Brevard, N.C.,
Incorporated (the "Company"), to be held on April 16, 1998, at 4:00 p.m., local
time, at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road,
Charlotte, North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 39.2748 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 147,516 shares of New Belk Class A Common Stock which
will represent approximately 0.2459% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(38)
<PAGE> 1585
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 1586
BELK'S DEPARTMENT STORE OF BREVARD, N.C., INCORPORATED
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK'S DEPARTMENT STORE OF BREVARD, N.C., INCORPORATED:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk's Department Store of Brevard, N.C., Incorporated (the
"Company") will be held on April 16, 1998, at 4:00 p.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 39.2748 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 1587
BELK'S DEPARTMENT STORE OF BREVARD, N.C., INCORPORATED
SUPPLEMENT NO. 38
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 38 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK'S DEPARTMENT
STORE OF BREVARD, N.C., INCORPORATED (THE "COMPANY"), THE DISCUSSION HEREIN
SUPERSEDES THE DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE
INFORMATION CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE
IN THE REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN
THE REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY
AND THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT
BE ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL
CAPITALIZED TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE
MEANINGS SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 1588
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1937. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 4:00 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 39.2748 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 4,800 shares of Common Stock
outstanding held of record by 43 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 67.5% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 1589
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. In addition, the Reorganization is expected to have
certain other benefits for the Company and the Shareholders, including the
ability to share the risk associated with the uncertain prospects for the
Company's store in its current location. The store is located in a relatively
small market that is also close to larger markets with larger Belk stores and
other competitors. The prospects for growth of the Company's store may be
limited because of the size of its market and its close proximity to such
competition. The Merger would allow the Company to share with New Belk the risk
associated with the Company's current market and participate in the growth of
other Belk stores located in markets with better growth prospects.
There can be no assurance, however, that any of these benefits will be
achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 4,800 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common
3
<PAGE> 1590
Stock are entitled to 10 votes per share. The holders of New Belk Class B Common
Stock are entitled to one vote per share. Shares of New Belk Class A Common
Stock may be owned only by Class A Permitted Holders. If a share of New Belk
Class A Common Stock is transferred to any person other than a Class A Permitted
Holder, whether by sale, assignment, gift, bequest, appointment or otherwise,
such share will be converted automatically into a share of New Belk Class B
Common Stock. Shares of New Belk Class A Common Stock are convertible into New
Belk Class B Common Stock, in whole or in part, at any time and from time to
time at the option of the holder, on the basis of one share of New Belk Class B
Common Stock for each share of New Belk Class A Common Stock converted. Shares
of New Belk Class A Common Stock held by a New Belk Stockholder who is a Class A
Permitted Holder will also automatically convert into New Belk Class B Common
Stock in the event that such New Belk Stockholder no longer meets the
requirements of a Class A Permitted Holder. New Belk Class B Common Stock has no
conversion rights. The Company Articles provide for only one class of common
stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same
4
<PAGE> 1591
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them
5
<PAGE> 1592
adversely. If any proposed amendment would alter or change the powers,
preferences or special rights of one or more series of any class so as to affect
them adversely, but would not so affect the entire class, then only the shares
of the series so affected by the amendment will be considered a separate class
for purposes of voting by classes. The New Belk Certificate is consistent with
the foregoing provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the shareholders and approved (i) by a majority
(unless the articles of incorporation, a bylaw adopted by the shareholders or
the board of directors require a greater vote or a vote by voting groups) of the
votes entitled to be cast on the amendment by any voting group with respect to
which the amendment would create dissenters' rights and (ii) when a quorum is
present, by all other voting groups entitled to vote on the amendment through
casting more affirmative than opposing votes. As under the DGCL, the holders of
the outstanding shares of a class or series are entitled to vote as a separate
voting group (if shareholder voting is otherwise required by the NCBCA) on a
proposed amendment if the amendment would change certain fundamental rights and
preferences of that class or series. The Company Articles do not specify a
greater voting requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires Stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power, nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has power, by
vote of a majority of all the directors, and without the assent or vote of the
shareholders, to make, alter, amend and rescind the bylaws of the Company.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without
6
<PAGE> 1593
prior notice, if all holders of outstanding shares entitled to vote on such
action sign the written consent(s) describing such action. The Company Bylaws
and Company Articles do not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more
7
<PAGE> 1594
than 30% during any 12-month period. The articles of incorporation or bylaws may
establish a variable range for the size of the board of directors by fixing a
minimum and maximum number of directors. If a variable range is established, the
number of directors may be fixed or changed from time to time, within the
minimum and maximum, by the shareholders or (unless the articles of
incorporation or a shareholders' agreement shall otherwise provide) the board of
directors. After shares are issued, only the shareholders may change the range
for the size of the board or change from a fixed to a variable-range size board
or vice versa. The Company Bylaws require the Company Board to consist of at
least three, but no more than 15, members.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
8
<PAGE> 1595
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the disinterested directors or committee authorized, approved or
ratified the transaction; (ii) the material facts of the transaction and the
director's interest were disclosed or known to the shareholders entitled to vote
and the disinterested shares authorized, approved or ratified the transaction;
or (iii) the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
9
<PAGE> 1596
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any transaction from which the director derived an improper
personal benefit or (iv) acts or omissions occurring prior to the date the
provisions became effective.
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested stockholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which
10
<PAGE> 1597
results in the issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder, except in certain circumstances; (iv)
any transaction involving the corporation which has the effect of increasing the
proportionate share of the stock of any class or series, or securities
convertible into the stock of any class or series, of the corporation which is
owned by the interested stockholder, except in certain circumstances; or (v) any
receipt by the interested stockholder of the benefit of any loans, advances,
guarantees, pledges or other financial benefits (other than those expressly
permitted in (i) through (iv) above) provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) an
affiliate or associate of the corporation who within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a
11
<PAGE> 1598
preemptive right to purchase, subscribe for or otherwise acquire stock of any
class or series of New Belk or any security convertible into or exchangeable
for, or any warrant, option or right to purchase, subscribe for or otherwise
acquire, stock of any class or series of New Belk, whether now or hereafter
authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation (i) if the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action by
the board of directors, records of any final action of a committee of the board
of directors while acting in place of the board of directors on behalf of the
corporation, minutes of any meeting of the shareholders and records of action
taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
12
<PAGE> 1599
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates must be deposited,
(iii) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the Payment Demand is received, (iv) set a date
by which the Surviving Corporation must receive the Payment Demand, which date
may not be fewer than 30 nor more than 60 days after the date the Dissenters'
Notice is mailed and (v) be accompanied by a copy of Article 13. A Shareholder
who is sent a Dissenters' Notice and who wishes to assert dissenters' rights
must demand payment and deposit his certificates in accordance with the terms of
the Dissenters' Notice. A Shareholder who demands payment and deposit his
certificates in accordance with the terms of the Dissenters' Notice retains all
other rights of a Shareholder until these rights are canceled or modified by the
consummation and effectiveness of the Merger. A Shareholder who does not demand
payments or deposit his certificates in accordance with the terms of the
Dissenters' Notice will not be entitled to payment for his shares under the
NCBCA. If any such holder of Common Stock fails to perfect or shall have
effectively withdrawn or lost such right, each share of such holder's Common
Stock will thereupon be deemed to have been converted into and to have become,
as of the Effective Time, the right to receive, without any interest thereon,
the number of shares of New Belk Class A Common Stock such Shareholder is
otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
13
<PAGE> 1600
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such Shareholder dissents and such
Shareholder's other shares were registered in the names of different
shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
14
<PAGE> 1601
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............. $2,524,845 $2,524,845 0.6 $634,880 $ 880,027
EBITDA................ 269,902 265,761 7 634,880 1,225,447
EBIT.................. 114,421 110,280 10 634,880 467,920
Net Income............ 46,907 43,947 15 -- 659,205
Book Equity........... 3,633,143 3,632,918 1 -- 3,632,918
</TABLE>
15
<PAGE> 1602
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
N/A N/A% X $ N/A = $ N/A
----------
Total $ N/A
==========
Relative Operating Value of Company $3,632,918
Relative Operating Value of Other Companies Owned by Company + --
----------
Total Relative Value of Company = $3,632,918
==========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Enterprises,
Inc. 1.1667% X $3,632,918 = $ 42,385
Belk of Waycross,
Ga., Inc. 20.5833 X 3,632,918 = 747,775
----------
Total $ 790,160
==========
Total Relative Value of Company $3,632,918
Total Relative Value of Company Owned by Other Belk Companies - 790,160
----------
Net Relative Value of Company = $2,842,758
==========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$2,842,758 / $1,156,226,577 = .2459%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.2459% X 59,998,834) / 3,756 = 39.2748
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 1603
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 9.77
Dividends(2).............................................. 0.00
Book value per share(3)................................... 756.90
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 37.70
Dividends(2).............................................. 10.21
Book value per share...................................... 491.72
</TABLE>
- ---------------
(1) Based on 4,800 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 4,800 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
17
<PAGE> 1604
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 2,804 $ 2,602 $ 2,525
Net income (loss)........................................... (35) (83) 47
Per common share
Net income (loss)(1)...................................... (7.25) (17.34) 9.77
Dividends................................................. -- -- --
Book value(2)............................................. 653.82 706.19 756.90
Total assets................................................ 4,805 5,139 5,255
Shareholders' equity........................................ 3,138 3,390 3,633
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $1,761 $1,744
Income from operations...................................... 7 68
</TABLE>
- ---------------
(1) Based on 4,800 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 4,800 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 1605
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
To the extent a discussion of the financial condition and results of
operations of the Company for any of the fiscal years ended January 31, 1995,
February 3, 1996 or February 1, 1997 or for either of the nine-month periods
ended November 2, 1996 or November 1, 1997 is necessary to identify certain
trends or conditions that differ from the combined Belk Companies and that are
material to Shareholders' understanding of the financial condition or results of
operations of the Company, such discussion is included below. The discussion
which follows is based upon and should be read in conjunction with the
historical financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus Supplement.
Income from operations decreased in fiscal year 1996 as a percent of sales
due to a decrease in sales without a corresponding decrease in operating
expenses. Comparable store sales decreased 7.2% in fiscal year 1996 due to
lay-offs at the market's largest employer.
Income from operations increased in fiscal year 1997 to 1.9% of sales due
to increased gross profit attributable to improved inventory management which
resulted in fewer markdowns and to a decrease in advertising expense.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Forest Gate
Shopping Center in Brevard, North Carolina. The Company's store operates in a
manner consistent with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is operated out of the Kuhne/Greiner group
office in Greenville, South Carolina.
Facilities. The Company owns the store property and building, which
contains approximately 30,000 square feet of floor area, together with an
adjacent parking area. The company believes the facility is adequate to meet its
current needs.
Competition. The Company's principal competitor in the market is Wal-Mart.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 1606
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d).............................................. 2,180 45.4%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(d)(e)................................................. 1,492 31.1%
H. W. McKay Belk (Director and Executive Officer)
(b)(d)(f)................................................. 1,452 30.3%
John R. Belk (Director and Executive Officer) (b)(d)(g)..... 1,414 29.5%
Sarah Belk Gambrell (Director) (c).......................... 908 18.9%
John A. Kuhne (Director and Executive Officer).............. 0 *
Robert E. Greiner (Director and Executive Officer).......... 0 *
Welch Bostick, Jr. (Executive Officer)...................... 0 *
Leroy Robinson (b).......................................... 348 7.3%
Katherine McKay Belk (b)(i)................................. 508 10.6%
Katherine Belk Morris (b)(h)................................ 410 8.5%
Kate Simpson (j)(k)......................................... 960 20.0%
Lucy Simpson Kuhne (j)(k)................................... 960 20.0%
Claire Russo (j)(k)......................................... 960 20.0%
Thomas M. Belk, Trustee U/A dated September 15, 1993........ 348 7.3%
Montgomery Investment Company............................... 696 14.5%
Belk of Waycross, Ga., Inc.................................. 988 20.6%
Simpson Enterprises, Inc.................................... 240 5%
Kate McArver Simpson, Lucy Caroline Bowden Simpson Kuhne and
Hazel Claire M. Efird as Personal Representative of the
Estate of William Henry Belk Simpson, Deceased............ 720 15.0%
All Directors and Executive Officers as a group (7
persons).................................................. 3,242 67.5%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business addresses for the beneficial owners, directors and/or officers
are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk, Leroy
Robinson, Katherine McKay Belk, and Katherine Belk Morris -- 2801 West Tyvola
Road, Charlotte, N.C. 28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road,
Charlotte, N.C. 28207; John A. Kuhne, Lucy S. Kuhne, Claire Russo, Robert E.
Greiner and Welch Bostick, Jr. -- 14 S. Main Street, Greenville, S.C. 29606;
Kate Simpson, Simpson Enterprises, Inc. and Estate of William Henry Bell
Simpson -- P.O. Box 17433, Greenville, S.C. 29606; Kate McArver Simpson, Lucy
Caroline Bowden Simpson Kuhne and Hazel Claire M. Efird -- P.O. Box 17433,
Greenville, S.C. 29606; Thomas M. Belk, Trustee U/A dated September 15, 1993,
Montgomery Investment Company and Belk of Waycross, Ga., Inc. -- 2801 West
Tyvola Road, Charlotte, N.C. 28217-4500.
All shares of common stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 696 shares held by Montgomery Investment Company, of which John M.
Belk is the majority shareholder.
20
<PAGE> 1607
(b) Includes 348 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(c) Includes 28 shares held in several Trusts established by the Will of Mary I.
Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(d) Includes 56 shares held by Belk Enterprises, Inc. and 988 shares held by
Belk of Waycross, Ga., Inc., which shares are voted by the members of the
Executive Committee of the Board of Directors of each such Corporation,
under authority given by the directors of each such Corporation at the
annual meeting of directors held in March, 1997. The Executive Committee of
each such Corporation consists of John M. Belk, Thomas M. Belk, Jr., H. W.
McKay Belk and John R. Belk.
(e) Includes 40 shares held by Thomas M. Belk, Jr., as custodian for his minor
children and 56 shares held as custodian for the minor children of his
brother, H. W. McKay Belk.
(f) Includes 60 shares held by H. W. McKay Belk as custodian for his minor
children.
(g) Includes 20 shares held by John R. Belk as custodian for his minor children
(h) Includes 60 shares held by Katherine Belk Morris as custodian for her minor
children
(i) Includes 160 shares held by Katherine M. Belk as custodian for her minor
grandchildren
(j) Includes 720 shares held by the Estate of William Henry Belk Simpson. Voting
and investment power is shared by the Personal Representatives, who are Kate
Simpson, Lucy Kuhne and Claire Russo.
(k) Includes 240 shares held by Simpson Enterprises, Inc. Voting and investment
power is shared by the Personal Representatives of the Estate of William
Henry Belk Simpson, who are Kate Simpson, Lucy Kuhne and Claire Russo.
21
<PAGE> 1608
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
</TABLE>
F-1
<PAGE> 1609
BELK'S DEPARTMENT STORE OF BREVARD, N.C., INCORPORATED
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 68,271 $ 73,239
Accounts receivable, net.................................. 337,276 385,482
Merchandise inventory..................................... 511,140 494,860
Refundable income taxes................................... 18,418 29,741
Deferred income taxes..................................... 12,541 --
Other..................................................... 78,222 60,521
---------- ----------
Total current assets........................................ 1,025,868 1,043,843
Investments................................................. 2,570,829 2,823,447
Property, plant and equipment, net.......................... 1,535,217 1,382,195
Other noncurrent assets..................................... 7,173 5,499
---------- ----------
$5,139,087 $5,254,984
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current installments of long-term debt.................... $ 725,000 $ --
Accounts payable and accrued expenses..................... 144,923 122,702
Payables to affiliates, net............................... 154,539 708,120
Deferred income taxes..................................... -- 64,671
---------- ----------
Total current liabilities................................... 1,024,462 895,493
Deferred income taxes....................................... 701,894 701,186
Other noncurrent liabilities................................ 23,034 25,163
---------- ----------
Total liabilities........................................... 1,749,390 1,621,842
Shareholders' equity:
Common stock.............................................. 480,000 480,000
Net unrealized gain (loss) on investments, net of income
taxes.................................................. 1,670,493 1,867,032
Retained earnings......................................... 1,239,204 1,286,110
---------- ----------
Total shareholders' equity.................................. 3,389,697 3,633,142
---------- ----------
$5,139,087 $5,254,984
========== ==========
</TABLE>
F-2
<PAGE> 1610
BELK'S DEPARTMENT STORE OF BREVARD, N.C., INCORPORATED
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $2,804,016 $2,602,304 $2,524,844
Operating costs and expenses............................... 2,802,938 2,676,306 2,477,770
---------- ---------- ----------
Income from operations..................................... 1,078 (74,002) 47,074
---------- ---------- ----------
Other income (expense):
Interest, net............................................ (61,593) (65,474) (48,793)
Dividend income.......................................... 50,143 54,636 61,737
Gain (loss) on sale of securities........................ 5,391 18,706 4,141
Miscellaneous, net....................................... (5,688) (716) 1,468
---------- ---------- ----------
Total other expense, net................................... (11,747) 7,152 18,553
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ (10,669) (66,850) 65,627
Income tax expense (benefit)............................... 24,137 16,385 18,721
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... (34,806) (83,235) 46,906
---------- ---------- ----------
Net earnings............................................... (34,806) (83,235) 46,906
Retained earnings at beginning of period................... 1,357,245 1,322,439 1,239,204
---------- ---------- ----------
Retained earnings at end of period......................... $1,322,439 $1,239,204 $1,286,110
========== ========== ==========
</TABLE>
F-3
<PAGE> 1611
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 1612
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 1613
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATIONS ACT
STATE OF NORTH CAROLINA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES.
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
A-1
<PAGE> 1614
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares; (ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (iv) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes; (v)
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional shares so created is to be acquired by cash under
G.S. 55-6-04; (vi) changes the corporation into a nonprofit corporation or
cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 1615
SEC.SEC. 55-13-04 TO 55-13-19. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS.
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 1616
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 1617
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES.
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 1618
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 1619
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
---------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement.................... $2,524,845 $46,907 $114,421 $269,902 $3,633,142
Adjustments to eliminate less than wholly-owned
subsidiaries................................. -- -- -- -- --
---------- ------- -------- -------- ----------
Adjusted Shareholders' Statement............... $2,524,845 46,907 114,421 269,902 3,633,142
========== ------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E................ -- -- --
Gain/loss on sale of securities.............. (2,960) (4,141) (4,141)
Impairment loss.............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries............................... -- -- --
Gain/loss on discontinued operations......... -- -- --
Adjustment to tax expense.................... -- -- -- --
------- -------- --------
Total non-operating items...................... (2,960) (4,141) (4,141)
------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities.............................. -- -- --
Adjustment for ownership in other Belk
entities................................... (225)
------- -------- -------- ----------
Per Model...................................... $43,947 $110,280 $265,761 $3,632,917
======= ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER SHAREHOLDERS'
STATEMENT
Assets
Cash & cash equivalents.................... $ (73,240)
Negative cash balances reclassified to
accounts payable......................... --
Receivables from affiliates, net........... --
Loans receivable from affiliates, net...... --
Liabilities
Notes payable.............................. --
Current installments of long-term debt..... --
Current portion of obligations under
capital leases........................... --
Payables to affiliates, net................ 708,120
Long-term debt, excluding current
installments............................. --
Obligations under capital leases, excluding
current portion.......................... --
Loans payable to affiliates, net........... --
----------
Net debt (cash)................................ 634,880
Adjustments to eliminate less than wholly-owned
subsidiaries................................. --
----------
Per Model...................................... $ 634,880
==========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 1620
SUPPLEMENT NO. 38
<PAGE> 1621
BELK'S DEPARTMENT STORE OF BREVARD, N.C., INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 4:00 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 38
<PAGE> 1622
BELK-BECK COMPANY OF BURLINGTON, NORTH CAROLINA, INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk-Beck Company of Burlington, North
Carolina, Inc. (the "Company"), to be held on April 15, 1998, at 8:20 a.m.,
local time, at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road,
Charlotte, North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 108.1051 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 480,851 shares of New Belk Class A Common Stock which
will represent approximately 0.8014% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(39)
<PAGE> 1623
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 1624
BELK-BECK COMPANY OF BURLINGTON, NORTH CAROLINA, INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK-BECK COMPANY OF BURLINGTON,
NORTH CAROLINA, INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk-Beck Company of Burlington, North Carolina, Inc. (the
"Company") will be held on April 15, 1998, at 8:20 a.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 108.1051 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 1625
BELK-BECK COMPANY OF BURLINGTON,
NORTH CAROLINA, INC.
SUPPLEMENT NO. 39
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 39 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK-BECK COMPANY OF
BURLINGTON, NORTH CAROLINA, INC. (THE "COMPANY"), THE DISCUSSION HEREIN
SUPERSEDES THE DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE
INFORMATION CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE
IN THE REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN
THE REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY
AND THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT
BE ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL
CAPITALIZED TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE
MEANINGS SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION.................................. B-1
</TABLE>
<PAGE> 1626
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1920. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 8:20 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 108.1051 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 6,682 shares of Common Stock
outstanding held of record by 52 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 66.5% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 1627
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 16,000 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock
3
<PAGE> 1628
held by a New Belk Stockholder who is a Class A Permitted Holder will also
automatically convert into New Belk Class B Common Stock in the event that such
New Belk Stockholder no longer meets the requirements of a Class A Permitted
Holder. New Belk Class B Common Stock has no conversion rights. The Company
Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving
4
<PAGE> 1629
the distribution. The Company Bylaws provide that the Board of Directors of the
Company (the "Company Board") may from time to time declare dividends on the
Company's outstanding shares in the manner and upon the terms and conditions
provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. DGCL requires that
an amendment of the certificate of incorporation of a corporation be adopted by
the board of directors and the holders of a majority of the outstanding shares
of stock entitled to vote thereon. The holders of the outstanding shares of a
class are entitled to vote as a separate class on a proposed amendment that
would increase or decrease the aggregate number of authorized shares of such
class, increase or decrease the par value of the shares of such class or alter
or change the powers, preferences or special rights of the shares of such class
so as to affect them adversely. If any proposed amendment would alter or change
the powers, preferences or special rights of one or more series of any class so
as to affect them adversely, but would not so affect the entire class, then only
the shares of the series so affected by the amendment will be considered a
separate class for purposes of voting by classes. The New Belk Certificate is
consistent with the foregoing provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the
5
<PAGE> 1630
shareholders and approved (i) by a majority (unless the articles of
incorporation, a bylaw adopted by the shareholders or the board of directors
require a greater vote or a vote by voting groups) of the votes entitled to be
cast on the amendment by any voting group with respect to which the amendment
would create dissenters' rights and (ii) when a quorum is present, by all other
voting groups entitled to vote on the amendment through casting more affirmative
than opposing votes. As under the DGCL, the holders of the outstanding shares of
a class or series are entitled to vote as a separate voting group (if
shareholder voting is otherwise required by the NCBCA) on a proposed amendment
if the amendment would change certain fundamental rights and preferences of that
class or series. The Company Articles do not specify a greater voting
requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power, nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has power, by
vote of a majority of all the directors, and without the assent or vote of the
shareholders, to make, alter, amend and rescind the bylaws of the Company.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without prior notice, if all
holders of outstanding shares entitled to vote on such action sign the written
consent(s) describing such action. The Company Bylaws and Company Articles do
not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding
6
<PAGE> 1631
having the right to vote for such directors, order an election to be held to
fill any such vacancies or newly created directorships or to replace the
directors chosen by the directors then in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more than 30% during any 12-month period. The
articles of incorporation or bylaws may establish a variable range for the size
of the board of directors by fixing a minimum and maximum number of directors.
If a variable range is established, the number of directors may be fixed or
changed from time to time, within the minimum and maximum, by the shareholders
or (unless the articles of incorporation or a shareholders' agreement shall
otherwise provide) the board of directors. After shares are issued, only the
shareholders may change the range for the size of the board or change from a
fixed to a variable-range size board or vice versa. The Company Bylaws require
the Company Board to consist of at least three, but no more than 15, members.
7
<PAGE> 1632
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under to the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the
8
<PAGE> 1633
disinterested directors or committee authorized, approved or ratified the
transaction; (ii) the material facts of the transaction and the director's
interest were disclosed or known to the shareholders entitled to vote and the
disinterested shares authorized, approved or ratified the transaction; or (iii)
the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him whether or not involving action in his or her
official capacity. A corporation will indemnify a director or officer who was
wholly successful, on the merits or otherwise, in the defense of any proceeding
to which he or she was a party because he was a director or officer of the
corporation against reasonable expenses incurred by the director or officer in
connection with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any
9
<PAGE> 1634
transaction from which the director derived an improper personal benefit or (iv)
acts or omissions occurring prior to the date the provisions became effective.
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested stockholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder,
except in certain circumstances; (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested stockholder, except
in certain circumstances; or (v) any receipt by the interested stockholder of
the benefit of any loans, advances, guarantees, pledges or other financial
benefits (other than those expressly permitted in (i) through (iv) above)
provided by or through the corporation.
10
<PAGE> 1635
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) an
affiliate or associate of the corporation that within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for
11
<PAGE> 1636
business to inspect for any proper purpose the corporation's stock ledger, a
list of its stockholders and its other books and records and to make copies or
extracts therefrom. A proper purpose means a purpose reasonably related to such
person's interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by board of directors, records of any final action of a committee of the board
of directors while acting in place of the board of directors on behalf of the
corporation, minutes of any meeting of the shareholders and records of action
taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates must be deposited,
(iii) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the Payment Demand is received, (iv) set a date
by which the Surviving Corporation must
12
<PAGE> 1637
receive the Payment Demand, which date may not be fewer than 30 nor more than 60
days after the date the Dissenters' Notice is mailed and (v) be accompanied by a
copy of Article 13. A Shareholder who is sent a Dissenters' Notice and who
wishes to assert dissenters' rights must demand payment and deposit his
certificates in accordance with the terms of the Dissenters' Notice. A
Shareholder who demands payment and deposit his certificates in accordance with
the terms of the Dissenters' Notice retains all other rights of a Shareholder
until these rights are canceled or modified by the consummation and
effectiveness of the Merger. A Shareholder who does not demand payments or
deposit his certificates in accordance with the terms of the Dissenters' Notice
will not be entitled to payment for his shares under the NCBCA. If any such
holder of Common Stock fails to perfect or shall have effectively withdrawn or
lost such right, each share of such holder's Common Stock will thereupon be
deemed to have been converted into and to have become, as of the Effective Time,
the right to receive, without any interest thereon, the number of shares of New
Belk Class A Common Stock such Shareholder is otherwise entitled to as a result
of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he
13
<PAGE> 1638
asserts dissenters' rights. The rights of such a partial dissenting Shareholder
are determined as to which such Shareholder dissents and such Shareholder's
other shares were registered in the names of different shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ----------- ----------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $15,182,639 $15,182,639 0.6 $ (926,698) $10,036,282
EBITDA............... 1,580,906 1,579,365 7 (926,698) 11,982,254
EBIT................. 1,066,312 1,064,771 10 (926,698) 11,574,409
Net Income........... 658,692 657,730 15 -- 9,865,950
Book Equity.......... 7,995,855 6,937,593 1 -- 6,937,593
</TABLE>
14
<PAGE> 1639
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk's Department
Store of Albemarle,
North Carolina,
Incorporated 4.7493% X $ 3,321,651 = $ 157,755
Belk Department Store
of Charleston,
S.C., Inc. .5965 X 31,169,909 = 185,929
Belk Department Store
of Eden, N.C., Inc. 2.6949 X 3,010,826 = 81,139
Belk-Beck Co. of High
Point, N.C., Inc. 7.0025 X 6,270,761 = 439,110
Belk's Department
Store of Mount
Airy, North
Carolina,
Incorporated 2.8678 X 3,686,607 = 105,725
Belk Department Store
of Reidsville,
N.C., Inc. 7.4883 X 2,024,233 = 151,581
Belk Department Store
of Shelby, N.C.,
Inc. 6.1594 X 13,263,379 = 816,945
-----------
Total $ 1,938,182
===========
Relative Operating Value of Company $11,982,254
Relative Operating Value of Other Companies Owned by Company + 1,938,182
-----------
Total Relative Value of Company = $13,920,436
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Brothers Company 32.2359% X $13,920,436 = $ 4,487,378
Belk Enterprises,
Inc. 1.1972% X 13,920,436 = 166,655
-----------
Total $ 4,654,033
===========
Total Relative Value of Company $13,920,436
Total Relative Value of Company Owned by Other Belk Companies - 4,654,033
-----------
Net Relative Value of Company = $ 9,266,402
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$9,266,402 / $1,156,226,577 = .8014%
</TABLE>
15
<PAGE> 1640
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.8014% X 59,998,834) / 4,448 = 108.1051
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 1641
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 98.58
Dividends(2).............................................. 35.00
Book value per share(3)................................... 1,196.63
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 103.78
Dividends(2).............................................. 28.11
Book value per share...................................... 1,353.48
</TABLE>
- ---------------
(1) Based on 6,682 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 6,682 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
17
<PAGE> 1642
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 14,155 $ 14,812 $ 15,183
Net income.................................................. 909 634 659
Per common share
Net income (loss)(1)...................................... 136.11 94.94 98.58
Dividends................................................. 30.00 35.00 35.00
Book value(2)............................................. 1,073.11 1,133.05 1,196.63
Total assets................................................ 8,267 8,952 10,671
Shareholders' equity........................................ 7,171 7,571 7,996
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $10,512 $10,546
Income from operations...................................... 557 675
</TABLE>
- ---------------
(1) Based on 6,682 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 6,682 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 1643
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Holly Hill Mall
in Burlington, North Carolina. The Company's store operates in a manner
consistent with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is managed out of the Huffstetler group office
in Greensboro, North Carolina.
Facilities. The Company leases its store building, which contains
approximately 88,000 square feet of floor area. The current term of the lease
expires in 2009. The Company believes the building is adequate to meet its
current needs.
Competition. Specific competitors in the Company's market include Penney,
Sears and Goody's.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 1644
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)........................................... 3,200 47.9%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(d)(e)(f).............................................. 2,438 36.5%
H. W. McKay Belk (Director and Executive Officer)
(b)(d)(e)(g).............................................. 2,400 35.9%
John R. Belk (Director and Executive Officer)
(b)(d)(e)(h).............................................. 2,374 35.5%
Henderson Belk (Director) (c)............................... 536 8.0%
Sarah Belk Gambrell (c)..................................... 676 10.1%
Leroy Robinson (Director) (b)............................... 110 1.6%
David Belk Cannon (Director) (j)............................ 486 7.3%
James K. Glenn, Jr. (Director) (i).......................... 578 8.7%
Pete Huffstetler (Executive Officer)........................ 0 *
Gordon J. Tendler (Executive Officer)....................... 0 *
Darrell Murphy (Executive Officer).......................... 0 *
J. V. Properties............................................ 2,154 32.2%
NationsBank, N.A. (k)(l).................................... 664 9.9%
SunTrust Bank, Augusta, N.A. (m)(n)......................... 408 6.1%
All Directors and Executive Officers as a group (9
persons).................................................. 4,444 66.5%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk and Leroy Robinson -- 2801 West Tyvola Road, Charlotte, N.C.
28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207;
David Belk Cannon -- 1607 W. Floyd Baker Blvd., Gaffney, S.C. 29341; James K.
Glenn, Jr. -- P. O. Box 2736, Winston-Salem, N.C. 27102; Pete Huffstetler,
Darrell Murphy and Gordon J. Tendler -- 1-104 Carolina Circle Mall, Greensboro,
N.C. 27405, J. V. Properties -- 2801 West Tyvola Road, Charlotte, N.C.
28217-4500, NationsBank, N.A. -- Sara McDonnell (NC1-002-07-13), NationsBank,
N.A., Charlotte, N.C. 28255; SunTrust Bank, Augusta, N.A. -- Carlton S. Faulk,
V.P., SunTrust Bank, Augusta, N.A., P. O. Box 927, Augusta, Ga. 30903-0927.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 160 shares held by Montgomery Investment Company, of which John M.
Belk is the majority shareholder.
(b) Includes 110 shares held by Milburn Investment Company, of which the Estate
of Thomas M. Belk is the sole shareholder. Voting and investment power is
shared by the Executors of the Estate of Thomas M. Belk, who are Katherine
McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W. McKay Belk,
John R. Belk, John M. Belk and Leroy Robinson.
(c) Includes 536 shares held in several Trusts established by the Will of Mary
I. Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by
20
<PAGE> 1645
John M. Belk, Sarah Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting
and investment power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr.
and Henderson Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson
Belk, W. H. Belk, Jr. and Irwin Belk.
(d) Includes 80 shares held by Belk Enterprises, Inc. which shares are voted by
the members of the Executive Committee of the Board of Directors of such
corporation, under authority given by the directors of such corporation at
the annual meeting of directors held in March, 1997. The Executive Committee
of such corporation consists of John M. Belk, Thomas M. Belk, Jr., H. W.
McKay Belk and John R. Belk.
(e) Includes 2,154 shares of J. V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
(f) Includes 24 shares held by Thomas M. Belk, Jr., as custodian for the minor
children of his brother, H. W. McKay Belk, and 30 shares held by his wife,
Sarah F. Belk.
(g) Includes 10 shares held by H. W. McKay Belk as custodian for his minor
children, and 30 shares held by his wife, Nina F. Belk.
(h) Includes 30 shares held by his wife, Kimberly D. Belk.
(i) Includes 16 shares held by James K. Glenn, Jr., Trustee under Will of Daisy
Belk Mattox, 90 shares held by John Belk Stevens Trust U/W ITEM III, Section
C f/b/o James Kirk Glenn, Jr., et al, 176 shares held by John Belk Stevens
Trust U/A ITEM III, Section B f/b/o Mary S. Whelchel and 176 shares held by
John Belk Stevens Trust U/A ITEM III, Section A f/b/o Sara S. Glenn. Voting
and investment power is vested in James K. Glenn, Jr., the Trustee of each
Trust.
(j) Includes 160 shares held by Residuary Trust U/W Mrs. Henry Belk Cannon. The
Trustees, David Belk Cannon and John C. Daughtridge, have voting and
investment power with respect to such shares.
(k) Includes 88 shares held by NationsBank as Trustee for the Daisy Belk
Doughton Lange Revocable Trust dated March 25, 1997, 188 shares held by Sara
Dew Misner and North Carolina National Bank, Co-trustees for Daisy Doughton
Lange U/A dated November 5, 1965, and 200 shares held by J. L. Green, Jr.
and N. C. National Bank, Trustees U/A dated July 9, 1965 -- Sadie Belk
Cummings, Grantor. NationsBank has sole voting and investing power with
respect to such shares.
(l) 188 shares held by Daisy Doughton Lange and North Carolina National Bank,
Trustees for Robert L. Doughton, II under Agreement dated July 21, 1965. The
named Trustees have voting and investment power with respect to such shares.
(m) Includes 136 shares held by SunTrust Bank, Augusta, N.A. and Joan C.
Whelchel as Successor Co-Trustees under Agreement with Mary Stevens Whelchel
dated September 15, 1950, 60 shares held by SunTrust Bank, August, N.A. and
Joan C. Whelchel, Successor Co-Trustees under Will of Nealie Belk Stevens
dated December 1, 1952, 6 shares held by SunTrust Bank, Augusta, N.A. and
Joan C. Whelchel, Successor Co-Trustee under Will of Nealie Belk Stevens for
Mary Stevens Whelchel, 12 shares held by SunTrust Bank, Augusta, N.A. and
Joan C. Whelchel, as Successor Co-Trustees under Agreement with Merritt
Cofer Whelchel, Jr., 152 shares held by SunTrust Bank, Augusta, N.A. and
Joan C. Whelchel as Successor Co-Trustees under Agreement with Mary Ruth
Whelchel, 12 shares held by SunTrust Bank, Augusta, N.A. and Joan C.
Whelchel as Successor Co-Trustees under Agreement with Sadie Elizabeth
Whelchel and 18 shares held by SunTrust Bank, Augusta, N.A. and Joan C.
Whelchel as Trustees under Agreement dated October 15, 1997 with Mary
Stevens Whelchel. SunTrust Bank and Joan C. Whelchel have voting and
investment power with respect to such shares.
(n) Includes 12 shares held by SunTrust Bank, Augusta, N.A. as Guardian for
Frankie Stevens Whelchel. SunTrust Bank has voting power with respect to
such shares.
21
<PAGE> 1646
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 1647
BELK-BECK COMPANY OF BURLINGTON, NORTH CAROLINA, INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 6,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 215,981 $ 193,751
Accounts receivable, net.................................. 2,361,708 2,731,491
Merchandise inventory..................................... 2,497,500 2,576,384
Receivable from affiliates, net........................... 958,430 1,752,268
Deferred income taxes..................................... 54,225 36,407
Other..................................................... 155,473 143,154
---------- -----------
Total current assets........................................ 6,243,317 7,433,455
Loans receivable from affiliates, net....................... 14,046 14,046
Investments................................................. 24,895 1,058,262
Property, plant and equipment, net.......................... 2,631,971 2,136,243
Other noncurrent assets..................................... 37,756 28,939
---------- -----------
$8,951,985 $10,670,945
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable............................................. $ -- $ 1,033,367
Accounts payable and accrued expenses..................... 925,756 1,052,013
Accrued income taxes...................................... 36,255 150,181
---------- -----------
Total current liabilities................................... 962,011 2,235,561
Deferred income taxes....................................... 283,603 294,029
Other noncurrent liabilities................................ 135,338 145,500
---------- -----------
Total liabilities........................................... 1,380,952 2,675,090
Shareholders' equity:
Common stock.............................................. 668,200 668,200
Retained earnings......................................... 6,902,833 7,327,655
---------- -----------
Total shareholders' equity.................................. 7,571,033 7,995,855
---------- -----------
$8,951,985 $10,670,945
========== ===========
</TABLE>
F-2
<PAGE> 1648
BELK-BECK COMPANY OF BURLINGTON, NORTH CAROLINA, INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Total store sales....................................... $14,155,724 $14,812,695 $15,184,354
Less: Leased Sales...................................... 1,159 987 1,715
----------- ----------- -----------
Net sales............................................... 14,154,565 14,811,708 15,182,639
Operating costs and expenses............................ 12,683,903 13,724,669 14,119,121
----------- ----------- -----------
Income from operations.................................. 1,470,662 1,087,039 1,063,518
----------- ----------- -----------
Other income (expense):
Interest, net......................................... 34,415 (19,471) (11,654)
Dividend income....................................... -- 280 280
Gain (loss) on disposal of property, plant and
equipment.......................................... -- -- 1,261
Miscellaneous, net.................................... (16,037) (33,650) 1,253
----------- ----------- -----------
Total other expense, net................................ 18,378 (52,841) (8,860)
----------- ----------- -----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities..... 1,489,040 1,034,198 1,054,658
Income tax expense (benefit)............................ 579,544 399,809 395,966
----------- ----------- -----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities................... 909,496 634,389 658,692
----------- ----------- -----------
Net earnings............................................ 909,496 634,389 658,692
Retained earnings at beginning of period................ 5,793,278 6,502,314 6,902,833
Dividends paid.......................................... (200,460) (233,870) (233,870)
----------- ----------- -----------
Retained earnings at end of period...................... $ 6,502,314 $ 6,902,833 $ 7,327,655
=========== =========== ===========
</TABLE>
F-3
<PAGE> 1649
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 1650
CONDENSED NOTES TO UNAUDITED HISTORICAL
FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 1651
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13.
DISSENTERS' RIGHTS.
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
A-1
<PAGE> 1652
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares; (ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (iv) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes; (v)
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional shares so created is to be acquired by cash under
G.S. 55-6-04; (vi) changes the corporation into a nonprofit corporation or
cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 1653
SEC.SEC. 55-13-04 TO 55-13-19. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 1654
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 1655
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 1656
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 1657
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................. $15,182,639 $658,692 $1,066,312 $1,580,906 $7,995,855
Adjustments to eliminate less than
wholly-owned subsidiaries................. -- -- -- -- --
----------- -------- ---------- ---------- ----------
Adjusted Shareholders' Statement............ $15,182,639 658,692 1,066,312 1,580,906 7,995,855
=========== -------- ---------- ---------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............. (788) (1,261) (1,261)
Gain/loss on sale of securities........... -- -- --
Impairment loss........................... -- -- --
Equity in earnings of unconsolidated
subsidiaries............................ -- -- --
Gain/loss on discontinued operations...... -- -- --
Adjustment to tax expense................. -- -- -- --
-------- ---------- ----------
Total non-operating items................... (788) (1,261) (1,261)
-------- ---------- ----------
Other Adjustments:
Adjustment for dividends received from
other Belk entities..................... (175) (280) (280)
Adjustment for ownership in other Belk
entities................................ (1,058,262)
-------- ---------- ---------- ----------
Per Model................................... $657,729 $1,064,771 $1,579,365 $6,937,593
======== ========== ========== ==========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................. $ (193,751)
Negative cash balances reclassified to
accounts payable...................... --
Receivables from affiliates, net........ (1,752,268)
Loans receivable from affiliates, net... (14,046)
Liabilities
Notes payable........................... 1,033,367
Current installments of long-term
debt.................................. --
Current portion of obligations under
capital leases........................ --
Payables to affiliates, net............. --
Long-term debt, excluding current
installments.......................... --
Obligations under capital leases,
excluding current portion............. --
Loans payable to affiliates, net........ --
-----------
Net debt (cash)............................. (926,698)
Adjustments to eliminate less than
wholly-owned subsidiaries................. --
-----------
Per Model................................... $ (926,698)
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 1658
SUPPLEMENT NO. 39
<PAGE> 1659
BELK-BECK COMPANY OF BURLINGTON, NORTH CAROLINA, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 8:20 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated:
, 1998
--------------------------
Signature
--------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 39
<PAGE> 1660
BELK BROTHERS COMPANY
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk Brothers Company (the "Company"), to be
held on April 16, 1998, at 12:20 p.m., local time, at the offices of Belk Stores
Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 96.5480 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 9,606,285 shares of New Belk Class A Common Stock which
will represent approximately 16.0108% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage paid
(40)
<PAGE> 1661
envelope. If you plan to attend the Special Meeting, you may vote in person if
you wish, even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 1662
BELK BROTHERS COMPANY
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK BROTHERS COMPANY:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk Brothers Company (the "Company") will be held on April 16,
1998, at 12:20 p.m., local time, at the offices of Belk Stores Services, Inc.,
2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for the following
purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 96.5480 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 1663
BELK BROTHERS COMPANY
SUPPLEMENT NO. 40
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 40 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/ PROSPECTUS AS TO ANY MATTER RELATING TO BELK BROTHERS
COMPANY, A NORTH CAROLINA CORPORATION (THE "COMPANY"), THE DISCUSSION HEREIN
SUPERSEDES THE DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE
INFORMATION CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE
IN THE REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN
THE REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY
AND THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT
BE ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL
CAPITALIZED TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE
MEANINGS SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 21
SELECTED HISTORICAL FINANCIAL INFORMATION................... 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 23
General................................................... 23
Results of Operations..................................... 23
Comparison of Nine Months Ended November 1, 1997 and
November 2, 1996....................................... 24
Comparison of Fiscal Years Ended February 1, 1997 and
February 3, 1996....................................... 24
Comparison of Fiscal Years Ended February 3, 1996 and
January 31, 1995....................................... 25
Seasonality and Quarterly Fluctuations.................... 26
Liquidity and Capital Resources........................... 26
Impact of Inflation....................................... 27
BUSINESS OF THE COMPANY..................................... 27
SECURITY OWNERSHIP OF THE COMPANY........................... 31
INDEX TO HISTORICAL FINANCIAL STATEMENTS.................... F-1
Report of KPMG Peat Marwick LLP, Independent Auditors..... F-2
Consolidated Balance Sheets............................... F-3
Consolidated Statements of Operations..................... F-4
Consolidated Statements of Shareholders' Equity........... F-5
Consolidated Statements of Cash Flows..................... F-6
Notes to Consolidated Financial Statements................ F-7
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION.................................. B-1
</TABLE>
<PAGE> 1664
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1921. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 12:20 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 96.5480 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 140,888 shares of Common Stock
outstanding held of record by 101 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 72.5% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 1665
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
" -- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
New Belk has entered into an agreement dated February 27, 1998 (the
"Hanahan Agreement") with Mary E.S. Hanahan ("Mrs. Hanahan"), who is the owner
of 106 shares of Common Stock of the Company (the "Hanahan Shares"). In the
Hanahan Agreement, Mrs. Hanahan granted to certain employees of BSS her
irrevocable proxy to vote the Hanahan Shares in favor of the Merger, agreed to
withdraw her appeal in certain litigation instituted by Belk of Spartanburg,
S.C., Inc. against Mrs. Hanahan and another party and released New Belk and the
Belk Companies from any and all claims which Mrs. Hanahan has or may have
against New Belk and the Belk Companies. New Belk agreed, among other things, to
purchase from Mrs. Hanahan, at her election at any time prior to December 31,
1999, all of the shares of New Belk Common Stock received by Mrs. Hanahan in
exchange for the Hanahan Shares and shares in other Belk Companies in the
Reorganization for an aggregate price of $3.85 million.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 140,888 shares of
Common Stock.
3
<PAGE> 1666
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock held by a New Belk Stockholder who is a Class A Permitted
Holder will also automatically convert into New Belk Class B Common Stock in the
event that such New Belk Stockholder no longer meets the requirements of a Class
A Permitted Holder. New Belk Class B Common Stock has no conversion rights. The
Company Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the
4
<PAGE> 1667
holders of New Belk Class B Common Stock upon the same terms and conditions
applicable to the conversion of New Belk Class A Common Stock into New Belk
Class B Common Stock and must have the same restrictions on transfer and
ownership applicable to the transfer and ownership of the New Belk Class A
Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distribution does not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate
5
<PAGE> 1668
number of authorized shares of such class, increase or decrease the par value of
the shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the shareholders and approved (i) by a majority
(unless the articles of incorporation, a bylaw adopted by the shareholders or
the board of directors require a greater vote or a vote by voting groups) of the
votes entitled to be cast on the amendment by any voting group with respect to
which the amendment would create dissenters' rights and (ii) when a quorum is
present, by all other voting groups entitled to vote on the amendment through
casting more affirmative than opposing votes. As under the DGCL, the holders of
the outstanding shares of a class or one or more series are entitled to vote as
a separate voting group (if shareholder voting is otherwise required by the
NCBCA) on a proposed amendment if the amendment would change certain fundamental
rights and preferences of that class or series. The Company Articles do not
specify a greater voting requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power, nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without
6
<PAGE> 1669
prior notice, if all holders of outstanding shares entitled to vote on such
action sign the written consent(s) describing such action. The Company Bylaws
and Company Articles do not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more
7
<PAGE> 1670
than 30% during any 12-month period. The articles of incorporation or bylaws may
establish a variable range for the size of the board of directors by fixing a
minimum and maximum number of directors. If a variable range is established, the
number of directors may be fixed or changed from time to time, within the
minimum and maximum, by the shareholders or (unless the articles of
incorporation or a shareholders' agreement shall otherwise provide) the board of
directors. After shares are issued, only the shareholders may change the range
for the size of the board or change from a fixed to a variable-range size board
or vice versa. The Company Bylaws require the Company Board to consist of at
least three, but no more than 15, members.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Unless the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
8
<PAGE> 1671
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the disinterested directors or committee authorized, approved or
ratified the transaction; (ii) the material facts of the transaction and the
director's interest were disclosed or known to the shareholders entitled to vote
and the disinterested shares authorized, approved or ratified the transaction;
or (iii) the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation, or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or
9
<PAGE> 1672
otherwise, in the defense of any proceeding to which he was a party because he
was a director or officer of the corporation against reasonable expenses
incurred by the director or officer in connection with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any transaction from which the director derived an improper
personal benefit or (iv) acts or omissions occurring prior to the date the
provisions became effective.
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, the participating shares are reduced by more than 20%.
"Participating shares" are those shares that are entitled to participate without
limitation in distributions. The DGCL and the NCBCA provisions on sales of all
or substantially all of the assets of a corporation other than in the regular
course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested
10
<PAGE> 1673
stockholder, except in certain circumstances; (iv) any transaction involving the
corporation which has the effect of increasing the proportionate share of the
stock of any class or series, or securities convertible into the stock of any
class or series, of the corporation which is owned by the interested
stockholder, except in certain circumstances; or (v) any receipt by the
interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits (other than those expressly permitted in (i)
through (iv) above) provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) an
affiliate or associate of the corporation who within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any
11
<PAGE> 1674
security convertible into or exchangeable for, or any warrant, option or right
to purchase, subscribe for or otherwise acquire, stock of any class or series of
New Belk, whether now or hereafter authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any final action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
12
<PAGE> 1675
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates must be deposited,
(iii) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the Payment Demand is received, (iv) set a date
by which the Surviving Corporation must receive the Payment Demand, which date
may not be fewer than 30 nor more than 60 days after the date the Dissenters'
Notice is mailed and (v) be accompanied by a copy of Article 13. A Shareholder
who is sent a Dissenters' Notice and who wishes to assert dissenters' rights
must demand payment and deposits his certificates in accordance with the terms
of the Dissenters' Notice. A Shareholder who demands payment and deposit his
certificates in accordance with the terms of the Dissenters' Notice retains all
other rights of a Shareholder until these rights are canceled or modified by the
consummation and effectiveness of the Merger. A Shareholder who does not demand
payments or deposit his certificates in accordance with the terms of the
Dissenters' Notice will not be entitled to payment for his shares under the
NCBCA. If any such holder of Common Stock fails to perfect or shall have
effectively withdrawn or lost such right, each share of such holder's Common
Stock will thereupon be deemed to have been converted into and to have become,
as of the Effective Time, the right to receive, without any interest thereon,
the number of shares of New Belk Class A Common Stock such Shareholder is
otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine
13
<PAGE> 1676
the fair value of the shares and accrued interest. A dissenting Shareholder who
takes no action within such 60-day period is deemed to have withdrawn his
dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such Shareholder dissents and such
Shareholder's other shares were registered in the names of different
shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
14
<PAGE> 1677
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ------------ ------------ -------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $185,048,897 $185,048,897 0.6 $84,466,582 $26,562,756
EBITDA............... 93,106,362 17,838,176 7 84,466,582 40,400,650
EBIT................. 88,450,755 13,182,569 10 84,466,582 47,359,108
Net Income........... 49,798,772 5,929,807 15 -- 88,947,105
Book Equity.......... 125,681,609 53,205,207 1 -- 53,205,207
</TABLE>
15
<PAGE> 1678
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk Department Store
of Ahoskie, N.C.,
Inc. 23.6576% X $ 3,798,793 = $ 898,703
Belk's Department
Store, Incorporated
of Aiken, South
Carolina 16.4444% X 3,110,056 = 511,430
Belk's Department
Store of Albemarle,
North Carolina,
Incorporated 43.4697% X 3,321,651 = 1,443,912
Gallant-Belk Company 2.5103% X 31,711,921 = 796,064
Belk's Department
Store of Asheville,
North Carolina,
Incorporated 11.9829% X 8,096,519 = 970,198
Belk-Simpson Company,
Incorporated of
Beaufort, South
Carolina 16.3492% X 7,226,118 = 1,181,412
Belk Enterprises,
Inc. 9.0466% X 358,369,404 = 32,420,246
Belk-Matthews Company 18.2642% X 833,990 = 152,322
Belk-Beck Company of
Burlington, North
Carolina, Inc. 32.2359% X 13,920,436 = 4,487,378
Belk's Department
Store of Camden,
S.C., Incorporated 11.4193% X 11,802,653 = 1,347,780
Belk's Department
Store of
Cartersville,
Georgia,
Incorporated 4.7529% X 3,810,247 = 181,097
Belk Department Store
of Charleston,
S.C., Inc. 2.2824% X 31,169,909 = 711,422
Belk-Matthews Company
of Cherryville,
N.C., Incorporated 11.6831% X 601,119 = 70,229
Belk's Department
Store of
Chesterfield, S.C.,
Incorporated 5.8697% X 967,437 = 56,786
Parks-Belk Company of
Clarksville,
Tennessee 3.6346% X 10,855,465 = 394,553
Belk Department Store
of Clinton, N.C.,
Inc. 10.4372% X 11,043,990 = 1,152,683
Belk's Department
Store of Conway,
S.C., Incorporated 9.6875% X 2,033,804 = 197,025
</TABLE>
16
<PAGE> 1679
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk-Simpson Company
of Corbin,
Kentucky,
Incorporated 10.9524% X 6,975,250 = 763,957
Belk of Miss., Inc. .3672% X 19,360,988 = 71,094
Belk of Cornelia, Ga.
Inc. 16.3484% X 4,947,119 = 808,775
Belk of Covington,
Ga., Inc. 11.9048% X 4,579,688 = 545,203
Belk of Dalton, Ga.,
Inc. 9.4967% X 8,605,064 = 817,197
Belk of Danville,
Va., Inc. 18.2516% X 16,469,104 = 3,005,875
Belk's Department
Store of Eden,
N.C., Inc. 5.0048% X 3,010,826 = 150,686
Belk Department Store
of Edenton, N.C.,
Inc. 6.9884% X 1,566,426 = 109,468
Belk Department Store
of Elkin, N.C.,
Inc. 12.8289% X 1,368,240 = 175,530
Belk Department Store
of Forest City,
N.C., Inc. .3823% X 7,237,011 = 27,667
Belk's Department
Store of Gaffney,
South Carolina,
Incorporated 7.9583% X 1,141,654 = 90,856
Matthews-Belk Company 15.0117% X 35,816,031 = 5,376,595
Belk Department Store
of Greenville,
N.C., Inc. 8.5493% X 25,446,622 = 2,175,508
Belk-Simpson Company,
Greenville, South
Carolina 7.4059% X 43,580,286 = 3,227,512
Belk's Department
Store of
Hartsville, S.C.,
Inc. 11.9212% X 3,783,866 = 451,082
Belk of Hartwell,
Ga., Inc. 15.1667% X 1,270,811 = 192,740
Belk-Simpson Company
of Hendersonville,
N.C., Incorporated 17.2656% X 9,384,434 = 1,620,279
Belk Department Store
of Hickory, N.C.,
Inc. 22.8608% X 26,225,818 = 5,995,432
Belk-Beck Co. of High
Point, N.C., Inc. 24.8023% X 6,270,761 = 1,555,293
Belk's Department
Store of
Jacksonville, N.C.,
Inc. 5.1760% X 29,859,959 = 1,545,551
Belk of LaGrange,
Ga., Inc. 16.1591% X 25,267,594 = 4,083,016
</TABLE>
17
<PAGE> 1680
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk's Department
Store of Lancaster,
S.C., Inc. 17.7617% X 13,686,538 = 2,430,962
Belk-Simpson Realty
Company 16.7000% X 582,350 = 97,252
Belk's Department
Store of Laurens,
South Carolina,
Incorporated 18.7055% X 4,498,438 = 841,455
Belk of
Lawrenceville, Ga.,
Inc. 15.8155% X 6,024,824 = 952,856
Belk's Department
Store of Lenoir,
North Carolina,
Incorporated 18.7872% X 6,891,593 = 1,294,737
Belk Department Store
of Lincolnton,
N.C., Inc. 13.5833% X 7,914,848 = 1,075,098
Belk-Lindsey Stores,
Inc. 2.4114% X 77,285,261 = 1,863,657
Belk Stores of
Virginia, Inc. .0104% X 129,824,509 = 13,502
Belk of Monroe, Ga.
Inc. 18.2361% X 1,961,637 = 357,726
Belk Brothers of
Monroe, North
Carolina,
Incorporated 29.2634% X 16,996,814 = 4,973,846
Belk's Department
Store of Mount
Airy, North
Carolina,
Incorporated 3.6471% X 3,686,607 = 134,454
Belk's Department
Store of New Bern,
N.C., Incorporated 21.7060% X 7,893,728 = 1,713,413
Belk of Newnan, Ga.,
Inc. 17.6439% X 1,320,331 = 232,958
Hudson-Belk Company 9.8545 X 71,085,804 = 7,005,151
Belk Department Store
of Reidsville,
N.C., Inc. 12.8705% X 2,024,233 = 260,529
Belk of Lynchburg,
Va. Inc. 1.2195% X 7,025,589 = 85,677
Belk's Department
Store of
Rockingham, N.C.,
Incorporated 10.4712% X 2,851,585 = 298,595
Belk-Harry Company,
Salisbury, N.C. 41.5960% X 9,875,286 = 4,107,724
Belk Department Store
of Shelby, N.C.,
Inc. 10.7402% X 13,263,379 = 1,424,513
Belk Stores of
Virginia, Inc. 59.4044% X 92,754,090 = 55,100,011
</TABLE>
18
<PAGE> 1681
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk of South Boston,
Va. Inc. 1.5448% X 3,958,842 = 61,156
Belk of Spartanburg,
S.C., Inc. .2827% X 10,010,262 = 28,299
Belk Realty of
Stauton, Va., Inc. .1372% X 3,827,783 = 5,252
Tags Stores, LLC 12.9390% X 15,118,749 = 1,956,215
Belk of Thomaston,
Ga., Inc. 10.0048% X 30,309,289 = 3,032,384
Belk of Toccoa, Ga.
Inc. 9.4467% X 4,349,985 = 410,930
Belk of Union, S.C.,
Inc. 44.5000% X 901,776 = 401,290
Belk of Washington,
Ga., Inc. 16.5700% X 1,274,815 = 211,237
Belk Department Store
of Waynesville,
N.C., Inc. 17.2145% X 6,879,640 = 1,184,296
Belk Department Store
of Wilkesboro,
N.C., Inc. 13.6585% X 3,451,898 = 471,477
Belk of Canton, Ga.,
Inc. 14.2340% X 2,207,655 = 314,238
Belk Department Store
of Winnsboro, S.C.,
Incorporated 3.1746% X 845,995 = 26,857
Kitchin's of Alabama,
Inc. 7.4141% X 3,095,005 = 229,467
Hudson's Department
Store, Incorporated 8.0838% X 1,306,752 = 105,635
Howard's Department
Store of Columbia,
S.C., Inc. 19.7222% X 3,010,794 = 593,795
Kitchin's of
Enterprise, Ala,
Inc. 6.3559% X 486,221 = 30,904
Kitchin's of
Starkville,
Mississippi, Inc. 6.0000% X 845,194 = 50,712
Kitchin's of Troy,
Alabama, Inc. 5.6723% X 747,359 = 42,392
------------
Total $173,183,208
============
Relative Operating Value of Company $ 88,947,105
Relative Operating Value of Other Companies Owned by Company + 173,183,208
------------
Total Relative Value of Company = $262,130,313
============
</TABLE>
19
<PAGE> 1682
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Enterprises,
Inc. 26.6148% X $262,130,313 = $ 69,765,459
Belk Finance Company 1.9416% X 262,130,313 = 5,089,522
Matthews-Belk Company .2087% X 262,130,313 = 547,066
Belk Brothers of
Monroe, North
Carolina,
Incorporated .2044% X 262,130,313 = 535,794
Belk's Department
Store, Morehead
City, N.C., Inc. .2044% X 262,130,313 = 535,794
Belk-Harry Company,
Salisbury, N.C. .2044% X 262,130,313 = 535,794
------------
Total $ 77,009,430
============
$262,130,313
- 77,009,430
------------
= $185,120,883
============
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$185,120,883 / $1,156,226,577 = 16.0108%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(16.0108% X 59,998,834) / 99,497.5 = 96.5480
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
20
<PAGE> 1683
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the notes thereto, contained elsewhere in this Prospectus Supplement and
unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS
ENDED FEBRUARY 1, ENDED NOVEMBER 1,
1997 1997
----------------- -----------------
<S> <C> <C>
COMPANY HISTORICAL
Earnings per share from continuing operations(1).......... $ 84.76 $ 8.17
Dividends(2).............................................. 10.00 10.00
Book value per share(3)................................... 892.07 890.46
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96 0.29
Dividends(2).............................................. 0.26 0.22
Book value per share(5)................................... 12.52 12.65
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 92.69 27.55
Dividends(2).............................................. 25.10 21.43
Book value per share...................................... 1,208.78 1,221.06
</TABLE>
- ---------------
(1) Based on 140,888 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding during the year ended February 1, 1997
and the nine-month period ended November 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 140,888 shares
of Common Stock, the number of shares of Common Stock outstanding at the end
of the periods presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying the New Belk pro forma combined book value per share and New
Belk pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
21
<PAGE> 1684
SELECTED HISTORICAL FINANCIAL INFORMATION
The following selected historical consolidated financial information of the
Company presented below under the captions "Selected Statement of Income Data"
and "Selected Balance Sheet Data" for, and as of the end of, each of the years
in the five-year period ended February 1, 1997 are derived from the consolidated
financial statements of the Company. The consolidated financial statements as of
February 3, 1996 and February 1, 1997 and for each of the years in the
three-year period ended February 1, 1997 have been audited by KPMG Peat Marwick
LLP, independent certified public accountants. Such consolidated financial
statements, and the report thereon, are included elsewhere in this Prospectus
Supplement. The selected data presented below for the nine-month periods ended
November 2, 1996 and November 1, 1997, and as of November 1, 1997 are derived
from the unaudited consolidated financial statements of the Company included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
The information presented below under the caption "Selected Operating Data" is
unaudited.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
------------------------------------------------------------------------ ---------------------------
FEBRUARY 2, FEBRUARY 1, JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1993 1994 1995 1996 1997 1996 1997
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED STATEMENT OF
INCOME DATA:
Revenues............... $181,705,912 $185,278,256 $194,420,976 $194,787,171 $196,795,296 $134,386,195 $141,684,068
Cost of goods sold..... 124,420,607 126,562,578 132,138,069 131,652,075 134,457,290 92,630,087 98,060,058
Depreciation and
amortization......... 8,213,244 8,016,463 7,444,592 9,212,217 9,620,419 8,165,218 4,612,765
Income from continuing
operations........... 4,240,293 4,319,885 6,816,668 5,608,241 11,941,237 2,683,336 1,151,550
Income (loss) from
discontinued
operations........... -- -- -- 1,298,344 37,857,535 (2,806,774) --
Net income (loss)...... 4,240,293 5,395,065 6,816,668 4,039,585 49,798,772 (123,438) 1,151,550
Net income (loss) per
share(1)............. 30.10 38.29 48.38 28.67 353.46 (0.88) 8.17
Dividends per share.... 8.00 8.00 8.00 10.00 10.00 10.00 10.00
SELECTED BALANCE SHEET
DATA:
Accounts receivable --
net.................. 32,230,771 30,690,117 30,163,752 29,801,982 34,759,335 31,684,599 33,739,030
Merchandise
inventories.......... 35,276,739 36,375,508 32,844,926 39,488,466 38,929,611 45,668,379 50,825,896
Working capital........ 54,509,978 51,324,851 49,756,271 (54,277,903) 48,666,918 (121,034,173) 39,776,329
Total assets........... 185,721,206 181,628,282 177,138,130 277,257,166 283,269,358 367,340,225 293,997,507
Long-term debt......... 91,408,763 78,192,254 66,902,163 55,991,852 77,424,913 77,058,298 72,240,905
Short-term debt........ -- 1,650,000 -- 105,990,739 1,000,000 175,530,268 5,748,830
Capitalized lease
obligations.......... 7,302,257 7,015,468 6,716,608 6,405,170 6,080,621 6,163,017 5,828,277
Shareholders' equity... 63,966,454 68,695,916 74,517,602 77,205,413 125,681,609 75,722,660 125,455,250
Book value per
share(2)............. 454.02 487.59 528.91 547.99 892.07 537.47 890.46
Weighted average number
of shares
outstanding.......... 140,888 140,888 140,888 140,888 140,888 140,888 140,888
SELECTED OPERATING
DATA:
Number of stores at end
of period............ 11 12 12 12 11 11 10
Comparable store net
revenue increases
(decreases).......... 2.1% 4.0% 5.5% (1.6%) 2.6% 1.7% (0.6%)
</TABLE>
- ---------------
(1) Based on the weighted average number of shares of Common Stock outstanding
for each period presented.
(2) Based on the number of shares of Common Stock outstanding at the end of each
period presented.
22
<PAGE> 1685
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is a discussion of the historical consolidated financial
condition and results of operations of Belk Brothers Co. and Subsidiaries for
each of the fiscal years ended January 31, 1995, February 3, 1996 and February
1, 1997 and for each of the nine-month periods ended November 2, 1996 and
November 1, 1997 which should be read in conjunction with the historical
consolidated financial statements, including the notes thereto, included
elsewhere in this Proxy Statement/Prospectus.
GENERAL
Acquisitions. During the fiscal year ended February 1, 1997, the Company
purchased stock in affiliated companies from several major stockholders for
$84.7 million. In November 1995, the Company purchased the stock of Ivey
Properties, Inc., a real estate investment trust, for $83.0 million(the "Ivey
Acquisition"). The largest holding of Ivey Properties, Inc. was a 50% interest
in J.V. Properties, a joint venture that developed SouthPark Mall in Charlotte,
North Carolina ("SouthPark").
Discontinued Operations. In November 1996, the Company sold its investment
in the company that owned a retail mall to an unrelated third party.
Accordingly, the Company's continuing operations for the fiscal years ended
February 1, 1997 and February 3, 1996 and the nine-month periods ended November
2, 1996 have been reclassified to report separately the operating results of the
discontinued operations.
Certain Components of Net Income. Revenues include sales from retail
operations and leased departments. Cost of goods sold include cost of
merchandise, buying and occupancy expense. Selling, general and administrative
expense ("SG&A") includes payroll, advertising, credit and depreciation expense.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship to revenues of certain items in the Company's consolidated
statements of income and other pertinent financial data.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
--------------------------------------- -------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995(A) 1996(A) 1997(A) 1996 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold....................... 68.0 67.6 68.3 68.9 69.2
Selling, general and administrative
expenses............................... 25.9 26.7 25.0 26.9 25.9
Income from operations................... 6.1 5.8 6.7 4.2 4.9
Interest expense, net.................... 1.9 1.6 1.5 1.4 2.3
Income taxes............................. 1.8 1.5 2.2 1.1 0.8
Income from continuing operations........ 3.5 2.9 6.1 2.0 0.8
Discontinued operations.................. 0.0 0.7 19.2 (2.1) 0.0
Net income............................... 3.5 2.1 25.3 (0.1) 0.8
Comparable stores revenues increase
(decrease)............................. 5.5 (1.6) 2.6 1.7 (0.6)
Number of stores
Opened................................. 0 0 0 0 0
Closed................................. 0 0 1 1 1
Total -- end of period................... 12 12 11 11 10
</TABLE>
- ---------------
(a) The fiscal years ended February 1, 1997 and January 31, 1995 consisted of 52
weeks. The fiscal year ended February 3, 1996 consisted of 368 days.
23
<PAGE> 1686
COMPARISON OF NINE MONTHS ENDED NOVEMBER 1, 1997 AND NOVEMBER 2, 1996
Revenues. The Company's revenues for the nine months ended November 1,
1997 increased 5.4%, or $7.3 million, over the same period in 1996 from $134.4
million to $141.7 million. The increase was attributable to an increase in
revenues of $13.0 million at the Greensboro, North Carolina store at Friendly
Shopping Center which opened in April, 1997, partially offset by a decrease in
revenues of $6.7 million at stores in the same market. Comparable store revenues
for the nine months ended November 1, 1997 decreased 0.6% from the nine months
ended November 2, 1996.
Cost of Goods Sold. As a percentage of revenues, cost of goods sold
increased slightly from 68.9% for the nine months ended November 2, 1996 to
69.2% for the nine months ended November 1, 1997. Cost of merchandise increases
were experienced due to higher markdowns associated with the relocation of the
Greensboro Friendly store. Cost of goods sold increased 5.9%, or $5.4 million
from $92.6 million for the nine months ended November 2, 1996 to $98.0 million
for the nine months ended November 1, 1997 primarily due to increased revenues.
Selling, General and Administrative Expenses. SG&A decreased from 26.9% of
revenues for the nine months ended November 2, 1996 to 25.9% of revenues for the
nine months ended November 1, 1997. The decrease was attributable primarily to
decreases in payroll and depreciation as a percentage of revenues.
Interest Expense, Net. Interest expense, net was 2.3% of revenues for the
nine months ended November 1, 1997 as compared to 1.4% of revenues for the same
period in 1996. The increase, which amounted to $1.4 million, was due to an
increase in average borrowings outstanding of $16.4 million. The Company also
made payments on Interest Rate Swap Agreements, which contributed to the
increase in interest expense, net.
Income from continuing operations. Income from continuing operations
decreased $1.5 million from $2.7 million, or 2.0% of revenues for the nine
months ended November 2, 1996, to $1.2 million, or 0.8% of revenues for the nine
months ended November 1, 1997. This decrease is primarily attributable to a loss
on investment of $1.4 million.
Discontinued Operations. As a result of selling the company that owned
SouthPark, the Company recognized an after-tax loss on discontinued operations
of $2.8 million for the nine months ended November 2, 1996.
Net Income (Loss). Net income increased $1.3 million to 0.8% of revenues
for the nine months ended November 1, 1997 compared to (0.1%) of revenues for
the nine months ended November 2, 1996. As discussed above, the net loss for the
nine months ended November 2, 1996 included an after-tax loss on discontinued
operations of $2.8 million. Net income for the nine months ended November 1,
1997 included an increase in income from operations of $1.3 million resulting
from a decrease in SG&A of 1.0%, as a percentage of revenues. Net income for the
nine months ended November 1, 1997 was also impacted by an increase in interest
expense of $1.4 million, a loss on investment of $1.4 million, and equity in
loss of unconsolidated entities, net of income taxes, of $0.7 million.
COMPARISON OF FISCAL YEARS ENDED FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
Revenues. The Company's revenues in fiscal year 1997 increased by 1.0%, or
$2.0 million, over fiscal year 1996 from $194.8 million to $196.8 million. On a
comparable store basis, revenues increased 2.6% compared to the first 52 weeks
of fiscal year 1996. The increase was attributable to an increase in revenues at
the Pineville, North Carolina store. These increases were partially offset by
decreases experienced by the Greensboro, Carolina Circle Mall store which
experienced a decrease in revenues as it discontinued the clearance center
operation at that location.
Cost of Goods Sold. As a percentage of revenues, cost of goods sold
increased from 67.6% in fiscal year 1996 to 68.3% in fiscal year 1997. Cost of
merchandise increases were experienced as a result of higher markdowns. Cost of
goods sold increased 2.1%, or $2.8 million, from $131.7 million in fiscal year
1996 to $134.5 million in fiscal year 1997 primarily due to an increase in
revenues.
24
<PAGE> 1687
Selling, General and Administrative Expenses. SG&A decreased from 26.7% of
revenues in fiscal year 1996 to 25.0% of revenues in fiscal year 1997. This
decrease, which amounted to $2.7 million, was attributable primarily to
decreases in payroll expense realized through efficiencies implemented in the
retail department stores and depreciation expense.
Interest Expense, Net. Interest expense, net was relatively constant at
1.6% of revenues in fiscal year 1996 and 1.5% of revenues in fiscal year 1997.
Interest expense, net was $3.2 million for fiscal year 1996 as compared to $3.0
million for fiscal year 1997.
Income Taxes. The effective income tax rate increased to 41.7% in fiscal
year 1997 from 35.3% in fiscal year 1996. The income tax rate of 35.3% in fiscal
year 1996 differs from the statutory federal income tax rate primarily due to
permanent differences related to deferred compensation insurance, a tax benefit
related to a prior year, and a correction of the value of deferred tax assets.
Income from continuing operations. Income from continuing operations
increased $6.3 million from $5.6 million, or 2.9% of revenues in fiscal year
1996, to $11.9 million, or 6.1% of revenues in fiscal year 1997. This increase
is primarily attributable to an increase in equity in earnings of unconsolidated
entities, net of tax, of $5.8 million due to the purchase of stock of six
affiliated entities which are accounted for under the equity method. The largest
contribution of equity earnings, which amounted to $2.0 million, was from the
purchase of stock in Belk of Virginia, a holding company for 42 acquired Leggett
stores.
Discontinued Operations. The Company recognized a gain on the disposal of
the company that owned J.V. Properties of $37.9 million in fiscal year 1997,
which was composed of a $3.6 million after-tax loss on operations and a $41.5
million after-tax gain on disposal of assets. In fiscal year 1996, the after-tax
income from J.V. Properties was $1.3 million.
Net Income. Net income increased $45.8 million to 25.3% of revenues in
fiscal year 1997 compared to 2.1% of revenues in fiscal year 1996. This increase
was primarily attributable to the gain on disposal of discontinued operations
discussed above. In addition, the Company recorded an increase of $5.8 million
in equity in earnings of unconsolidated entities, net of income taxes.
COMPARISON OF FISCAL YEARS ENDED FEBRUARY 3, 1996 AND JANUARY 31, 1995
Revenues. The Company's revenues in fiscal year 1996 increased by 0.2%, or
$0.4 million, from $194.4 million in fiscal year 1995 to $194.8 million in
fiscal year 1996. Adjusting for the additional days in fiscal year 1996,
comparable store revenues decreased 1.6%. Very solid revenues increases were
experienced by the Pineville, North Carolina store and the Mooresville Festival
store. These increases were offset by decreases experienced by other stores in
the consolidated group such as the Greensboro, Four Seasons Mall and the
Charlotte, Eastland Mall stores which experienced substantial decreases in
revenues.
Cost of Goods Sold. As a percentage of revenues, cost of goods sold
decreased from 68.0% of revenues in fiscal year 1995 to 67.6% of revenues in
fiscal year 1996. Cost of goods sold decreased 0.4%, or $0.4 million, from
$132.1 million in fiscal year 1995 to $131.7 million in fiscal year 1996.
Selling, General and Administrative Expenses. SG&A increased from 25.9% of
revenues in fiscal year 1995 to 26.7% of revenues in fiscal year 1996. This
increase, which amounted to $1.5 million, was attributable primarily to
increases in payroll and credit expense. (Credit expense increased in part due
to an increase in Belk proprietary credit card promotions and third party bank
fees.) These increases were accompanied by a decrease in finance charge income.
Interest Expense, Net. Interest expense, net decreased from 1.9% of
revenues in fiscal year 1995 and to 1.6% of revenues in fiscal year 1996.
Interest expense, net was $3.7 million for fiscal year 1995 as compared to $3.2
million for fiscal year 1996. This decrease was attributable to a decrease in
average outstanding borrowings of $3.6 million.
Income Taxes. The effective income tax rate decreased to 35.3% in fiscal
year 1996 from 41.6% in fiscal year 1995. The income tax rate of 35.3% in fiscal
year 1996 differs from the statutory federal income tax rate primarily due to
permanent differences related to deferred compensation insurance, a tax benefit
related to a prior year, and a correction of the value of deferred tax assets.
25
<PAGE> 1688
Income from continuing operations. Income from continuing operations
decreased $1.2 million from $6.8 million, or 3.5% of revenues in fiscal year
1995, to $5.6 million, or 2.9% of revenues in fiscal year 1996. This decrease is
primarily attributable to an increase in SG&A of 0.8% as a percentage of
revenues and a decrease in equity in earnings of unconsolidated entities, net of
tax of $1.8 million.
Net Income. Net income decreased $2.8 million to 2.1% of revenues in
fiscal year 1996 compared to 3.5% of revenues in fiscal year 1995. This decrease
was a result of a loan prepayment penalty of $2.9 million, net of income tax
benefit, charged against income in fiscal year 1996 which was recognized as an
extraordinary item in the Consolidated Statements of Income.
SEASONALITY AND QUARTERLY FLUCTUATIONS
The Company has historically experienced and expects to continue to
experience seasonal fluctuations in its revenues, operating income, and net
income. The highest revenue period for the Company is the fourth quarter which
includes the Christmas selling season. A disproportionate amount of the
Company's revenues and a substantial amount of the Company's operating and net
income are realized during the fourth quarter. If for any reason the Company's
revenues were below seasonal norms during the fourth quarter, the Company's
annual results of operations could be adversely affected. The Company's
inventory levels generally reach their highest in anticipation of increased
revenues during these months,.
The following table illustrates the seasonality of revenues by quarter as a
percentage of the full year for the fiscal years indicated.
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
First quarter............................................... 21.9% 21.3% 23.1%
Second quarter.............................................. 21.3 22.0 21.4
Third quarter............................................... 23.8 24.0 23.8
Fourth quarter.............................................. 33.0 32.7 31.7
</TABLE>
The Company's quarterly results of operations could also fluctuate
significantly as a result of a variety of factors, including the timing of new
store openings and remodelings.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash on hand, cash flow from
operations, and borrowings under credit facilities.
During the nine months ended November 1, 1997, net cash provided by
operations was $1.2 million, compared to net cash used by operations of $4.0
million during the same period in 1996. This increase is primarily attributable
to an increase in accounts payables and accrued expenses of $7.3 million.
In fiscal year 1997, the Company had sufficient cash flows from operations
and credit facilities to fund its working capital needs, capital expenditures,
and equity purchases. Net cash provided by operations was $17.6 million, $6.0
million, and $17.9 million for the 1995, 1996, and 1997 fiscal years,
respectively. The decrease in cash flow in fiscal year 1996 was primarily
attributable to reduced net income and an additional investment in merchandise
inventory for the Pineville, North Carolina store needed to support revenues
growth. The increase in cash flow in fiscal year 1997 is primarily attributable
to an increase in income from continuing operations and payables to affiliates,
slightly offset by an increase in accounts receivable from customers.
Investing activities included capital expenditures, primarily for new,
relocated and remodeled stores; purchases and sales of equity investments; and
the purchases and sales of property and equipment related to store openings and
closings. The Company acquired the stock of Ivey Properties, Inc. in fiscal year
1996 for $83.0 million and acquired stock in affiliated companies, including
Belk of Virginia, in fiscal year 1997 for $84.7 million.
Capital expenditures, primarily for new and remodeled stores, amounted to
$11.0 million in the first nine months of fiscal 1998 and $2.2 million in the
comparable period in fiscal year 1997. Capital expenditures amounted to $3.7
million, $3.4 million, and $3.8 million for the 1995, 1996, and 1997 fiscal
years, respectively. In fiscal year 1996, the Mooresville Festival store was
expanded. In fiscal year 1997, the Greensboro Friendly store was relocated with
an additional 98,000 square feet in its new locale. The Company operated 12, 12,
and
26
<PAGE> 1689
11 department stores, respectively for the 1995, 1996, and 1997 fiscal years.
Stores are strategically opened and closed to allow the Company to focus on its
most productive and profitable markets.
Financing activities included payments or additional borrowings on credit
facilities. The Company's total indebtedness at November 1, 1997 was $83.8
million, comprised of $16.0 million of short-term borrowings and current
installments of long-term debt and capital lease obligations, and $67.8 million
of long-term debt and capital lease obligations. Of the $83.8 million of total
indebtedness, $5.8 million represents capital lease obligations, $5.7 million
was variable rate debt based on the secondary CD rate, $38.1 million is variable
rate debt based on LIBOR, and $34.2 million was fixed-rate. The Company has
entered into interest rate swap agreements with various financial institutions
to manage the exposure to changes in interest rates on its LIBOR based
indebtedness.
IMPACT OF INFLATION
While it is difficult to determine the precise effects of inflation,
Management does not believe inflation had a material impact on the consolidated
financial statements for the periods presented.
BUSINESS OF THE COMPANY
General. The Company owns, either directly or indirectly, (i) 100% of the
capital stock of Belk Charlotte, Inc., a North Carolina corporation ("Belk
Charlotte"), Belk Department Store of Greensboro, N.C., Inc., a North Carolina
corporation ("Belk Greensboro"), Belk Brothers Properties, Inc., a North
Carolina corporation ("Belk Brothers Properties") and Belk's Department Store of
Rock Hill, S.C., Incorporated, a South Carolina corporation ("Belk Rock Hill"),
(ii) 56% of the common stock of Belk of Virginia, Inc., a Virginia corporation
("Belk Virginia"), (iii) approximately 33% of BSS, and (iv) a 100% interest in
J.V. Properties, a North Carolina partnership ("J.V. Properties").
Belk Charlotte operates six retail department stores in the following
locations in North Carolina: Eastland Mall and SouthPark Mall in Charlotte;
Carolina Mall in Concord; Mooresville Festival in Mooresville; Carolina Place
Mall in Pineville; Signal Hill Mall in Statesville; and a Belk Express Store in
downtown Charlotte. The department stores operated by Belk Charlotte generally
operate in a manner consistent with the operations of the Belk Companies' retail
department store business, except that the Belk Express store sells only a
limited line of cosmetics and hosiery and does not carry the full lines of
merchandise carried by traditional Belk stores. Specific competitors in Belk
Charlotte's markets include Dillard, Sears, Hecht's and Penney. Belk Charlotte
operates the Pennell group office in Charlotte, North Carolina. The Pennell
group office provides buying, advertising, accounting, personnel and other
services to the stores in the Pennell group area. Belk Charlotte also operates a
distribution center in Charlotte, North Carolina, from which Belk Charlotte
receives, marks and distributes goods to the stores in the Pennell group area.
Belk Charlotte's stores are managed out of the Pennell group office in
Charlotte, North Carolina.
In addition, Belk Charlotte owns real property consisting of 1.94 acres
that it leases to a Hollywood Video store in Charlotte, North Carolina. The
lease agreement was signed in 1996 and has a term of 15 years. The lease
agreement provides for initial annual payments of $123,000. Belk Charlotte also
owns 100% of the common stock of Belk Rock Hill.
Belk Greensboro operates two retail department stores in Four Seasons Towne
Centre and Friendly Shopping Center in Greensboro, North Carolina. The
department stores operated by Belk Greensboro generally operate in a manner
consistent with the operations of the Belk Companies' retail department store
business. Specific competitors in Belk Greensboro's market include Dillard,
Sears, Hecht's and Penney. Belk Greensboro operates the Huffstetler group office
which provides buying, advertising, accounting, personnel and other services to
stores in the Huffstetler group area. In addition, Belk Greensboro operates a
distribution center in Greensboro, North Carolina which provides receiving,
marking and distribution services to stores in the Huffstetler group area. These
stores are managed out of the Huffstetler group office in Greensboro, North
Carolina.
27
<PAGE> 1690
Belk Greensboro owns real property consisting of 15.4 acres at the Carolina
Circle Mall in Greensboro, North Carolina. Belk Greensboro formerly operated a
retail department store in that location; however, the store was closed in 1997.
A portion of the property at Carolina Circle Mall is currently being leased to
the United States Postal Service for the operation of a mail sorting facility.
The lease was signed in 1994 and has a term of 10 years. The lease provides for
annual payments of $191,400. The Huffstetler group office also operates in a
portion of the former Carolina Circle store building.
Belk Brothers Properties does not operate any department stores. Belk
Brothers Properties owns (i) the building in Charlotte, North Carolina in which
BSS' offices are located, (ii) a number of parking lots located in Charlotte,
North Carolina and (iii) a 99% partnership interest in J.V. Properties. The
lease agreement with BSS for its offices was signed in 1992 and expires in 2013.
The lease agreement provides for monthly payments of $348,576.
Belk Rock Hill operates one retail department store at the Rock Hill
Galleria in Rock Hill, South Carolina. The department store operated by Belk
Rock Hill generally operates in a manner consistent with the operations of the
Belk Companies' retail department store business. Specific competitors within
Belk Rock Hill's market include Wal-Mart, Penney and Sears. Belk Rock Hill also
has a 25% limited partnership interest in the Rock Hill Zamias Limited
Partnership which was formed for the purpose of developing the Galleria in Rock
Hill. The store is managed out of the Pennell group office in Charlotte, North
Carolina.
J.V. Properties holds stock in other Belk Companies and Surviving Belk
Subsidiaries. J.V. Properties owns stock in the following corporations:
<TABLE>
<CAPTION>
PERCENTAGE OF
COMMON STOCK
CORPORATION OWNED
- ----------- -------------
<S> <C>
Belk Brothers of Monroe, N.C., Incorporated................. 29.2634%
Belk of Union, S.C., Inc.................................... 44.5000
Matthews-Belk Company....................................... 15.0117
Belk-Harry Company-Salisbury, N.C........................... 41.5960
Hudson-Belk Company......................................... 9.8545
Belk's Department Store of Rockingham, N.C., Incorporated... 10.4712
Belk's Department Store of Albemarle, N.C., Incorporated.... 49.4697
Gallant-Belk Company........................................ 2.5109
Belk Department Store of Lincolnton, N.C., Inc.............. 13.5833
Belk-Beck Company of Burlington, N.C., Inc.................. 32.2959
Belk Department Store of Hickory, N.C., Inc................. 22.8608
Belk-Beck Co. of High Point, N.C., Inc...................... 24.8023
Belk Department Store of Reidsville, N.C., Inc.............. 12.8705
Belk Department Store of Clinton, N.C., Inc................. 10.4372
Belk Department Store of Charleston, S.C., Inc.............. 2.2824
Belk's Department Store of Mount Airy, N.C., Incorporated... 3.6471
Belk Department Store of Wilkesboro, N.C., Inc.............. 13.6585
Belk's Department Store of Lenoir, N.C., Incorporated....... 18.7872
Belk's Department Store of Winnsboro, S.C., Incorporated.... 3.1746
Belk's Department Store of Lancaster, S.C., Inc............. 17.7617
Belk-Simpson Company, Greenville, S.C....................... 2.6877
Belk's Department Store of Asheville, N.C., Incorporated.... 11.9829
Belk's Department Store of Gaffney, S.C., Incorporated...... 7.9582
Belk-Matthews Company....................................... 18.2642
Belk of Hartwell, Ga., Inc.................................. 15.1667
Belk Department Store of Shelby, N.C., Inc.................. 10.7402
Belk's Department Store of New Bern, N.C., Incorporated..... 21.7060
Belk's Department Store of Laurens, S.C., Incorporated...... 18.7055
Belk of Monroe, Ga., Inc.................................... 18.2361
</TABLE>
28
<PAGE> 1691
<TABLE>
<CAPTION>
PERCENTAGE OF
COMMON STOCK
CORPORATION OWNED
- ----------- -------------
<S> <C>
Belk of Canton, Ga., Inc.................................... 14.2340
Belk of LaGrange, Ga., Inc.................................. 16.1591
Belk-Simpson Company of Corbin, Ky., Incorporated........... 10.9524
Belk's Department Store of Conway, S.C., Incorporated....... 9.6875
Belk's Department Store of Camden, S.C., Incorporated....... 11.4193
Belk of Spartanburg, S.C., Inc.............................. .2827
Belk Department Store of Forest City, N.C., Inc............. .3829
Belk's Department Store of Hartsville, S.C., Incorporated... 11.9212
Belk-Matthews Company of Cherryville, N.C., Incorporated.... 11.6831
Hudson's Department Store, Incorporated..................... 8.0838
Belk's Department Store of Chesterfield, S.C.,
Incorporated.............................................. 5.8697
Belk of Toccoa, Ga., Inc.................................... 9.4467
Belk Department Store of Ahoskie, N.C., Inc................. 23.6576
Belk Department Store of Elkin, N.C., Inc................... 12.8289
Belk Department Store of Greenville, N.C., Inc.............. 8.5495
Belk Department Store of Waynesville, N.C., Inc............. 17.8145
Howard's Department Store of Columbia, S.C., Inc............ 19.7222
Belk-Simpson Company of Hendersonville, N.C.,
Incorporated.............................................. 17.2656
Belk of Cornelia, Ga., Inc.................................. 16.3484
Belk of Newnan, Ga., Inc.................................... 17.6439
Belk of Washington, Ga., Inc................................ 16.5700
Belk of Dalton, Ga., Inc.................................... 9.4967
Belk Department Store of Eden, N.C., Inc.................... 5.0048
Belk-Simpson Company, Incorporated of Beaufort, S.C......... 16.3492
Belk of Lawrenceville, Ga., Inc............................. 15.9155
Belk of Covington, Ga., Inc................................. 11.9048
Belk of Miss., Inc.......................................... .3672
Belk's Department Store, Incorporated of Aiken, S.C......... 16.4444
Belk Department Store of Edenton, N.C., Inc................. 6.9884
Belk-Simpson Realty Company................................. 16.7000
Belk Enterprises Inc........................................ 9.0466
Belk's Department Store of Jacksonville, N.C., Inc.......... 5.1760
Parks-Belk Company of Clarksville, Tenn..................... 3.7774
Belk of Thomaston, Ga., Inc................................. 10.0048
Belk-Lindsey Stores, Inc.................................... 2.4114
Belk's Department Store of Cartersville, Ga.,
Incorporated.............................................. 4.7529
Kitchin's of Alabama, Inc................................... 7.4141
Kitchin's of Troy, Alabama, Inc............................. 5.6723
Kitchin's of Starkville, Miss., Inc......................... 6.0000
Kitchin's of Enterprise, Ala., Inc.......................... 6.3559
Belk of Virginia, Inc....................................... 8.2978
Belk of Danville, Va., Inc.................................. 18.2516
Belk of South Boston, Va., Inc.............................. 1.5648
Belk of Lynchburg, Va., Inc................................. 1.2195
Belk Realty of Staunton, Va., Inc........................... .1372
Belk Stores of Virginia, Inc................................ .0104
</TABLE>
29
<PAGE> 1692
Belk of Virginia owns stock in the following corporations:
<TABLE>
<CAPTION>
PERCENTAGE OF
COMMON STOCK
CORPORATION OWNED
- ----------- -------------
<S> <C>
Belk of South Boston, Va., Inc.............................. 89.5%
Belk of Lynchburg, Va., Inc................................. 93.9
Belk Outlet Center, Lynchburg, Va........................... 94.2
Belk of Roanoke, Va......................................... 94.6
Belk Realty of Radford, Va.................................. 95.9
Belk Realty of Staunton, Va................................. 96.4
Belk of Lawrenceville, Va., Inc............................. 90.6
Belk Stores of Virginia, Inc................................ 92.2
</TABLE>
BSS provides various administrative services to the Belk Companies. The
services provided include: accounts payable and payroll services, merchandise
buying, sales promotion, real estate management, store planning, employee
benefits, training, loss prevention, management information services and legal,
tax and accounting services.
Facilities. Belk Charlotte operates six retail department stores, of which
one is leased under a long-term lease and five are owned by the Company. The
store lease has a termination date of 2001. The floor area of the leased
building is 101,000 square feet. The owned stores range in size from 56,000 to
284,000 square feet. The Company believes its facilities are adequate to meet
its current needs. Belk Charlotte also operates a Belk Express Store which
contains 2,000 square feet of floor area. The Belk Express facility is leased
under a lease expiring in 1999. The Company has no lease renewal options
remaining; however, the Company believes that renewal options at market rates
will be available.
Belk Greensboro leases both of its store buildings. The leases have
termination dates of 2007 and 2010. The floor area of the leased buildings is
140,000 and 220,000 square feet. The Company believes these facilities are
adequate to meet its current needs.
Belk Rock Hill leases its store building, which contains approximately
89,000 square feet of floor area. The current term of the lease expires in 2011.
The Company believes the building is adequate to meet its current needs.
Competition. Specific competitors in the Company's markets include Penney,
Dillard, Hecht's, Sears and Wal-Mart.
Legal Proceedings. Neither the Company nor any of its subsidiaries is
currently a party to any material litigation, nor are they currently aware of
any pending or threatened litigation that could have a material adverse effect
on the business, financial condition or results of operations of the Company and
its subsidiaries taken as a whole.
30
<PAGE> 1693
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)(f)........................................ 65,479.00 46.5%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(d)(f)................................................. 51,308.25 36.4%
H. W. McKay Belk (Director and Executive Officer)
(b)(d)(f)................................................. 51,308.25 36.4%
John R. Belk (Director and Executive Officer) (b)(d)(f)..... 51,306.25 36.4%
Sarah Belk Gambrell (e)..................................... 16,422.00 11.7%
David Belk Cannon (Director) (h)............................ 10,260.00 7.3%
James K. Glenn, Jr. (Director) (g).......................... 9,186.00 6.5%
Leroy Robinson (Director) (b)(d)............................ 7,515.00 5.3%
Katherine McKay Belk (b)(d)................................. 9,378.00 6.7%
Katherine Belk Morris (b)(d)................................ 9,864.25 7.0%
Belk Enterprises, Inc....................................... 37,497 26.6%
James K. Glenn, Jr., Trustee under will of Daisy Belk
Mattox.................................................... 7,526 5.3%
NationsBank, N.A. (i)(j).................................... 8,583 6.1%
All Directors and Executive Officers as a group (7
persons).................................................. 101,591.75 72.5%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Leroy Robinson, Katherine McKay Belk and Katherine Belk Morris -- 2801 West
Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk Gambrell -- 300 Cherokee
Road, Charlotte, N.C. 28207; David Belk Cannon -- 1607 W. Floyd Baker Blvd.,
Gaffney, S.C. 29341; James K. Glenn, Jr. and James K. Glenn, Trustee under will
of Daisy Belk Mattox, -- P.O. Box 2736, Winston-Salem, N.C. 27102; Belk
Enterprises, Inc. -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500;
NationsBank, N.A. -- Sara McDonnell (NC1-002-07-13), Charlotte, N.C. 28255.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 2,058 shares held by Montgomery Investment Company, of which John
M. Belk is the majority shareholder.
(b) Includes 4,567 shares held by Brothers Investment Company, which
Corporation is equally owned by John M. Belk and the Estate of Thomas M.
Belk. Voting and investment power is shared by John M. Belk, Katherine
McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W. McKay Belk,
John R. Belk and Leroy Robinson.
(c) Represented by 154.5 shares of Mary Claudia Belk Irrevocable Trust dated
1/4/94. Claudia W. Belk, Trustee, is John M. Belk's wife.
(d) Includes 2,948 shares held by Thomas M. Belk, Trustee U/A dated September
15, 1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
31
<PAGE> 1694
(e) Includes 6,342 shares held in several Trusts established by the Will of
Mary I. Belk for the benefit of her children. Voting and investment power
of the Trusts for John M. Belk and Thomas M. Belk is shared by John M.
Belk, Sarah Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and
investment power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and
Henderson Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson
Belk, W. H. Belk, Jr. and Irwin Belk.
(f) Includes 37,497 shares held by Belk Enterprises, Inc., 288 shares held by
Belk Brothers of Monroe, North Carolina, Incorporated., 288 shares held by
Belk-Harry Company, 288 shares held by Belk's Department Store of Morehead
City, N.C., Inc., 2,735.5 shares held by Belk Finance Company and 294
shares held by Matthews-Belk Company, which shares are voted by the members
of the Executive Committee of the Board of Directors of each such
Corporation, under the authority given by the directors of each such
Corporation at the annual meeting of directors held in March, 1997. The
Executive Committee of each such Corporation consists of John M. Belk,
Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(g) Includes 7,526 shares held by James K. Glenn, Jr., Trustee under will of
Daisy Belk Mattox, 310 shares held by John Belk Stevens Trust U/W ITEM III,
Section C f/b/o James Kirk Glenn, Jr., et al and 621 shares held by John
Belk Stevens Trust U/W ITEM III, Section B f/b/o Mary S. Whelchel, and 621
shares held by John Belk Stevens Trust U/W ITEM III, Section A f/b/o Sara
S. Glenn. Voting and investment power is vested in James K. Glenn, Jr., the
Trustee of each Trust.
(h) Includes 2,412 shares held by Residuary Trust U/W Mrs. Henry Belk Cannon.
The Trustees, David Belk Cannon and John C. Daughtridge, have voting and
investment power with respect to such shares.
(i) Includes 614 shares held by NationsBank as Trustee for the Robert L.
Doughton II Revocable Trust dated 3/25/97, 2,008 shares held by Sara Dew
Misner and North Carolina National Bank, Co-Trustees for Daisy Doughton
Lange U/A dated November 5, 1965, 94 shares held by North Carolina National
Bank, successor trustee U/W J. Norton Doughton for Virginia D.P. Doughton,
340 shares held by North Carolina National Bank and John L. Green, Jr.,
Co-Trustees U/A Mike Belk Hudson dated 8/18/65 -- Mike Belk Hudson,
Grantor, 340 shares held by Amos J. Cummings, John L. Green, Jr. and North
Carolina National Bank, Co-Trustees U/A 8/18/65 -- Mike Belk Hudson,
Grantor, 2,403 shares held by J. L. Green, Jr. and N.C. National Bank,
Trustees U/A 7/9/65 -- Sadie Belk Cummings, Grantor. NationsBank has sole
voting and investing power with respect to such shares.
(j) Includes 2,784 shares held by Daisy Doughton Lange and North Carolina
National Bank, Trustees for Robert L. Doughton, II under Agreement dated
July 21, 1965. The named Trustees have voting and investment power with
respect to such shares.
32
<PAGE> 1695
INDEX TO HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of KPMG Peat Marwick LLP, Independent Auditors....... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Shareholders' Equity............. F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 1696
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Belk Brothers Co., and Subsidiaries
We have audited the accompanying consolidated balance sheets of Belk
Brothers Co., and Subsidiaries as of February 3, 1996 and February 1, 1997, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the years in the three-year period ended February 1,
1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Belk
Brothers Co., and Subsidiaries at February 3, 1996 and February 1, 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended February 1, 1997, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Charlotte, North Carolina
April 25, 1997
F-2
<PAGE> 1697
BELK BROTHERS CO., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 6,584,769 $ 14,783,850 $ 3,209,435
Accounts receivable, net........................... 29,801,982 34,759,335 33,739,030
Merchandise inventory.............................. 39,488,466 38,929,611 50,825,896
Receivables from affiliates........................ 1,598,173 2,715,623 7,327,507
Prepaid income taxes............................... 3,992 1,284,091 4,498,445
Deferred income taxes.............................. 1,050,915 801,597 801,597
Prepaid expenses and other current assets.......... 2,726,350 2,072,457 1,419,849
------------ ------------ ------------
Total current assets................................. 81,254,647 95,346,564 101,821,759
Deferred income taxes................................ 101,912 -- --
Investments.......................................... 1,973,818 63,890,467 62,587,502
Investments in unconsolidated entities............... 3,598,369 39,838,916 38,848,805
Property and equipment, net.......................... 175,808,595 82,509,925 88,832,950
Intangible assets, net............................... 10,386,174 -- --
Other assets......................................... 4,133,651 1,683,486 1,906,491
------------ ------------ ------------
Total assets......................................... $277,257,166 $283,269,358 $293,997,507
============ ============ ============
LIABILITIES, DEFERRED INCOME AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable................................... $ 12,365,388 $ 12,726,612 $ 20,046,473
Accrued expenses................................... 4,988,672 5,228,711 5,226,607
Payables to affiliates............................. 7,958,567 17,460,521 20,715,883
Accrued income taxes............................... 272,768 -- --
Lines of credit and notes payable.................. 105,990,739 1,000,000 5,748,830
Current installments of long-term debt and capital
lease obligations............................... 3,956,416 10,263,802 10,307,637
------------ ------------ ------------
Total current liabilities............................ 135,532,550 46,679,646 62,045,430
Deferred income taxes................................ -- 31,826,969 32,772,620
Long-term debt and capital lease obligations,
excluding current installments..................... 58,440,606 73,241,732 67,761,545
Other liabilities.................................... 3,202,667 3,274,405 3,532,665
------------ ------------ ------------
Total liabilities.................................... 197,175,823 155,022,752 166,112,260
------------ ------------ ------------
Deferred income...................................... 2,875,930 2,564,997 2,429,997
------------ ------------ ------------
Shareholders' equity:
Common stock, $100 par value; authorized, issued
and outstanding 140,888 shares.................. 14,088,800 14,088,800 14,088,800
Retained earnings.................................. 62,927,385 111,317,277 111,059,947
Net unrealized gains on investments................ 189,228 275,532 306,503
------------ ------------ ------------
Total shareholders' equity........................... 77,205,413 125,681,609 125,455,250
------------ ------------ ------------
Total liabilities, deferred income and shareholders'
equity............................................. $277,257,166 $283,269,358 $293,997,507
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 1698
BELK BROTHERS CO., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
------------------------------------------ ---------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
------------ ------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues............................. $194,420,976 $194,787,171 $196,795,296 $134,386,195 $141,684,068
Cost of goods sold (including
occupancy and buying expenses)..... 132,138,069 131,652,075 134,457,290 92,630,087 98,060,058
Selling, general and administrative
expenses........................... 50,381,691 51,927,826 49,186,729 36,131,273 36,752,081
------------ ------------ ------------ ------------ ------------
Income from operations............... 11,901,216 11,207,270 13,151,277 5,624,835 6,871,929
Interest expense, net................ (3,683,139) (3,168,570) (3,008,501) (1,917,300) (3,292,483)
Rental operations with affiliate,
net................................ (103,549) (83,367) (44,710) (41,103) 5,992
Loss on investment................... -- -- -- -- (1,350,442)
Other income, net.................... 144,954 385,827 50,811 276,582 757,890
------------ ------------ ------------ ------------ ------------
Income from continuing operations
before income taxes and equity in
earnings of unconsolidated
entities........................... 8,259,482 8,341,160 10,148,877 3,943,014 2,992,886
Income taxes......................... 3,434,887 2,941,953 4,233,752 1,537,000 1,167,000
------------ ------------ ------------ ------------ ------------
Income from continuing operations
before equity in earnings of
unconsolidated entities............ 4,824,595 5,399,207 5,915,125 2,406,014 1,825,886
Equity in earnings (loss) of
unconsolidated entities, net of
income taxes....................... 1,992,073 209,034 6,026,112 277,322 (674,336)
------------ ------------ ------------ ------------ ------------
Income from continuing operations.... 6,816,668 5,608,241 11,941,237 2,683,336 1,151,550
Discontinued operations:
Income (loss) from rental
operations disposed of, net of
income tax benefit (expense) of
$(834,000) in 1996 and $2,308,000
in 1997.......................... -- 1,298,344 (3,608,986) (2,806,774) --
Gain on disposal of rental
operations, net of income taxes
of $29,897,000................... -- -- 41,466,521 -- --
------------ ------------ ------------ ------------ ------------
Income (loss) before extraordinary
item............................... 6,816,668 6,906,585 49,798,772 (123,438) 1,151,550
Extraordinary item -- loan prepayment
penalty, net of income tax benefit
of $1,833,000...................... -- (2,867,000) -- -- --
------------ ------------ ------------ ------------ ------------
Net income (loss).................... $ 6,816,668 $ 4,039,585 $ 49,798,772 $ (123,438) $ 1,151,550
============ ============ ============ ============ ============
Earnings (loss) per share:
Income from continuing operations
before extraordinary items......... $ 48.38 $ 39.81 $ 84.76 $ 19.04 $ 8.17
Discontinued operations.............. -- 9.21 268.70 (19.92) --
Extraordinary items.................. -- (20.35) -- -- --
------------ ------------ ------------ ------------ ------------
Net income (loss).................... $ 48.38 $ 28.67 $ 353.46 $ (0.88) $ 8.17
============ ============ ============ ============ ============
Weighted average shares.............. 140,088 140,088 140,088 140,088 140,088
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to combined financial statements.
F-4
<PAGE> 1699
BELK BROTHERS CO., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
NET
UNREALIZED
COMMON RETAINED GAINS ON
STOCK EARNINGS INVESTMENTS TOTAL
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Balance at February 1, 1994................. $14,088,800 $ 54,607,116 $ -- $ 68,695,916
Unrealized gains on investments, net of
income taxes.............................. -- -- 132,122 132,122
Cash dividends.............................. -- (1,127,104) -- (1,127,104)
Net income.................................. -- 6,816,668 -- 6,816,668
----------- ------------ -------- ------------
Balance at January 31, 1995................. 14,088,800 60,296,680 132,122 74,517,602
Unrealized gains on investments, net of
income taxes.............................. -- -- 57,106 57,106
Cash dividends.............................. -- (1,408,880) -- (1,408,880)
Net income.................................. -- 4,039,585 -- 4,039,585
----------- ------------ -------- ------------
Balance at February 3, 1996................. 14,088,800 62,927,385 189,228 77,205,413
Unrealized gains on investments, net of
income taxes.............................. -- -- 86,304 86,304
Cash dividends.............................. -- (1,408,880) -- (1,408,880)
Net income.................................. -- 49,798,772 -- 49,798,772
----------- ------------ -------- ------------
Balance at February 1, 1997................. 14,088,800 111,317,277 275,532 125,681,609
Unrealized gains on investments, net of
income taxes (Unaudited).................. -- -- 30,971 30,971
Cash dividends (Unaudited).................. -- (1,408,880) -- (1,408,880)
Net income (Unaudited)...................... -- 1,151,550 -- 1,151,550
----------- ------------ -------- ------------
Balance at November 1, 1997................. $14,088,800 $111,059,947 $306,503 $125,455,250
=========== ============ ======== ============
</TABLE>
See accompanying notes to combined financial statements.
F-5
<PAGE> 1700
BELK BROTHERS CO., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
----------------------------------------- ---------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
----------- ------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................. $ 6,816,668 $ 4,039,585 $ 49,798,772 $ (123,438) $ 1,151,550
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating
activities:
Deferred income taxes......................... (765,575) (855,495) 2,534,989 501,955 925,892
Deferred income............................... 100,215 329,135 (180,000) (147,595) (135,000)
Depreciation and amortization................. 7,444,592 9,212,217 9,620,419 8,165,218 4,612,765
Write-off of long-term debt premium........... -- (697,306) -- -- --
Loss (gain) on disposal of rental operations,
net......................................... -- -- (41,466,521) -- --
Loss (gain) on sale of property and
equipment................................... (8,830) 89,693 103,044 87,179 31,694
Gain on sale of investments................... 20,095 (79,142) (7,230) -- 2,265
Loss (gain) on investment..................... -- -- -- -- 1,350,442
Equity in loss (earnings) of unconsolidated
entities.................................... (1,992,073) (1,414,762) (6,026,112) (277,322) 674,336
(Increase) decrease in:
Accounts receivable, net.................... 526,365 513,299 (5,280,783) (1,882,617) 1,020,305
Merchandise inventory....................... 3,530,582 (3,211,054) 558,855 (7,001,944) (11,896,285)
Receivables from affiliates................. (1,431,600) 1,400,537 (1,117,450) (1,755,564) (4,611,884)
Prepaid income taxes........................ -- (1,589,335) (3,733,583) (3,214,354)
Prepaid expenses............................ (22,948) (1,595,645) 90,861 47,486 429,603
Increase (decrease) in:
Accounts payable and accrued expenses....... 77,324 (1,664,550) 1,544,948 2,565,153 7,317,757
Payables to affiliates...................... 3,853,317 703,970 9,501,954 (156,308) 3,255,362
Accrued income taxes........................ (900,557) (1,489,905) (272,768) (272,768) --
Other liabilities........................... 310,997 803,686 71,738 35,539 258,260
----------- ------------ ------------ ------------ ------------
Net cash provided (used) by operating
activities.................................... 17,558,572 6,084,263 17,885,381 (3,948,609) 1,172,708
----------- ------------ ------------ ------------ ------------
Cash flows from investing activities:
Distributions received from real estate
partnership................................. -- -- 3,375,000 875,000 --
Purchase of the net assets of Ivey Properties,
Inc., net of cash acquired.................. -- (82,953,737) -- -- --
Purchases of property and equipment........... (3,708,715) (3,355,368) (3,790,511) (2,235,263) (10,968,728)
Proceeds from sale of note receivable......... -- -- 1,097,974 1,097,974 --
Proceeds from sale of property and
equipment................................... 389,979 2,378 3,406,448 4,400,000 1,244
Proceeds from sale of investments............. 116,138 165,973 7,230 -- 988
Other changes in investments.................. 2,095,384 1,048,479 (1,856,872) 117,528 315,775
Purchase of stock in affiliated companies..... -- -- (84,718,899) (84,718,349) --
----------- ------------ ------------ ------------ ------------
Net cash used by investing activities........... (1,107,214) (85,092,275) (82,479,630) (80,463,110) (10,650,721)
----------- ------------ ------------ ------------ ------------
Cash flows from financing activities:
Proceeds from notes payable................... $ -- $104,840,739 $ 92,500,000 $ 59,897,500 $ --
Payments on notes payable..................... (1,650,000) -- (30,022,739) -- (330,115)
Net proceeds from (payments on) lines of
credit -- 1,150,000 (150,000) 3,350,000 4,748,830
Proceeds from issuance of long-term debt -- -- 45,303,000 45,303,000 --
Principal payments on long-term debt and
capital lease obligations................... (11,588,951) (28,991,126) (33,428,051) (24,478,707) (5,106,237)
Dividends paid................................ (1,127,104) (1,408,880) (1,408,880) (1,408,880) (1,408,880)
----------- ------------ ------------ ------------ ------------
Net cash provided (used) by financing
activities.................................... (14,366,055) 75,590,733 72,793,330 82,662,913 (2,096,402)
----------- ------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents................................... 2,085,303 (3,417,279) 8,199,081 (1,748,806) (11,574,415)
Cash and cash equivalents at beginning of
period........................................ 7,916,745 10,002,048 6,584,769 6,584,769 14,783,850
----------- ------------ ------------ ------------ ------------
Cash and cash equivalents at end of period...... $10,002,048 $ 6,584,769 $ 14,783,850 $ 4,835,963 $ 3,209,435
=========== ============ ============ ============ ============
Supplemental disclosures of cash flow
information:
Interest paid................................. $ 7,275,723 $ 7,802,563 $ 15,645,505 $ 8,082,461 $ 6,480,253
Income taxes paid 5,723,802 5,109,818 3,056,367 2,867,267 2,573,387
Supplemental information regarding noncash
investing and financing activities:
Decrease in assets and liabilities due to sale
of rental operations........................ $ -- $ -- $167,318,000 $ -- $ --
Increase in investments and notes payable..... $ -- $ -- 9,233,563 6,292,029 $ --
</TABLE>
See accompanying notes to combined financial statements.
F-6
<PAGE> 1701
BELK BROTHERS CO., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
COMPANY OPERATIONS
The consolidated financial statements include the accounts of Belk Brothers
Company and its wholly owned subsidiaries (hereafter referred to as the
"Company"). The wholly owned subsidiaries are:
Belk Charlotte, Inc.
Belk Department Store of Greensboro, N.C., Inc.
Belk Brothers Properties, Inc.
Belk Department Store of Rock Hill, S.C., Incorporated
J.V. Properties
The Company operates retail department stores in North and South Carolina.
FISCAL YEAR
Starting fiscal year 1996, the Company's fiscal year ends on the Saturday
closest to each January 31. Fiscal years 1996 and 1997 ended on February 3, 1996
and February 1, 1997, and included 368 and 365 days, respectively. Fiscal year
1995 ended on Tuesday, January 31, 1995 and included 364 days.
INTERIM FINANCIAL STATEMENTS
The consolidated financial statements as of and for the periods ended
November 2, 1996 and November 1, 1997 are unaudited and are presented pursuant
to the rules and regulations of the Securities and Exchange Commission. In the
opinion of management, the accompanying consolidated financial statements
reflect all adjustments (which are of normal recurring nature) necessary to
present fairly the financial position and results of operations and cash flows
for the interim periods, but are not necessarily indicative of the results of
operations for a full fiscal year.
REVENUES
Revenues include sales from retail operations and leased departments, net
of returns. Revenues from leased departments amounted to approximately,
$9,670,000, $10,343,000 and $11,746,000 in fiscal years 1995, 1996 and 1997,
respectively.
COST OF GOODS SOLD
Cost of goods sold includes occupancy and buying expenses. Occupancy
expenses include rent, utilities and real estate taxes. Buying expenses include
payroll and travel expenses associated with the buying function.
MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market as
determined by the retail inventory method.
FINANCE CHARGES
Selling, general and administrative expenses in the consolidated statements
of operations are reduced by finance charge revenue arising from customer
accounts receivable. Finance charge revenue amounted to approximately
$3,752,000, $3,416,000 and $3,641,000 in fiscal years 1995, 1996 and 1997,
respectively.
F-7
<PAGE> 1702
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY AND EQUIPMENT, NET
Property and equipment owned by the Company are stated at cost less
accumulated depreciation. Depreciation and amortization are provided utilizing
straight-line and various accelerated methods over the shorter of estimated
asset lives or related lease terms.
Property and equipment leased by the Company under capital leases are
stated at an amount equal to the present value of the minimum lease payments
less accumulated amortization.
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred income tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement bases
and the respective tax bases of the assets and liabilities and operating loss
and tax credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized.
PRE-OPENING COSTS
Store pre-opening costs are expensed as incurred.
CASH EQUIVALENTS
Cash equivalents include liquid investments with an original maturity of 90
days or less.
ADVERTISING
Advertising costs are expensed as incurred and amounted to $5,779,918,
$5,917,825 and $5,969,263 in fiscal years 1995, 1996 and 1997, respectively.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company utilizes various derivative financial instruments (interest
rate swap agreements) to manage the interest rate risk associated with its
borrowings. The counterparties to these instruments are major financial
institutions. These agreements are used to reduce the potential impact of
increases in interest rates on variable rate long-term debt. The differential to
be paid or received is accrued as interest rates change and recognized as an
adjustment to interest expense. The fair values of the swap agreements are not
recognized in the combined financial statements.
(2) ACCOUNTS RECEIVABLE, NET
Customer receivables arise primarily under open-end revolving credit
accounts used to finance purchases of merchandise from the Company. These
accounts have various billing and payment structures, including varying minimum
payment levels and finance charge rates. Installments of deferred payment
accounts receivable maturing after one year are included in current assets in
accordance with industry practice.
The Company provides an allowance for doubtful accounts which is determined
based on a number of factors, including the risk characteristics of the
portfolio, historical charge-off patterns, and management judgment.
F-8
<PAGE> 1703
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Accounts receivable, net consists of:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Customer receivables............................ $28,907,850 $33,016,231 $33,611,063
Other........................................... 1,351,118 2,284,880 773,827
Less allowance for doubtful accounts............ (456,986) (541,776) (645,860)
----------- ----------- -----------
Accounts receivable, net........................ $29,801,982 $34,759,335 $33,739,030
=========== =========== ===========
</TABLE>
Change in allowance for doubtful accounts are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
--------------------------------------- -------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance, beginning of period... $ 419,221 $ 439,121 $ 456,986 $ 456,986 $ 541,776
Charged to expense............. 488,629 504,762 740,853 448,208 882,713
Net uncollectible balances
written off.................. (468,729) (486,897) (656,063) (448,208) (778,629)
--------- --------- --------- --------- ---------
Balance, end of period......... $ 439,121 $ 456,986 $ 541,776 $ 456,986 $ 645,860
========= ========= ========= ========= =========
</TABLE>
(3) INVESTMENTS IN UNCONSOLIDATED ENTITIES
The Company's investments in the following unconsolidated entities include
the unamortized excess of the Company's investment over its equity in the
investments' net assets, if applicable. The excess was $1,865,709, at February
1, 1997, and is being amortized on a straight-line basis over a period of 15
years.
The investments in unconsolidated entities and percentage owned are:
<TABLE>
<S> <C>
Belk Department Store of Ahoskie, N.C., Inc................. 23.7%
Belk's Department Store of Albemarle, North Carolina,
Incorporated.............................................. 43.5
Belk-Beck Company of Burlington, North Carolina, Inc........ 32.2
Belk Department Store of Hickory, N.C., Inc................. 22.9
Belk-Beck Co. of High Point, N.C., Incorporated............. 24.8
Belk Brothers of Monroe, North Carolina, Incorporated....... 29.3
Belk's Department Store of New Bern, N.C., Incorporated..... 21.7
Belk-Harry Company, Salisbury, N.C.......................... 41.6
Belk's Department Store of Union, S.C., Incorporated........ 44.5
Belk Stores Services, Inc. (BSS)............................ 33.5
Carolina Place Associates Partnership (CPA)................. 25.0
JV Properties (February through November, 1995-see Note
13)....................................................... 50.0
Belk of Virginia, Inc....................................... 59.4
</TABLE>
F-9
<PAGE> 1704
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Condensed combined financial information of the unconsolidated entities is
as follows:
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- ------------
<S> <C> <C> <C>
Current assets................................. $14,736,826 $31,308,191 $167,857,312
Noncurrent assets.............................. 24,087,106 18,387,934 106,395,866
Current liabilities............................ 4,772,531 31,768,701 161,359,126
Noncurrent liabilities......................... 19,847,956 17,991,550 48,733,730
Shareholders' equity........................... 14,203,445 (64,126) 64,160,322
Revenues....................................... 41,461,229 27,461,938 210,329,184
Net income..................................... 6,706,442 3,050,213 7,430,373
</TABLE>
During the year ended February 1, 1997, the Company acquired a 59.4%
interest in Belk of Virginia, Inc., (Virginia). Virginia was formed to acquire a
controlling interest in retail companies headquartered in Virginia. The
Company's control of Virginia is considered temporary and accordingly, the
investment has been accounted for on the equity method.
Equity in earnings of unconsolidated entities for the year ended February
1, 1997 includes $3,072,000, net of income tax expense of $1,973,000, for the
Company's portion of the gain recognized by CPA partnership for the sale of its
investment in Carolina Place Joint Venture, a retail mall joint venture.
(4) INVESTMENTS
The Company classifies all equity securities with a readily determinable
market value as securities available-for-sale with unrealized gains and losses,
net of income taxes, reported as a component of shareholders' equity.
Details of the equity investments in available-for-sale securities are as
follows:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Cost................................................. $ 2,603 $ 2,603 $ 2,603
Gross unrealized gains............................... 310,985 452,735 503,465
-------- -------- --------
Fair value of securities............................. $313,588 $455,338 $506,068
======== ======== ========
</TABLE>
Gains and losses on sales of securities are recognized when realized on a
specific identification basis. Gross realized gains included in income in 1996
and 1997 were $18,316 and 0, respectively.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values are recorded at original cost
when ownership is less than 20%. Any such investments owned 20% or more but not
greater than 50% are accounted for on the equity method. Investments that were
previously accounted for on the cost method may become qualified for use of the
equity method. The carrying amount of those investments are adjusted to reflect
the investor's share of the income, losses and dividends received from the
investors.
The Company owns 12.9% of TAGS Stores, LLC (TAGS) and, accordingly,
accounts for its investment in TAGS on a cost basis. In September 1997, the
managers and advisory board of TAGS adopted a formal plan to liquidate its
operations during the 1997 Christmas retailing season. During the nine months
ended November 1, 1997, the Company reduced its investment in TAGS by
$1,350,442, to the estimated net realizable value of its investment.
F-10
<PAGE> 1705
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(5) PROPERTY AND EQUIPMENT, NET
Details of property and equipment are as follows:
<TABLE>
<CAPTION>
ESTIMATED FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
LIVES 1996 1997 1997
--------- ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Land................................ N/A $ 21,535,585 $ 7,158,086 $ 7,455,488
Buildings........................... 30-50 179,786,015 96,911,437 100,897,282
Furniture, fixtures and equipment... 5-7 40,807,361 40,628,571 48,422,351
Construction in progress............ N/A 399,297 1,767,930 --
------------ ------------ ------------
242,528,258 146,466,024 156,775,121
Less accumulated depreciation and
amortization...................... (66,719,663) (63,956,099) (67,942,171)
------------ ------------ ------------
Property and equipment, net......... $175,808,595 $ 82,509,925 $ 88,832,950
============ ============ ============
</TABLE>
Included in the February 3, 1996, February 1, 1997 and November 1, 1997
amounts above is land of $5,144,200 and building, net of accumulated
depreciation, of $31,031,355 and $29,867,676 and $28,994,917, respectively,
related to a building leased by BSS from the Company. Rental operations with
affiliate consist of the following components:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Rental income................................... $ 4,182,912 $ 4,182,912 $ 3,137,184
Interest expense................................ (3,033,032) (2,997,456) (2,214,635)
Depreciation expense............................ (1,163,679) (1,163,679) (872,759)
Property taxes.................................. (69,568) (66,487) (43,798)
----------- ----------- -----------
$ (83,367) $ (44,710) $ 5,992
=========== =========== ===========
</TABLE>
(6) ACCRUED EXPENSES
Accrued expenses are comprised of the following:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Salaries, wages and employee benefits.............. $2,413,294 $2,220,796 $2,214,100
Interest........................................... 273,934 580,895 528,062
Taxes, other than income........................... 402,240 317,854 560,091
Rent............................................... 228,242 227,129 25,574
Other.............................................. 1,670,962 1,882,037 1,898,780
---------- ---------- ----------
$4,988,672 $5,228,711 $5,226,607
========== ========== ==========
</TABLE>
F-11
<PAGE> 1706
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) BORROWINGS
Long-term debt, principally due to banks, and capital lease obligations
consist of the following:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Capital lease obligations through October
2010.......................................... $ 6,405,170 $ 6,080,621 $ 5,828,279
9.625% mortgage note payable in installments,
through June 2003............................. 31,318,518 30,913,713 30,583,598
8.00% unsecured notes payable in installments,
through January 2007.......................... 733,334 666,666 666,666
5.6% secured notes payable due in January
1998.......................................... -- 2,941,534 2,941,534
Unsecured term loan agreement with three banks,
due in 2002................................... 23,940,000 -- --
Unsecured term loan agreement payable in
installments through October 2003; interest at
LIBOR (5.65% at November 1, 1997) plus from 80
to 175 basis points........................... -- 42,903,000 38,049,105
----------- ----------- -----------
62,397,022 83,505,534 78,069,182
Less current installments....................... (3,956,416) (10,263,802) (10,307,637)
----------- ----------- -----------
Long-term debt and capital lease obligations,
excluding current installments................ $58,440,606 $73,241,732 $67,761,545
=========== =========== ===========
</TABLE>
Carrying values of land and buildings pledged as collateral for the
mortgage note were approximately $35,012,000 at February 1, 1997. The secured
notes payable are collateralized by letters of credit with a bank.
The annual maturities of long-term debt over the next five years are:
$10,263,802, $7,381,329, $7,445,500, $7,515,258 and $7,591,130.
On November 1, 1996, the Company signed a term loan agreement with a bank
for $45.3 million. The proceeds of this term loan were used to refinance
existing term debt, to finance store renovations and fund the investment in
Virginia. The Company's term loan agreement contains, among other provisions and
covenants, restrictions relating to the creation of additional funded debt, and
the disposal, expansion or purchase of property and equipment and investments.
In addition, the Company must maintain at the end of any fiscal year a maximum
ratio of consolidated debt to consolidated total tangible capital, as defined.
The Company must also maintain at the end of the fiscal quarter, commencing with
the fiscal quarter ending February 1, 1997, at minimum fixed charge coverage
ratio, as defined. The Company was in compliance with the provision and
covenants of the term loan agreement as of November 1, 1997.
The covenants also include a restriction on dividend payments. The Company
can only declare dividends from operating profits from the preceding fiscal
year. At February 1, 1997, the Company had $61,518,505 of retained earnings
unavailable for dividend payments.
The Company has entered into interest rate swap agreements with various
financial institutions to manage the exposure to changes in interest rates on
its LIBOR based indebtedness. The amount of indebtedness covered by the interest
rate swaps is $100 million at November 1, 1997. Subsequent to November 1, 1997,
the Company entered into an additional $50 million in interest rate swaps. The
amount of indebtedness covered by the interest rate swaps is $150 million for
1998 and 1999, $75 million for 2000 and 2001 and $50 million through 2007.
At February 1, 1997 the Company has unsecured line of credit agreements
totaling $23,500,000 with banks at interest rates quoted by the banks (which
historically have been approximately 80 points above
F-12
<PAGE> 1707
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
LIBOR.) The amounts outstanding under these agreements at February 3, 1996,
February 1, 1997 and November 1, 1997 were $1,150,000, $1,000,000 and
$5,748,830, respectively.
During fiscal 1997, short-term loan agreements were refinanced and
subsequently distributed to BAC. See note 13 for further discussion.
(8) LEASES
The Company leases certain stores, warehouse facilities and equipment under
operating leases. The majority of those leases will expire over the next 20
years. The leases usually contain renewal options and provide for payment by the
leasee of real estate taxes and other expenses and, in certain instances,
increased rentals based on percentages of sales.
Future minimum lease payments under noncancelable leases as of February 1,
1997 were as follows:
<TABLE>
<CAPTION>
FISCAL YEAR CAPITAL OPERATING
- ----------- ----------- -----------
<S> <C> <C>
1998...................................................... $ 582,984 $ 1,605,694
1999...................................................... 582,984 1,574,194
2000...................................................... 582,984 1,443,407
2001...................................................... 582,984 1,328,832
2002...................................................... 582,984 1,333,288
After 2002................................................ 5,052,523 10,249,665
----------- -----------
Total.................................................. 7,967,443 $17,535,080
===========
Less imputed interest....................................... (1,886,822)
-----------
Present value of minimum lease payments..................... 6,080,621
Less current portion........................................ (338,208)
-----------
$ 5,742,413
===========
</TABLE>
Rental expense for all operating leases consists of the following:
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Buildings:
Minimum rentals.................................. $1,239,331 $1,352,938 $1,689,758
Contingent rentals............................... 184,476 183,296 211,014
Equipment.......................................... 247,517 234,969 212,615
---------- ---------- ----------
Total rental expense.......................... $1,671,324 $1,771,203 $2,113,387
========== ========== ==========
</TABLE>
Contingent rentals are determined on the basis of a percentage of sales in
excess of stipulated minimums for certain store facilities.
F-13
<PAGE> 1708
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(9) INCOME TAXES
Federal and state income tax expense (benefit) from continuing operations
is as follows:
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
Federal.................... $3,285,194 $1,514,409 $ 280,441 $ 769,020 $ 113,627
State...................... 915,268 450,039 1,083,322 266,025 127,481
---------- ---------- ---------- ---------- ----------
4,200,462 1,964,448 1,363,763 1,035,045 241,108
Deferred:
Federal.................... (607,814) 910,584 2,045,817 462,397 828,907
State...................... (157,761) 66,921 824,172 39,558 96,985
---------- ---------- ---------- ---------- ----------
(765,575) 977,505 2,869,989 501,955 925,892
---------- ---------- ---------- ---------- ----------
Income taxes................. $3,434,887 $2,941,953 $4,233,752 $1,537,000 $1,167,000
========== ========== ========== ========== ==========
</TABLE>
A reconciliation between income taxes from continuing operations computed
using the effective income tax rate and the federal statutory income tax rate of
34% for January 31, 1995 and February 3, 1996 and 35% for February 1, 1997 was
as follows:
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Income tax at the statutory federal rate........... $2,808,223 $2,835,993 $3,552,106
State income taxes, net of federal income tax
benefit.......................................... 499,955 341,194 1,239,871
Other.............................................. 126,709 (235,234) (558,225)
---------- ---------- ----------
Income taxes....................................... $3,434,887 $2,941,953 $4,233,752
========== ========== ==========
</TABLE>
F-14
<PAGE> 1709
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred taxes based upon differences between the financial statement and
tax bases of assets and liabilities and available tax carryforwards consist of:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- ------------
<S> <C> <C>
Deferred tax assets:
Benefit plan costs........................................ $1,114,722 $ 1,140,803
Developer incentive....................................... 1,160,230 956,744
Inventory capitalization.................................. 822,945 818,116
Capital lease............................................. 455,765 467,775
Allowance for doubtful accounts........................... 178,405 211,570
Tax carryovers............................................ 174,494 94,562
JV Property joint venture................................. 848,546 1,190
Other..................................................... 2,477 2,492
---------- ------------
Gross deferred tax assets................................... 4,757,584 3,693,252
Less valuation allowance.................................... -- (52,960)
---------- ------------
Net deferred tax assets..................................... 4,757,584 3,640,292
---------- ------------
Deferred tax liabilities:
Gain on disposal of rental operations..................... -- 29,179,273
Property and equipment.................................... 3,141,918 3,160,156
CPA Partnership........................................... 48,530 1,973,415
Investment securities..................................... 121,642 177,087
Prepaid pension costs..................................... 205,889 136,035
Other..................................................... 86,778 39,698
---------- ------------
Gross deferred tax liabilities.............................. 3,604,757 34,665,664
---------- ------------
Net deferred tax assets (liabilities)....................... $1,152,827 $(31,025,372)
========== ============
</TABLE>
As of February 1, 1997, a $52,960 valuation allowance has been recorded for
the portion of the state net operating loss carryforward unlikely to be
utilized. In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the temporary differences becoming deductible.
Management considers the scheduled reversals of deferred tax liabilities,
projected future income, and tax planning strategies in making this assessment.
As of February 1, 1997, the Company has net operating loss carryforwards
for state income tax purposes of $537,000 net of the valuation allowance of
$683,000, which are available to offset future state taxable income, if any,
through 2002.
(10) BENEFIT PLANS
The Company participates in the Belk Pension Plan, a defined benefit
multi-employer plan, that covers substantially all of the employees of the Belk
companies. Pension expense allocated to the Company was $123,368, $240,791 and
$178,910 for fiscal years 1995, 1996 and 1997, respectively. Because the Belk
Pension Plan is a multi-employer plan, allocation of plan assets to the Company
is not practical.
The Company also participates in the Belk Employee's Group Medical Plan,
that provides medical benefits to substantially all employees of the Belk
companies. This Plan is "self-funded" for medical benefits through a 501(c)(9)
Trust. The Company participates in a Group Life Insurance Plan that provides
life insurance to its employees, and is fully insured through a contract issued
by an insurance company. Contributions by the Company under the Belk Employees'
Group Medical Plan and the Group Life Insurance Plan amounted to approximately
$1,341,000, $1,379,000 and $1,431,000 in fiscal years 1995, 1996 and 1997,
respectively.
F-15
<PAGE> 1710
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company participates in the Belk Profit Sharing Plan, a contributory,
defined contribution multi-employer plan, that provides benefits for
substantially all employees of the Belk companies. The cost of the plan
generally represent 10% of profits, as defined, and amounted to $1,027,919,
$996,136 and $1,240,036 in fiscal years 1995, 1996 and 1997, respectively.
The Company participates in a Supplemental Executive Retirement Plan
(SERP), a non-qualified defined benefit retirement plan that provides retirement
and death benefits to certain qualified executives of the Company. Total SERP
costs charged to operations were $171,587, $213,117 and $75,819 in fiscal years
1995, 1996 and 1997, respectively. The effective discount rate used in
determining the net periodic SERP cost was 8.5% for fiscal years 1995 and 1996,
and 7.25% for fiscal year 1997. Actuarial gains and losses are amortized over
the average remaining service lives of the participants.
Certain eligible employees also participate in a non-qualified Deferred
Compensation Plan (DCP). Participants in the plan have elected to defer a
portion of their regular compensation subject to certain limitations prescribed
by the DCP. The Company is required to pay interest on the employees' deferred
compensation at various rates between 9% and 15%. Total interest expense related
to this plan and charged to operations was $175,833, $188,732 and $191,972 in
fiscal years 1995, 1996 and 1997, respectively.
The Company provides postretirement benefits to certain retired employees
in the form of medical and life insurance premiums. The Company recorded
approximately $142,000, $176,000 and $191,000 as selling, general and
administrative expense in fiscal years 1995, 1996 and 1997, respectively.
(11) RELATED PARTY TRANSACTIONS
The Belk Center, Inc. services the Company's customer accounts receivable.
The Company paid The Belk Center, Inc. approximately $1,866,000, $2,012,000 and
$3,072,000 during 1995, 1996 and 1997, respectively, for these services.
Various other selling, general, administrative and transaction processing
services are provided by Belk Stores Services, Inc. (BSS). The Company paid BSS
approximately $3,449,000, $4,002,000 and $3,612,000 during 1995, 1996 and 1997,
respectively, for these services, not including the transaction processing
services. The Company paid approximately $2,109,000, $2,198,000 and $2,305,000
during 1995, 1996 and 1997, respectively for transaction processing fees.
The Company had a demand deposit with an affiliated company at January 31,
1995, February 3, 1996 and February 1, 1997 of $5,509,134, $1,100,000 and
$3,290,000, respectively, which is included in cash and cash equivalents in the
accompanying consolidated balance sheets.
The Company may participate in operational, investing and financing
activities with other Belk companies. Receivables from and payables to
affiliates within the consolidated entity have been eliminated.
(12) FAIR VALUE OF FINANCIAL INSTRUMENTS
For financial instruments which are short-term in nature, such as cash and
cash equivalents, accounts receivable, accounts receivable with affiliates,
accounts payable, accounts payable with affiliates, accrued
F-16
<PAGE> 1711
expenses and lines of credit, carrying values approximate fair values. The fair
value of other financial instruments is as follows:
<TABLE>
<CAPTION>
FEBRUARY 3, 1996 FEBRUARY 1, 1997 NOVEMBER 1, 1997
------------------------- ----------------------- -------------------------
CARRYING FAIR CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE VALUE VALUE
----------- ----------- ---------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Notes payable........ 104,840,000 104,840,000 -- -- -- --
Long-term debt
(excluding
capitalized
leases)............ 55,991,852 57,181,613 74,483,379 75,751,773 69,299,369 71,578,285
Interest rate swap
agreements......... -- -- -- -- -- (923,816)
Fair value of
securities......... 313,588 313,588 455,338 455,388 506,068 506,068
</TABLE>
The fair value of the Company's fixed rate long-term debt and notes payable
is estimated based on the current rates offered to the Company for debt of the
same remaining maturities. The carrying values of the Company's variable rate
long-term debt and note payable are reasonable estimates of fair value.
The fair value of interest rate swap agreements is the estimated amount
that the Company would pay to terminate the swap agreement, taking into account
current credit worthiness of the swap counterparties.
(13) ACQUISITION AND DISCONTINUED OPERATIONS
On November 6, 1995, BAC, Inc. (BAC), a wholly owned subsidiary of the
Company, purchased the stock of Ivey Properties Inc., (IVEY), a real estate
investment trust. The largest holding of Ivey was an interest in JV Properties
(JV), a retail mall joint venture. Prior to fiscal year 1996 Ivey owned 50% of
JV, while the other 50% was owned by the Company. The acquisition was accounted
for as a purchase.
Prior to the purchase, the Company's ownership of JV was accounted for
using the equity method of accounting. Subsequent to the purchase, the Company
has consolidated assets, liabilities and operations of JV, which is comprised of
the operations of a shopping mall facility located in Charlotte, North Carolina.
In November 1996, JV's interest in the shopping mall, along with debt, was
distributed to BAC in redemption of BAC's partnership interest in JV.
Subsequently, the Company sold the stock of BAC to an unrelated third party and
recognized a gain on the disposal of the retail operations totaling $41,466,521,
net of income tax expense of $29,897,000.
The accompanying financial statements present the results of operations of
JV, previously reported as rental operations, as discounted operations. JV
recorded revenues of $11,897,000 for 1997 and $4,111,000 for the three months
ended February 3, 1996, (after purchasing the stock of Ivey).
(14) EXTRAORDINARY ITEM
The extraordinary item of $2,867,000, net of tax, represents a penalty paid
by JV to extinguish its mortgage debt on the SouthPark property during 1996.
This debt was distributed to BAC during 1997 (see note 13).
F-17
<PAGE> 1712
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATIONS ACT
STATE OF NORTH CAROLINA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
A-1
<PAGE> 1713
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares; (ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (iv) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes; (v)
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional shares so created is to be acquired by cash under
G.S. 55-6-04; (vi) changes the corporation into a nonprofit corporation or
cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 1714
SEC.SEC. 55-13-04 TO 55-13-19. Reserved for future codification purposes.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 1715
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 1716
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 1717
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 1718
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
------------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement........ $ 196,795,296 $ 49,798,772 $ 88,450,755 $ 93,106,362 $ 125,681,609
Adjustments to eliminate less than
wholly-owned subsidiaries........ -- -- -- -- --
Less: Leased sales................. (11,746,399) -- -- -- --
------------- ------------ ------------ ------------ -------------
Adjusted Shareholders' Statement... $ 185,048,897 49,798,772 88,450,755 93,106,362 125,681,609
============= ------------ ------------ ------------ -------------
Adjustments for non-operating
items:
Gain/loss on disposal of PP&E.... 60,058 103,044 103,044
Gain/loss on sale of
securities..................... (4,214) (7,230) (7,230)
Impairment loss.................. -- -- --
Equity in earnings of
unconsolidated subsidiaries.... (6,026,112) (10,339,303) (10,339,303)
Gain/loss on discontinued
operations..................... (37,857,535) (64,954,074) (64,954,074)
Adjustment to tax expense........ -- -- -- 29,897,000(3)
------------- ------------ ------------ ------------ -------------
Total non-operating items.......... (43,827,803) (75,197,563) (75,197,563) 29,897,000
------------- ------------ ------------ ------------ -------------
Other Adjustments:
Adjustment for dividends received
from other Belk entities....... (41,162) (70,623) (70,623) --
Adjustment for ownership in other
Belk entities.................. -- -- -- (102,373,402)
------------ ------------ ------------ -------------
Per Model.......................... $ 5,929,807 $ 13,182,569 $ 17,838,176 $ 53,205,207
============ ============ ============ =============
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents........ $ (14,783,850)
Negative cash balances
reclassified to accounts
payable...................... --
Receivables from affiliates,
net.......................... (2,715,623)
Loans receivable from
affiliates, net.............. --
Liabilities
Notes payable.................. 1,000,000
Current installments of
long-term debt............... 9,925,594
Current portion of obligations
under capital leases......... 338,208
Payables to affiliates, net.... 17,460,521
Long-term debt, excluding
current installments......... 67,499,319
Obligations under capital
leases, excluding current
portion...................... 5,742,413
Loans payable to affiliates,
net.......................... --
-------------
Net debt (cash).................... 84,466,582
Adjustments to eliminate less than
wholly-owned subsidiaries........ --
-------------
Per Model.......................... $ 84,466,582
=============
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
(3) Shareholders' equity was adjusted to remove a reserve for deferred tax
liability, relating to the sale of BAC, which will be eliminated in the
reorganization.
B-1
<PAGE> 1719
SUPPLEMENT NO. 40
<PAGE> 1720
BELK BROTHERS COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 12:20 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------
Signature
--------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 40
<PAGE> 1721
BELK ENTERPRISES, INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk Enterprises, Inc. (the "Company"), to be
held on April 16, 1998, at 12:30 p.m., local time, at the offices of Belk Stores
Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $1.00 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 18.4129 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 15,835,660 shares of New Belk Class A Common Stock which
will represent approximately 26.3932% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage paid
(41)
<PAGE> 1722
envelope. If you plan to attend the Special Meeting, you may vote in person if
you wish, even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 1723
BELK ENTERPRISES, INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK ENTERPRISES, INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk Enterprises, Inc. (the "Company") will be held on April 16,
1998, at 12:30 p.m., local time, at the offices of Belk Stores Services, Inc.,
2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for the following
purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $1.00 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 18.4129 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 1724
BELK ENTERPRISES, INC.
SUPPLEMENT NO. 41
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 41 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK ENTERPRISES,
INC. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE DISCUSSION IN THE
PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED HEREIN ASSUMES THAT
ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION. IF ANY ONE OR MORE
BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE INFORMATION
CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 21
SELECTED HISTORICAL FINANCIAL INFORMATION................... 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 23
General................................................... 23
Results of Operations..................................... 23
Comparison of Nine Months Ended November 1, 1997 and
November 2, 1996........................................ 23
Comparison of Fiscal Years Ended February 1, 1997 and
February 3, 1996........................................ 24
Comparison of Fiscal Years Ended February 3, 1996 and
January 31, 1995........................................ 25
Seasonality and Quarterly Fluctuations.................... 25
Liquidity and Capital Resources........................... 26
Impact of Inflation....................................... 26
BUSINESS OF THE COMPANY..................................... 26
SECURITY OWNERSHIP OF THE COMPANY........................... 31
INDEX TO HISTORICAL FINANCIAL STATEMENTS.................... F-1
Report of KPMG Peat Marwick LLP, Independent Auditors..... F-2
Consolidated Balance Sheets............................... F-3
Consolidated Statements of Income......................... F-4
Consolidated Statements of Shareholders' Equity........... F-5
Consolidated Statements of Cash Flows..................... F-6
Notes to Consolidated Financial Statements................ F-7
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION................................... B-1
</TABLE>
<PAGE> 1725
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1947. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 12:30 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $1 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 18.4129 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 1,009,973 shares of Common Stock
outstanding held of record by 146 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 80.9% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 1726
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
New Belk has entered into an agreement dated February 27, 1998 (the
"Hanahan Agreement") with Mary E. S. Hanahan ("Mrs. Hanahan"), who is the owner
of 191 shares of Common Stock of the Company (the "Hanahan Shares"). In the
Hanahan Agreement, Mrs. Hanahan granted to certain employees of BSS her
irrevocable proxy to vote the Hanahan Shares in favor of the Merger, agreed to
withdraw her appeal in certain litigation instituted by Belk of Spartanburg,
S.C., Inc. against Mrs. Hanahan and another party and released New Belk and the
Belk Companies from any and all claims which Mrs. Hanahan has or may have
against New Belk and the Belk Companies. New Belk agreed, among other things, to
purchase from Mrs. Hanahan, at her election at any time prior to December 31,
1999, all of the shares of New Belk Common Stock received by Mrs. Hanahan in
exchange for the Hanahan Shares and Shares in other Belk Companies in the
Reorganization for an aggregate purchase price of $3.85 million.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 1,500,000 shares
of Common Stock.
3
<PAGE> 1727
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock held by a New Belk Stockholder who is a Class A Permitted
Holder will also automatically convert into New Belk Class B Common Stock in the
event that such New Belk Stockholder no longer meets the requirements of a Class
A Permitted Holder. New Belk Class B Common Stock has no conversion rights. The
Company Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the
4
<PAGE> 1728
holders of New Belk Class B Common Stock upon the same terms and conditions
applicable to the conversion of New Belk Class A Common Stock into New Belk
Class B Common Stock and must have the same restrictions on transfer and
ownership applicable to the transfer and ownership of the New Belk Class A
Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. DGCL requires that
an amendment of the certificate of incorporation of a corporation be adopted by
the board of directors and the holders of a majority of the outstanding shares
of stock entitled to vote thereon. The holders of the outstanding shares of a
class are entitled to vote as a separate class on a proposed amendment that
would increase or decrease the aggregate
5
<PAGE> 1729
number of authorized shares of such class, increase or decrease the par value of
the shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the shareholders and approved (i) by a majority
(unless the articles of incorporation, a bylaw adopted by the shareholders or
the board of directors require a greater vote or a vote by voting groups) of the
votes entitled to be cast on the amendment by any voting group with respect to
which the amendment would create dissenters' rights and (ii) when a quorum is
present, by all other voting groups entitled to vote on the amendment through
casting more affirmative than opposing votes. As under the DGCL, the holders of
the outstanding shares of a class or one or more series are entitled to vote as
a separate voting group (if shareholder voting is otherwise required by the
NCBCA) on a proposed amendment if the amendment would change certain fundamental
rights and preferences of that class or series. The Company Articles do not
specify a greater voting requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors as otherwise provided in the articles of incorporation
or a bylaw adopted by the shareholders or the NCBCA and (ii) a bylaw adopted,
amended or repealed by the shareholders may not be readopted, amended or
repealed by the board of directors if neither the articles of incorporation nor
a bylaw adopted by the shareholders authorizes the board of directors to adopt,
amend or repeal that particular bylaw or the bylaws generally. Conferring such
power upon the board of directors of the corporation does not divest the
shareholders of their power, nor limit their power to adopt, amend or repeal the
bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has power, by
vote of a majority of all the directors, and without the assent or vote of the
shareholders, to make, alter, amend and rescind the bylaws of the Company.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
6
<PAGE> 1730
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without prior notice, if all
holders of outstanding shares entitled to vote on such action sign the written
consent(s) describing such action. The Company Bylaws and Company Articles do
not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of
7
<PAGE> 1731
incorporation or bylaws to fix or change the number of directors and if the
shareholders do not have the right to cumulate their votes for directors, the
board may increase or decrease the number of directors by not more than 30%
during any 12-month period. The articles of incorporation or bylaws may
establish a variable range for the size of the board of directors by fixing a
minimum and maximum number of directors. If a variable range is established, the
number of directors may be fixed or changed from time to time, within the
minimum and maximum, by the shareholders or (unless the articles of
incorporation or a shareholders' agreement shall otherwise provide) the board of
directors. After shares are issued, only the shareholders may change the range
for the size of the board or change from a fixed to a variable-range size board
or vice versa. The Company Bylaws require the Company Board to consist of at
least three, but no more than 15, members.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
8
<PAGE> 1732
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the disinterested directors or committee authorized, approved or
ratified the transaction; (ii) the material facts of the transaction and the
director's interest were disclosed or known to the shareholders entitled to vote
and the disinterested shares authorized, approved or ratified the transaction;
or (iii) the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
9
<PAGE> 1733
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any transaction from which the director derived an improper
personal benefit or (iv) acts or omissions occurring prior to the date the
provisions became effective.
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damage for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, the participating shares are reduced by more than 20%.
"Participating shares" are those shares that are entitled to participate without
limitation in distributions. The DGCL and the NCBCA provisions on sales of all
or substantially all of the assets of a corporation other than in the regular
course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which
10
<PAGE> 1734
results in the issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder, except in certain circumstances; (iv)
any transaction involving the corporation which has the effect of increasing the
proportionate share of the stock of any class or series, or securities
convertible into the stock of any class or series, of the corporation which is
owned by the interested stockholder, except in certain circumstances; or (v) any
receipt by the interested stockholder of the benefit of any loans, advances,
guarantees, pledges or other financial benefits (other than those expressly
permitted in (i) through (iv) above) provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) an
affiliate or associate of the corporation who within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a
11
<PAGE> 1735
preemptive right to purchase, subscribe for or otherwise acquire stock of any
class or series of New Belk or any security convertible into or exchangeable
for, or any warrant, option or right to purchase, subscribe for or otherwise
acquire, stock of any class or series of New Belk, whether now or hereafter
authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any final action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
12
<PAGE> 1736
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates must be deposited,
(iii) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the Payment Demand is received, (iv) set a date
by which the Surviving Corporation must receive the Payment Demand, which date
may not be fewer than 30 nor more than 60 days after the date the Dissenters'
Notice is mailed and (v) be accompanied by a copy of Article 13. A Shareholder
who is sent a Dissenters' Notice and who wishes to assert dissenters' rights
must demand payment and deposits his certificates in accordance with the terms
of the Dissenters' Notice. A Shareholder who demands payment and deposit his
certificates in accordance with the terms of the Dissenters' Notice retains all
other rights of a Shareholder until these rights are canceled or modified by the
consummation and effectiveness of the Merger. A Shareholder who does not demand
payments or deposit his certificates in accordance with the terms of the
Dissenters' Notice will not be entitled to payment for his shares under the
NCBCA. If any such holder of Common Stock fails to perfect or shall have
effectively withdrawn or lost such right, each share of such holder's Common
Stock will thereupon be deemed to have been converted into and to have become,
as of the Effective Time, the right to receive, without any interest thereon,
the number of shares of New Belk Class A Common Stock such Shareholder is
otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
13
<PAGE> 1737
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such Shareholder dissents and such
Shareholder's other shares were registered in the names of different
shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
14
<PAGE> 1738
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ------------ ------------ -------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............. $342,793,899 $205,682,737 0.6 $98,164,461 $25,245,181
EBITDA................ 45,678,923 19,493,287 7 98,164,461 38,288,548
EBIT.................. 37,270,794 14,617,893 10 98,164,461 48,014,469
Net Income............ 18,938,851 5,902,041 15 -- 88,530,615
Book Equity........... 145,866,827 8,710,210 1 -- 8,710,210
</TABLE>
15
<PAGE> 1739
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk Department Store
of Ahoskie, N.C.,
Inc. 9.7289% X $ 3,798,793 = $ 369,581
Belk Department
Store, Incorporated
of Aiken, S.C. 26.6667 X 3,110,056 = 829,349
Belk's Department
Store of Albany,
Georgia 1.8611 X 6,361,249 = 118,389
Belk's Department
Store of Albemarle,
N.C., Incorporated 3.8698 X 3,321,651 = 128,541
Gallant-Belk Company .7789 X 31,711,921 = 247,003
Belk of Asheboro,
N.C., Inc. 9.600 X 10,609,421 = 1,018,504
Belk's Department
Store of Asheville,
N.C., Incorporated 18.2564 X 8,096,519 = 1,478,133
Belk of Athens, Ga.,
Inc. .9918 X 14,290,078 = 141,727
Belk of Statesboro,
Ga., Inc. 99.9552 X 13,931,862 = 13,925,621
Belk-Simpson Co., of
Bainbridge, Ga.,
Inc. 16.0000 X 3,606,676 = 577,068
Belk's Department
Store of Batesburg,
S.C., Inc. 2.4540 X 924,996 = 22,699
Belk-Simpson Company,
Incorporated of
Beaufort, S.C. .2381 X 7,226,118 = 17,205
Belk Brothers Company 26.6148 X 262,130,313 = 69,765,459
Belk's Department
Store of Boone,
N.C., Incorporated 28.7879 X 12,985,621 = 3,738,288
Belk's Department
Store of Brevard,
N.C., Incorporated 1.1667 X 3,632,918 = 42,385
Parks-Belk Company,
Incorporated 13.8727 X 12,516,874 = 1,736,428
Belk-Beck Company of
Burlington, N.C.,
Inc. 1.1972 X 13,920,436 = 166,655
Belk's Department
Store of Camden,
S.C., Incorporated .7541 X 11,802,653 = 89,004
Belk's Department
Store of
Cartersville, Ga.,
Incorporated 3.0418% X 3,810,247 = 115,900
</TABLE>
16
<PAGE> 1740
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk Department Store
of Charleston,
S.C., Inc. 19.2991 X 31,169,909 = 6,015,512
Belk-Matthews Company
of Cherryville,
N.C., Incorporated .1343 X 601,119 = 807
Belk's Department
Store of
Chesterfield, S.C.,
Incorporated 6.3350 X 967,437 = 61,287
Parks-Belk Company of
Clarksville, Tenn. 49.2976 X 10,855,465 = 5,351,484
Belk Department Store
of Clinton, N.C.,
Inc. 4.9526 X 11,043,990 = 546,965
Belk's Department
Store of Columbia,
S.C., Incorporated 36.2574 X 2,690,719 = 975,585
Belk's Department
Store of Conway,
S.C., Incorporated 14.3750 X 2,033,804 = 292,359
Belk-Simpson Company
of Corbin, Ky.,
Incorporated 10.4762 X 6,975,250 = 730,741
Belk of Miss., Inc. 22.2111 X 19,360,988 = 4,300,289
Belk of Cornelia,
Ga., Inc. 19.3287 X 4,947,119 = 956,214
Belk of Dalton, Ga.,
Inc. 7.5973 X 8,605,064 = 653,753
Belk of Danville,
Va., Inc. 3.3170 X 16,469,104 = 546,280
Belk of Dawson, Ga.,
Inc. 21.5938 X 862,681 = 186,286
Belk's Department
Store of Dunn,
N.C., Incorporated .9090 X 14,191,195 = 128,998
Belk Department Store
of Eden, N.C., Inc. 13.4745 X 3,010,826 = 405,694
Belk Department Store
of Edenton, N.C.,
Inc. 25.1248 X 1,566,426 = 393,562
Belk Department Store
of Elkin, N.C.,
Inc. 25.2632 X 1,368,240 = 345,661
Belk's Department
Store of Florence,
S.C., Incorporated 25.3510 X 24,968,409 = 6,329,741
Belk Department Store
of Forest City,
N.C., Inc. 9.8433% X 7,237,010 = 712,361
</TABLE>
17
<PAGE> 1741
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Hudson-Belk Co. of
Fuquay-Varina,
N.C., Inc. 4.7184 X 5,660,048 = 267,064
Belk's Department
Store of Gaffney,
S.C., Incorporated 1.2500 X 1,141,654 = 14,271
Matthews-Belk Company 1.4844 X 35,816,031 = 531,653
Belk Department Store
of Greenville,
N.C., Inc. 20.7164 X 25,446,622 = 5,271,624
Belk-Simpson Company,
Greenville, S.C. 20.4420 X 43,580,286 = 8,908,682
Belk Department Store
of Greenwood, S.C.,
Inc. 17.4825 X 8,472,623 = 1,481,226
Belk-Simpson Company
of Harlan, Ky.,
Incorporated 10.5263 X 5,274,830 = 555,244
Belk-Simpson Company
of Hendersonville,
N.C., Incorporated .3125 X 9,384,434 = 29,326
Belk Department Store
of Hickory, N.C.,
Inc. 3.7510 X 26,225,818 = 983,731
Belk-Beck Co. of High
Point, N.C., Inc. .4970 X 6,270,761 = 31,166
Belk's Department
Store of
Jacksonville, N.C.,
Inc. 8.5478 X 29,859,959 = 2,552,369
Belk of LaGrange,
Ga., Inc. 16.2920 X 25,267,594 = 4,116,596
Belk's Department
Store,
Incorporated, of
Lake City, S.C. .8750 X 1,498,527 = 13,112
Belk's Department
Store of Laurens,
S.C., Incorporated .2082 X 4,498,438 = 9,366
Belk of
Lawrenceville, Ga.,
Inc. 21.5815 X 6,024,824 = 1,300,248
Belk's Department
Store of Lenior,
N.C., Incorporated 5.5319 X 6,891,593 = 381,236
Belk-Lindsey Stores,
Inc. 56.1613 X 77,285,261 = 43,404,407
Belk Stores of
Virginia, Inc. 1.2195 X 129,824,509 = 1,583,210
Belk-Matthews Company
of Macon, Ga. 2.400% X 14,496,059 = 347,905
</TABLE>
18
<PAGE> 1742
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk-Matthews Company
of Milledgeville,
Ga., Inc. .5093 X 6,178,663 = 31,468
Belk of Monroe, Ga.,
Inc. 17.2414 X 1,961,637 = 338,214
Belk Brothers of
Monroe, N.C.,
Incorporated 1.3271 X 16,996,814 = 225,565
Belk's Department
Store of Morehead
City, N.C., Inc. 5.2703 X 10,315,936 = 543,681
Belk's Department
Store of Mount
Airy, N.C.,
Incorporated 55.1122 X 3,686,607 = 2,031,770
Belk's Department
Store of New Bern,
N.C., Incorporated 17.1406 X 7,893,728 = 1,353,031
Belk of Orangeburg,
S.C., Inc. 13.8953 X 11,906,703 = 1,654,472
Hudson-Belk Company 11.7731 X 71,085,804 = 8,369,003
Belk Department Store
of Reidsville,
N.C., Inc. 4.8362 X 2,024,233 = 97,896
Belk's Department
Store of
Rockingham, N.C.,
Incorporated 10.1533 X 2,851,585 = 289,530
Belk-Rhodes Company,
Rome, Ga. .4902 X 6,599,184 = 32,349
Belk-Harry Company,
Salisbury, N.C. 1.6162 X 9,875,286 = 159,604
Belk of Seneca, S.C.,
Inc. 9.4697 X 4,287,122 = 405,978
Belk Department Store
of Shelby, N.C.,
Inc. 1.0352 X 13,263,379 = 137,302
Belk of Siler City,
N.C., Inc. 2.8070 X 107,854 = 3,027
Belk of Virginia,
Inc. 40.5956 X 92,754,090 = 37,654,079
Belk of South Boston,
Va., Inc. .3014 X 3,958,842 = 11,932
Belk of Spartanburg,
S.C., Inc. 6.1131 X 10,010,262 = 611,937
Belk Realty of
Staunton, Va., Inc. .1019 X 3,827,783 = 3,901
Belk Department Store
of Stuttgart, Ark.,
Inc. 3.6712 X 2,236,259 = 82,098
Belk of
Lawrenceville, Va.,
Inc. 4.8780% X 10,018,391 = 488,697
Tags Stores, LLC 10.9430 X 15,118,749 = 1,654,445
</TABLE>
19
<PAGE> 1743
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk of Thomaston,
Ga., Inc. 41.5589 X 30,309,289 = 12,596,207
Belk of Thomasville,
N.C., Inc. 8.3140 X 1,980,347 = 164,646
Belk of Thomson, Ga.,
Inc. 30.7918 X 1,433,519 = 441,406
Belk of Toccoa, Ga.,
Inc. 14.2105 X 4,349,985 = 618,155
Belk of Union, S.C.,
Inc. 2.6667 X 901,776 = 24,048
Belk of Washington,
Ga., Inc. 23.1980 X 1,274,815 = 295,732
Belk of Waycross,
Ga., Inc. 1.5025 X 43,828,148 = 658,518
Belk Department Store
of Waynesville,
N.C., Inc. 37.7160 X 6,879,640 = 2,594,725
Belk Department Store
of Wilkesboro,
N.C., Inc. 6.8293 X 3,451,898 = 235,740
Belk of Canton, Ga.,
Inc. 24.6718 X 2,207,655 = 544,668
Belk's Department
Store of Winnsboro,
S.C., Incorporated 4.7619 X 845,995 = 40,285
Howard's Department
Store of Columbia,
S.C., Inc. 6.6667 X 3,010,794 = 200,721
------------
Total $269,292,478
============
Relative Operating Value of Company $ 88,530,615
Relative Operating Value of Other Companies Owned by Company + 269,838,789
------------
Total Relative Value of Company = $358,369,404
============
</TABLE>
20
<PAGE> 1744
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk's Department
Store of Asheville,
North Carolina,
Incorporated .2086% X $358,369,404 = $ 747,559
Belk Brothers Company 9.0466% X 358,369,404 = 32,420,246
Belk Finance Company 4.6265% X 358,369,404 = 16,579,960
Belk Department Store
of Edenton, N.C.,
Inc. .0464% X 358,369,404 = 166,283
Matthews-Belk Company .5481% X 358,369,404 = 1,964,223
Belk Brothers of
Monroe, North
Carolina,
Incorporated .2714% X 358,369,404 = 972,615
Belk-Harry Company --
Salisbury, N.C. .0985% X 358,369,404 = 352,994
------------
Total $ 53,203,880
============
Total Relative Value of Company $358,369,404
Total Relative Value of Company Owned by Other Belk Companies - 53,203,880
------------
Net Relative Value of Company = $305,165,524
============
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$305,165,524 / $1,156,226,577 = 26.3932%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(26.3932% X 59,998,834) / 860,030.75 = 18.4129
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
21
<PAGE> 1745
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share, and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the notes thereto, contained elsewhere in this Prospectus Supplement and
unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS
ENDED FEBRUARY 1, ENDED NOVEMBER 1,
1997 1997
----------------- -----------------
<S> <C> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 18.75 $ 2.19
Dividends(2).............................................. 1.85 1.85
Book value per share(3)................................... 144.43 144.88
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96 0.29
Dividends(2).............................................. 0.26 0.22
Book value per share(5)................................... 12.52 12.65
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 17.68 5.25
Dividends(2).............................................. 4.79 4.09
Book value per share...................................... 230.53 232.87
</TABLE>
- ---------------
(1) Based on 1,009,973 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding during the year ended February 1, 1997
and the nine-month period ended November 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 1,009,973 shares
of Common Stock, the number of shares of Common Stock outstanding at the end
of the periods presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying the New Belk pro forma combined book value per share and New
Belk pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
22
<PAGE> 1746
SELECTED HISTORICAL FINANCIAL INFORMATION
The following selected historical financial information of the Company
presented below under the captions "Selected Statement of Income Data" and
"Selected Balance Sheet Data" for, and as of the end of, each of the years in
the five-year period ended February 1, 1997, are derived from the financial
statements of the Company. The financial statements as of February 1, 1997 and
for the then year ended have been audited by KPMG Peat Marwick LLP, independent
certified public accountants. Such financial statements, and the report thereon,
are included elsewhere in this Prospectus Supplement. The selected data
presented below for, and as of the end of, each of the years in the four-year
period ended February 3, 1996 and for the nine-month periods ended November 2,
1996 and November 1, 1997, and as of November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited data reflects, in the
judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
The information presented below under the caption "Selected Operating Data" is
unaudited.
Selected historical combined and pro forma financial data for the Belk
Companies is included in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
------------------------------------------------------------------------ ---------------------------
FEBRUARY 2, FEBRUARY 1, JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1993 1994 1995 1996 1997 1996 1997
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED STATEMENT OF
INCOME:
Revenues............... $393,351,055 $381,061,032 $374,457,278 $365,006,555 $347,885,356 $236,038,169 $235,450,711
Cost of goods sold..... 271,849,864 266,905,436 257,579,601 250,587,410 238,273,497 162,932,973 160,051,021
Depreciation and
amortization......... 8,802,894 8,983,501 9,561,095 9,379,909 8,408,129 6,146,553 6,243,386
Income from continuing
operations........... 12,032,842 6,076,273 7,449,643 6,873,299 18,938,851 6,989,952 2,215,541
Net income............. 12,032,842 7,223,570 7,449,643 6,873,299 18,938,851 6,989,952 2,215,541
Net income per
share(1)............. 12.02 7.19 7.38 6.81 18.75 6.92 2.19
Dividends per share.... 1.40 1.50 1.60 1.75 1.85 1.85 1.85
Weighted average number
of shares
outstanding.......... 1,001,017 1,004,749 1,009,973 1,009,973 1,009,973 1,009,973 1,009,973
SELECTED BALANCE SHEET
DATA:
Accounts
receivable -- net.... 63,478,548 62,677,622 58,350,729 56,846,153 61,139,946 56,874,347 58,288,599
Merchandise
inventories.......... 83,640,075 82,075,954 79,838,000 76,676,096 76,348,212 90,799,279 87,029,218
Working capital........ 107,125,922 112,872,280 116,371,855 113,553,360 99,993,361 93,136,926 95,240,387
Total assets........... 295,228,542 293,623,805 294,067,315 296,952,445 394,477,868 357,634,982 359,765,459
Short-term debt........ 6,200,010 2,694,726 1,734,726 1,134,726 22,434,726 24,801,309 23,254,726
Long-term debt......... 64,647,946 73,137,614 66,189,746 52,941,718 90,025,838 73,705,494 79,240,270
Capitalized lease
obligations.......... 3,255,333 2,901,973 2,575,307 1,525,453 1,371,408 1,409,920 1,243,177
Shareholders' equity... 108,957,060 117,377,024 123,301,313 128,781,912 145,866,827 133,105,110 146,321,190
Book value per
share(2)............. 108.85 116.22 122.08 127.51 144.43 131.79 144.88
SELECTED OPERATING
DATA:
Number of stores at end
of period............ 47 49 46 46 40 40 38
Comparable store net
revenue increases.... 1.4% 3.7% 2.6% (1.6)% 1.0% 0.5% 2.7%
</TABLE>
- ---------------
(1) Based on the weighted average number of shares of Common Stock outstanding
for each period presented.
(2) Based on the number of shares of Common Stock outstanding at the end of each
period presented.
23
<PAGE> 1747
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is a discussion of the historical consolidated financial
condition and results of operations of the Belk Enterprises, Inc. and
Subsidiaries for each of the fiscal years ended January 31, 1995, February 3,
1996, and February 1, 1997 and for each of the nine-month periods ended November
2, 1996 and November 1, 1997 which should be read in conjunction with the
historical consolidated financial statements, including the notes thereto,
included elsewhere in this Proxy Statement/Prospectus.
GENERAL
Certain Components of Net Income. Revenues include sales from retail
operations and leased departments. Cost of goods sold include cost of
merchandise, buying, and occupancy expense. Selling, general, and administrative
expense ("SG&A") includes payroll, advertising, credit, and depreciation
expense.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship to revenues of certain items in the Company's consolidated
statements of income and other pertinent financial data.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
--------------------------------------- -------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995(A) 1996(A) 1997(A) 1996 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold....................... 68.8 68.7 68.5 69.0 68.0
Selling, general and administrative
expenses............................... 27.1 27.4 26.6 28.9 27.4
Income from operations................... 4.1 4.0 4.3 1.2 4.6
Interest expense, net.................... 1.5 1.4 1.9 1.8 2.6
Income before income taxes............... 2.5 2.8 8.2 7.8 1.7
Income taxes............................. 0.9 1.0 3.1 3.0 0.6
Net income............................... 2.0 1.9 5.4 3.0 0.9
Comparable stores revenues increase
(decrease)............................. 2.6 (1.6) 1.0 0.5 2.7
Number of stores
Opened................................. 1 1 1 1 0
Closed................................. 4 1 5 5 2
Transferred out........................ 0 0 2 2 0
Total -- end of period................... 46 46 40 40 38
</TABLE>
- ---------------
(a) The fiscal years ended February 1, 1997 and January 31, 1995 consisted of 52
weeks. The fiscal year ended February 3, 1996 consisted of 368 days.
COMPARISON OF NINE MONTHS ENDED NOVEMBER 1, 1997 AND NOVEMBER 2, 1996
Revenues. The Company's revenues for the nine months ended November 1,
1997 decreased 0.2%, or $0.6 million, over the same period in 1996 from $236.0
million to $235.4 million. The decrease was attributable to the revenue decrease
associated with the closing of 5 stores which contributed a decrease in revenues
of $8.5 million. This decrease was partially offset by an increase in comparable
store revenues of 2.7%.
Cost of Goods Sold. Cost of goods sold decreased 1.8%, or $2.9 million,
from $162.9 million for the nine months ended November 2, 1996 to $160.0 million
for the nine months ended November 1, 1997 primarily due to decreased revenues.
As a percentage of revenues, cost of goods sold decreased from 69.0% in 1996 to
68.0% in 1997. The closed store at Augusta Regency Mall experienced cost of
goods sold of 94.3%, as a percentage of revenues, in the nine months ended
November 2, 1996. Many of the Florida stores experienced
24
<PAGE> 1748
decreases in cost of merchandise due to better inventory management and lower
markdowns in the nine months ended November 1, 1997.
Selling, General, and Administrative Expenses. SG&A decreased from 28.9%
of revenues for the nine months ended November 2, 1996 to 27.4% of revenues for
the nine months ended November 1, 1997. This decrease, which amounted to $3.7
million, was attributable primarily to decreases in payroll, advertising,
insurance, and supplies related to the closed stores. These decreases were
slightly offset by an increase in bad debt expense.
Income from Operations. Income from operations was 1.2% of revenues for
the nine months ended November 2, 1996 and 4.6% of revenues for the nine months
ended November 1, 1997. The increase, which amounted to $8.1 million, resulted
from a decrease of 1.0% and 1.5% in cost of goods sold and SG&A expense as a
percentage of revenues, respectively.
Interest Expense, Net. Interest expense was 1.8% of revenues for the nine
months ended November 2, 1996 and 2.6% of revenues for the nine months ended
November 1, 1997. Interest expense was $4.3 million for the nine months ended
November 2, 1996 as compared to $6.1 million for the nine months ended November
1, 1997. The $1.8 million increase in interest expense resulted from an increase
in average outstanding borrowings of $39.8 million, offset partially by an
increase in interest income of $0.6 million.
Income before Income Taxes. Income before income taxes decreased $14.4
million from $18.3 million, or 7.8% of revenues for the nine months ended
November 2, 1996, to $3.9 million, or 1.7% of revenues for the nine months ended
November 1, 1997. A gain of $19.2 million on the sale of property and fixtures
of the closed stores in Florida and Georgia was recognized in the nine months
ended November 2, 1996. Management does not anticipate that future sales of
store assets, if any, will result in a gain of this magnitude. In addition,
income before income taxes for the nine months ended November 2, 1996 included
an impairment charge of $2.1 million to adjust certain property and equipment to
net realizable value. Income before income taxes for the nine months ended
November 1, 1997 included an increase in interest expense, net of $1.8 million
and a loss on investment of $1.1 million.
Net Income. Net income decreased $4.8 million to 0.9% of revenues for the
nine months ended November 1, 1997 compared to 3.0% of revenues for the nine
months ended November 2, 1996. This decrease is attributable to the items
discussed above in Income before income taxes, offset partially by a decrease in
the reduction for minority interest in earnings of subsidiaries, of $3.8
million.
COMPARISON OF FISCAL YEARS ENDED FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
Revenues. The Company's revenues in fiscal year 1997 decreased by 4.7%, or
$17.1 million, from $365.0 million in fiscal year 1996 to $347.9 million in
fiscal year 1997. On a comparable store basis, revenues increased 1.0% compared
to the first 52 weeks of fiscal year 1996. Very solid revenue increases were
experienced by recently remodeled stores at Leesburg Lake Square and Gainesville
Oaks Mall. The comparable store increases were offset by decreases related to
the closed stores in Florida and Georgia which contributed a revenue decrease of
$18.2 million.
Cost of Goods Sold. As a percentage of revenues, cost of goods sold
decreased from 68.7% in fiscal year 1996 to 68.5% in fiscal year 1997. Cost of
goods sold decreased 4.9%, or $12.3 million, from $250.6 million in fiscal year
1996 to $238.3 million in fiscal year 1997 primarily due to a decrease in
revenues.
Selling, General, and Administrative Expenses. SG&A decreased from 27.4%
of revenues in fiscal year 1996 to 26.6% of revenues in fiscal year 1997. This
decrease, which amounted to $7.5 million, was attributable primarily to a
decrease in payroll expense of $4.9 million. In addition, decreases in
depreciation and administrative expense were experienced, partially offset by an
increase in bad debts.
Interest Expense, Net. Interest expense, net was 1.4% of revenues in
fiscal year 1996 and 1.9% of revenues in fiscal year 1997. Interest expense was
$5.2 million for fiscal year 1996 as compared to $6.5 million for fiscal year
1997.
25
<PAGE> 1749
Income before Income Taxes. Income before income taxes increased $18.2
million from $10.4 million, or 2.8% of revenues in fiscal year 1996, to $28.6
million, or 8.2% of revenues in fiscal year 1997. This increase is primarily
attributable to the gain of $19.2 million on the sale of property and fixtures
of the closed stores in Florida and Georgia which was recognized in fiscal year
1997.
Net Income. Net income increased $12.1 million to 5.4% of revenues in
fiscal year 1997 compared to 1.9% of revenues in fiscal year 1996. This increase
is primarily attributable to the gain on sale of property and fixtures discussed
above. This gain was partially offset by an increase in interest expense, net of
$1.4 million.
COMPARISON OF FISCAL YEARS ENDED FEBRUARY 3, 1996 AND JANUARY 31, 1995
Revenues. The Company's revenues in fiscal year 1996 decreased by 2.5%, or
$9.5 million, from $374.5 million in fiscal year 1995 to $365.0 million in
fiscal year 1996. Adjusting for the impact of the additional days in fiscal year
1996, comparable store revenues decreased 1.6%. A very solid revenues increase
was experienced by the Wilmington, North Carolina store offset by decreases in
revenues at the Leesburg Lakeland Square and Gainesville, Florida stores.
Significant revenue decreases amounting to $9.2 million were contributed by the
closed stores.
Cost of Goods Sold. As a percentage of revenues, cost of goods sold
decreased slightly from 68.8% in fiscal year 1995 to 68.7% in fiscal year 1996.
Cost of goods sold decreased 2.7%, or $7.0 million, from $257.6 million in
fiscal year 1995 to $250.6 million in fiscal year 1996 primarily due to a
decrease in revenues.
Selling, General, and Administrative Expenses. SG&A increased from 27.1%
of revenues in fiscal year 1995 to 27.4% of revenues in fiscal year 1996.
However, SG&A decreased $1.6 million from fiscal year 1995 to fiscal year 1996.
This decrease was attributable primarily to decreases in payroll and
administrative expense, offset partially by a decrease in finance charge income.
Interest Expense, Net. Interest expense, net was 1.5% of revenues in
fiscal year 1995 and 1.4% of revenues in fiscal year 1996. Interest expense was
$5.5 million for fiscal year 1995 as compared to $5.2 million for fiscal year
1996.
Income before Income Taxes. Income before income taxes was 2.5% of
revenues in fiscal year 1995 as compared to 2.8% of revenues in fiscal year
1996.
Net Income. Net income decreased $0.6 million to 1.9% of revenues in
fiscal year 1996 compared to 2.0% of revenues in fiscal year 1995.
SEASONALITY AND QUARTERLY FLUCTUATIONS
The Company has historically experienced and expects to continue to
experience seasonal fluctuations in its revenues, operating income, and net
income. The highest revenue period for the Company is the fourth quarter which
includes the Christmas selling season. A disproportionate amount of the
Company's revenues and a substantial amount of the Company's operating and net
income are realized during the fourth quarter. If for any reason the Company's
revenues were below seasonal norms during the fourth quarter, the Company's
annual results of operations could be adversely affected. The Company's
inventory levels generally reach their highest in anticipation of increased
revenues during these months,
The following table illustrates the seasonality of revenues by quarter as a
percentage of the full year for the fiscal years indicated.
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
First quarter............................................... 22.5% 22.0% 23.5%
Second quarter.............................................. 21.8 21.8 22.0
Third quarter............................................... 22.6 22.6 22.7
Fourth quarter.............................................. 33.1 33.6 31.8
</TABLE>
The Company's quarterly results of operations could also fluctuate
significantly as a result of a variety of factors, including the timing of new
store openings and remodelings.
26
<PAGE> 1750
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash on hand, cash flow from
operations, and borrowings under credit facilities.
During the nine months ended November 1, 1997, net cash provided by
operations was $3.9 million, compared to net cash used by operations of $10.2
million during the same period in 1996. Such increase in cash provided by
operations was attributable to an increase in net income (excluding the gain on
sale of property and equipment) for the nine months ended November 1, 1997
combined with less additional investment in inventory.
In fiscal year 1997, the Company had sufficient cash flows from operations
and credit facilities to fund its working capital needs, capital expenditures,
and equity purchases. Net cash provided (used) by operations was $18.1 million,
$21.2 million, and $(0.4) million for the 1995, 1996, and 1997 fiscal years,
respectively.
Investing activities included capital expenditures, primarily for new,
relocated and remodeled stores; purchases and sales of equity investments; and
the purchases and sales of property and equipment related to store openings and
closings. During the fiscal year ended February 1, 1997, the Company purchased
stock in affiliated companies from several major stockholders for $54.1 million.
Capital expenditures, primarily for new and remodeled stores, amounted to
$4.0 million in the first nine months of fiscal year 1998 and $9.1 million in
the comparable period in fiscal year 1997. Capital expenditures amounted to $4.2
million, $7.8 million, and $12.7 million for the 1995, 1996, and 1997 fiscal
years, respectively. In fiscal year 1995, four stores were closed and the
Lumberton Outlet opened. In fiscal year 1996, 3 stores were remodeled and a new
regional office was completed; the Orlando Colonial store closed. In fiscal year
1997, the new store at Wilmington Landfall Mall was opened adding 32,976 square
feet and the Gainesville Oaks Mall, Kingston and Goldsboro stores were
remodeled. In addition, in fiscal year 1997, five stores were closed. The
Company operated 46, 46, and 40 department stores, respectively for the 1995,
1996 and 1997 fiscal years. Stores are strategically opened and closed to allow
the Company to focus on its most productive and profitable markets.
Financing activities included payments or additional borrowings on credit
facilities. The Company's total indebtedness at November 1, 1997 was $103.7
million, comprised of $34.4 million of current maturities of long-term debt and
short-term borrowings and $69.3 of long-term debt. Of the $103.7 million of
total indebtedness, $94.2 million was variable rate debt based on LIBOR, $2.1
million was variable rate debt based on the secondary CD rate and $7.4 million
was fixed-rate. The Company has entered into interest rate swap agreements with
various financial institutions to manage the exposure to changes in interest
rates on its LIBOR based indebtedness.
IMPACT OF INFLATION
While it is difficult to determine the precise effects of inflation,
management does not believe inflation had a material impact on the consolidated
financial statements for the periods presented.
BUSINESS OF THE COMPANY
General. The Company operates 17 retail department stores in the following
locations in North Carolina: Southgate Mall in Elizabeth City, Cross Creek Mall,
Eutaw Village Shopping Center, and Tallywood Shopping Center in Fayetteville,
Berkeley Mall in Goldsboro, Dare Center in Kill Devil Hills, Vernon Park Mall in
Kinston, Parkway Plaza in Lexington, Scotland Crossing in Laurinburg, Biggs Park
in Lumberton, Golden East Crossing in Rocky Mount, Pinecrest Plaza in Southern
Pines, Washington Square Mall in Washington, White's Crossing in Whiteville,
Independence Mall and Landfall Shopping Center in Wilmington, and Hanes Mall in
Winston-Salem. The stores in Wilmington are managed out of the Nipper group
office in Summerville, South Carolina. The stores in Winston-Salem and Lexington
are managed out of the Huffstetler group office in Greensboro, North Carolina.
The remaining stores are managed out of the Howard group office in Fayetteville,
North Carolina. The Company's stores operate in a manner consistent
27
<PAGE> 1751
with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The Company also owns and operates the Howard group office
and operates a distribution center in a leased facility in Fayetteville. The
Company also owns 6.8 acres in Fayetteville which it is holding for future
development. The Howard group office provides buying, advertising, accounting,
personnel and other services to the stores in the Howard group area and the
distribution center provides receiving, marking and distribution services to the
stores in the Howard group area. The Company closed its store at Park Hill Mall
in Tarboro, North Carolina in January, 1998.
The Company also has one wholly owned subsidiary, Belk Investment Co. In
addition, the Company owns more than 50% of the capital stock of Belk-Lindsey
Stores, Inc., Belk's Department Store of Mount Airy, North Carolina,
Incorporated, Belk of Statesboro, Ga., Inc., and Parks-Belk Company of
Clarksville, Tennessee. In addition, the Company owns approximately one-third of
the capital stock of Belk Stores Services, Inc.
Belk-Lindsey Stores, Inc., Belk's Department Store of Mount Airy, North
Carolina, Incorporated, Belk of Statesboro, Ga., Inc., and Parks-Belk Company of
Clarksville, Tennessee operate retail stores in a manner consistent with the
business of the Belk Companies described in the Proxy Statement/Prospectus. Belk
Stores Services, Inc. provides various administrative services to the Belk
Companies. The services provided include: accounts payable and payroll services,
merchandise buying, sales promotion, real estate management, store planning,
employee benefits, training, loss prevention, management information services
and legal, tax and accounting services.
Facilities. The Company operates 17 stores, of which 11 are leased under
long term-leases and six are owned by the Company. The leases have termination
dates ranging from 1999 through 2009. The leases for the Southgate Mall store in
Elizabeth City and the Tallywood Shopping Center store expire in 1999. The
Company has options to renew the Southgate Mall lease through 2009. As for the
Tallywood Shopping Center lease, the Company believes that renewal options at
market rates will be available. The floor area of the leased buildings ranges
from 32,000 to 104,000 square feet. The floor area of the owned buildings ranges
from 58,000 to 236,000 square feet. The Company believes the facilities are
adequate to meet its current needs, with the exception of the Cross Creek Mall
store in Fayetteville. The Company's Board has approved a remodeling of the
Cross Creek Mall store for 1998.
The Company also owns an office building in downtown Charlotte that is
leased to the Pennell group. In addition, the Company owns certain parking lots
in downtown Charlotte.
Competition. Specific competitors in the Company's markets include
Dillard, Hecht's, Sears, Penney and Wal-Mart.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
28
<PAGE> 1752
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(f)(g)(h)..................................... 537,397.125 53.2%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(e)(g)(h)(i)........................................... 317,166.5 31.4%
H. W. McKay Belk (Director and Executive Officer)
(b)(e)(g)(h)(j)........................................... 315,337.5 31.2%
John R. Belk (Director and Executive Officer)
(b)(e)(g)(h)(k)........................................... 315,196.5 31.2%
Sarah Belk Gambrell (Director) (f).......................... 171,695.625 17.0%
David Belk Cannon (Director) (o)............................ 26,316.000 2.6%
James K. Glenn, Jr. (Director) (n).......................... 43,793.000 4.3%
W. B. Beery, III (Director)................................. 2,669.000 *
Leroy Robinson (b)(e)....................................... 150,187.500 14.9%
Katherine McKay Belk (b)(e)(m).............................. 171,334.000 17.0%
Katherine Belk Morris (b)(e)(l)............................. 165,902.250 16.4%
Troy M. Howard (Executive Officer).......................... 0 *
Pete Huffstetler (Executive Officer)........................ 0 *
Thomas A. Nipper (Executive Officer)........................ 0 *
Lars Petersen (Executive Officer)........................... 0 *
Bob Webster (Executive Officer)............................. 0 *
Thomas M. Belk, Trustee U/A dated September 15, 1993........ 136,692.5 13.5%
J. V. Properties............................................ 91,368 9.0%
All Directors and Executive Officers as a group (11
persons).................................................. 817,095 80.9%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Leroy Robinson, Katherine McKay Belk and Katherine Belk Morris -- 2801 West
Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk Gambrell -- 300 Cherokee
Road, Charlotte, N.C. 28207; David Belk Cannon -- 1607 W. Floyd Baker Blvd.,
Gaffney, S.C. 29341; James K. Glenn, Jr. -- P. O. Box 2736, Winston-Salem, N.C.
27102; W. B. Beery, III -- 1919 Brookhaven Road, Wilmington, N.C. 28403; Troy M.
Howard -- 4525 Camp Ground Road, Fayetteville, N.C. 28314; Pete
Huffstetler -- 1-104 Carolina Circle Mall, Greensboro, N.C. 27405; Thomas A.
Nipper, Lars Petersen, Bob Webster -- 200 Marymeade Drive, Summerville, S.C.
29483; J.V. Properties and Thomas M. Belk, Trustee U/A dated 1/15/93 -- 2801
West Tyvola Road, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 22,478 shares held by Montgomery Investment Company, of which John
M. Belk is the majority shareholder.
(b) Includes 13,495 shares held by Brothers Investment Company, which
Corporation is equally owned by John M. Belk and the Estate of Thomas M.
Belk. Voting and investment power is shared by John M.
29
<PAGE> 1753
Belk, Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H.
W. McKay Belk, John R. Belk and Leroy Robinson.
(c) Includes 839 shares held by Mary Claudia, Inc. of which John M. Belk is the
majority shareholder.
(d) Includes 356 shares held by Claudia Watkins Belk Grantor Trust dated
2/23/96, and 947.375 shares held by Mary Claudia Belk Irrevocable Trust
dated 1/4/94 and 390 shares held by Claudia W. Belk, Trustee U/A f/b/o Mary
Claudia Belk. Claudia W. Belk, Trustee, is John M. Belk's wife.
(e) Includes 136,692.5 shares held by Thomas M. Belk, Trustee U/A dated
September 15, 1993. Voting and investment power is shared by the Trustees,
who are Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr.,
H. W. McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(f) Includes 12,087 shares held in several Trusts established by the Will of
Mary I. Belk for the benefit of her children. Voting and investment power
of the Trusts for John M. Belk and Thomas M. Belk is shared by John M.
Belk, Sarah Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and
investment power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and
Henderson Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson
Belk, W. H. Belk, Jr. and Irwin Belk.
(g) Includes 2,741 shares held by Belk Brothers of Monroe, North Carolina,
Incorporated, 995 shares held by Belk-Harry Company, 2,107 shares held
Belk's Department Store of Asheville, North Carolina, Incorporated, 469
shares held by Belk Department Store of Edenton, N.C., Inc., 46,726.25
shares held by Belk Finance Company, and 5,536 shares held by Matthews-Belk
Company, which shares are voted by the members of the Executive Committee
of the Board of Directors of each such Corporation, under the authority
given by the directors of each such Corporation at the annual meeting of
directors held in March, 1997. The Executive Committee of each such
Corporation consists of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk.
(h) Includes 91,368 shares held by J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
(i) Includes 3,400 shares held by Thomas M. Belk, Jr. as custodian for his
minor children, and 1,720 shares held as custodian for the minor children
of his brother, H. W. McKay Belk.
(j) Includes 3,145 shares held by H. W. McKay Belk as custodian for his minor
children.
(k) Includes 2,339 shares held by John R. Belk as custodian for his minor
children.
(l) Includes 3,439 shares held by Katherine Belk Morris as custodian for her
minor children.
(m) Includes 4,459 shares held by Katherine M. Belk as custodian for her minor
grandchildren.
(n) Includes 17,448 shares held by James K. Glenn, Jr., Trustee under will of
Daisy Belk Mattox, 4,580 shares held by John Belk Stevens Trust U/W ITEM
III, Section C f/b/o James Kirk Glenn, Jr., et al and 9,161 shares held by
John Belk Stevens Trust U/W ITEM III, Section B f/b/o Mary S. Whelchel, and
9,161 shares held by John Belk Stevens Trust U/W ITEM III, Section A f/b/o
Sara S. Glenn. Voting and investment power is vested in James K. Glenn,
Jr., the Trustee of each Trust.
(o) Includes 8,079 shares held by Residuary Trust U/W Mrs. Henry Belk Cannon.
The Trustees, David Belk Cannon and John C. Daughtridge, have voting and
investment power with respect to such shares.
30
<PAGE> 1754
INDEX TO HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of KPMG Peat Marwick LLP, Independent Auditors....... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Income........................... F-4
Consolidated Statements of Shareholders' Equity............. F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 1755
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
Belk Enterprises, Inc., and Subsidiaries:
We have audited the accompanying consolidated balance sheet of Belk
Enterprises, Inc., and Subsidiaries as of February 1, 1997, and the related
consolidated statements of income, shareholders' equity and cash flows for the
year then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Belk
Enterprises, Inc., and Subsidiaries at February 1, 1997 and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
As discussed in note 1 to the consolidated financial statements, the
Company adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of," during fiscal year 1997.
KPMG Peat Marwick LLP
Charlotte, North Carolina
November 14, 1997
F-2
<PAGE> 1756
BELK ENTERPRISES, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 14,022,137 $ 16,034,982 $ 4,493,635
Accounts receivable, net................................ 56,846,153 61,139,946 58,288,599
Merchandise inventory................................... 76,676,096 76,348,212 87,029,218
Prepaid income taxes.................................... -- -- 2,466,545
Receivables from affiliates............................. 50,593,033 74,168,408 45,027,190
Deferred income taxes................................... 1,238,153 711,366 633,601
Prepaid expenses and other current assets............... 4,307,873 3,334,808 1,912,023
------------ ------------ ------------
Total current assets...................................... 203,683,445 231,737,722 199,850,811
Deferred income taxes..................................... 1,696,535 1,073,543 956,365
Investments in unconsolidated entities.................... 11,588,145 72,371,037 71,887,566
Investments............................................... 12,862,975 22,048,520 21,059,248
Property and equipment, net............................... 64,427,750 64,908,069 62,674,728
Other noncurrent assets................................... 2,693,595 2,338,977 3,336,741
------------ ------------ ------------
Total assets.............................................. $296,952,445 $394,477,868 $359,765,459
============ ============ ============
LIABILITIES, DEFERRED INCOME, MINORITY INTEREST, AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable........................................... $ 1,134,726 $ 22,434,726 $ 23,254,726
Accounts payable........................................ 19,048,090 21,593,689 23,323,995
Accrued expenses........................................ 9,111,617 8,996,880 10,098,578
Payables to affiliates.................................. 49,465,020 63,870,533 36,777,330
Accrued income taxes.................................... 193,560 1,451,800 --
Current installments of long-term debt and capital lease
obligations........................................... 11,177,072 13,396,733 11,155,795
------------ ------------ ------------
Total current liabilities................................. 90,130,085 131,744,361 104,610,424
Long-term debt and capital lease obligations, excluding
current installments.................................... 43,290,099 78,000,513 69,327,652
Deferred compensation..................................... 9,418,636 8,222,186 8,467,266
Other noncurrent liabilities.............................. 1,261,155 1,526,657 1,731,291
------------ ------------ ------------
Total liabilities......................................... 144,099,975 219,493,717 184,136,633
------------ ------------ ------------
Deferred income........................................... 1,123,439 1,395,457 1,245,721
------------ ------------ ------------
Minority interest......................................... 22,947,119 27,721,867 28,061,915
------------ ------------ ------------
Shareholders' equity:
Common stock; $1 par value; authorized 1,500,000 shares;
issued and outstanding 1,009,973 shares............... 1,009,973 1,009,973 1,009,973
Retained earnings....................................... 127,403,385 144,222,644 144,569,735
Net unrealized gains on investments..................... 368,554 634,210 741,482
------------ ------------ ------------
Total shareholders' equity................................ 128,781,912 145,866,827 146,321,190
------------ ------------ ------------
Total liabilities, deferred income, minority interest and
shareholders' equity.................................... $296,952,445 $394,477,868 $359,765,459
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 1757
BELK ENTERPRISES, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
------------------------------------------ ---------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
------------ ------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................... $374,457,278 $365,006,555 $347,885,356 $236,038,169 $235,450,711
Cost of goods sold
(including occupancy and
buying expenses)......... 257,579,601 250,587,410 238,273,497 162,932,973 160,051,021
Selling, general and
administrative
expenses................. 101,620,924 99,977,203 92,460,215 68,184,614 64,456,859
Impairment charges......... -- -- 2,124,660 2,124,660 --
------------ ------------ ------------ ------------ ------------
Income from operations..... 15,256,753 14,441,942 15,026,984 2,795,922 10,942,831
Interest expense, net...... (5,542,153) (5,186,160) (6,546,986) (4,288,188) (6,123,674)
Dividend income............ 499,230 556,615 535,161 529,390 568,963
Gain (loss) on sale of
property and equipment... (539,964) 190,220 19,253,437 19,237,793 10,757
Gain (loss) on sale of
investments.............. -- 86,511 46,447 46,447 (1,890)
Loss on investment......... -- -- -- -- (1,147,267)
Other, net................. (324,147) 302,122 242,203 15,489 (295,751)
------------ ------------ ------------ ------------ ------------
Income before income taxes,
equity in earnings of
unconsolidated entities
and minority interest.... 9,349,719 10,391,250 28,557,246 18,336,853 3,953,969
Income taxes............... 3,220,925 3,471,783 10,953,913 6,973,000 1,399,000
------------ ------------ ------------ ------------ ------------
Income before equity in
earnings of
unconsolidated entities
and minority interest.... 6,128,794 6,919,467 17,603,333 11,363,853 2,554,969
Equity in earnings (loss)
of unconsolidated
entities, net of income
taxes.................... 823,020 271,137 6,736,637 (79,325) 101,716
Deduct (add) minority
interest in earnings
(loss) of subsidiaries... (497,829) 317,305 5,401,119 4,294,576 441,144
------------ ------------ ------------ ------------ ------------
Net income................. $ 7,449,643 $ 6,873,299 $ 18,938,851 $ 6,989,952 $ 2,215,541
============ ============ ============ ============ ============
Earnings per share......... $ 7.38 $ 6.81 $ 18.75 $ 6.92 $ 2.19
============ ============ ============ ============ ============
Weighted average shares.... 1,009,973 1,009,973 1,009,973 1,009,973 1,009,973
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 1758
BELK ENTERPRISES, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
NET
UNREALIZED
COMMON RETAINED GAINS ON
STOCK EARNINGS INVESTMENTS TOTAL
---------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Balance at February 1, 1994 (unaudited)...... $1,009,973 $116,367,052 $ -- $117,377,025
Unrealized gains on investments, net of
income taxes (unaudited)................... -- 257,479 257,479
Cash dividends (unaudited)................... -- (1,615,957) -- (1,615,957)
Net income (unaudited)....................... -- 7,449,643 -- 7,449,643
Other (unaudited)............................ -- (166,877) -- (166,877)
---------- ------------ -------- ------------
Balance at January 31, 1995 (unaudited)...... 1,009,973 122,033,861 257,479 123,301,313
Unrealized gains on investments, net of
income taxes (unaudited)................... -- -- 111,075 111,075
Cash dividends (unaudited)................... -- (1,767,453) -- (1,767,453)
Net income (unaudited)....................... -- 6,873,299 -- 6,873,299
Other (unaudited)............................ -- 263,678 -- 263,678
---------- ------------ -------- ------------
Balance at February 3, 1996.................. 1,009,973 127,403,385 368,554 128,781,912
Unrealized gains on investments, net of
income taxes............................... -- -- 179,352 179,352
Equity in net unrealized gains on investments
held by unconsolidated entities............ -- -- 86,304 86,304
Cash dividends............................... -- (1,868,450) -- (1,868,450)
Net income................................... -- 18,938,851 -- 18,938,851
Other........................................ -- (251,142) -- (251,142)
---------- ------------ -------- ------------
Balance at February 1, 1997.................. 1,009,973 144,222,644 634,210 145,866,827
Unrealized gains on investments, net of
income taxes (unaudited)................... -- -- 98,449 98,449
Equity in net unrealized gains on investments
held by unconsolidated entities
(unaudited)................................ -- -- 8,823 8,823
Cash dividends (unaudited)................... -- (1,868,450) -- (1,868,450)
Net income (unaudited)....................... -- 2,215,541 -- 2,215,541
---------- ------------ -------- ------------
Balance at November 1, 1997 (unaudited)...... $1,009,973 $144,569,735 $741,482 $146,321,190
========== ============ ======== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 1759
BELK ENTERPRISES, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
--------------------------------------- --------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
----------- ----------- ----------- ------------ -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income................................... $ 7,449,643 $ 6,873,299 $18,938,851 $ 6,989,952 $ 2,215,541
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Deferred income taxes........................ (1,149,968) (157,613) 1,149,779 475,000 132,000
Deferred income.............................. -- 220,753 272,018 108,180 (149,736)
Depreciation and amortization................ 9,561,095 9,379,909 8,408,129 6,146,553 6,243,386
Impairment of long-lived assets.............. -- -- 2,124,660 2,124,660 --
Minority interest in consolidated
subsidiaries............................... (497,829) 317,305 5,401,119 4,294,576 441,144
Loss (gain) on sale of property and
equipment.................................. 539,964 (190,220) (19,253,437) (19,237,793) (10,757)
Loss (gain) on sale of investments........... -- (86,511) (46,447) (46,447) 1,890
Loss on investment........................... -- -- -- -- 1,147,267
Equity in (earnings) loss of unconsolidated
entities, net of income taxes.............. (823,020) (271,137) (6,736,637) 79,325 (101,716)
(Increase) decrease in:
Accounts receivable, net................... 4,327,507 1,504,576 (4,580,572) (314,973) 2,851,347
Merchandise inventory...................... 2,237,954 3,161,904 (267,455) (14,718,522) (10,681,006)
Receivables from affiliates................ (7,639,591) (12,196,641) (23,575,375) (3,663,915) 29,141,218
Prepaid income taxes....................... -- -- -- (668,479) (2,466,545)
Prepaid expenses and other assets.......... 802,432 1,044,073 1,308,563 656,977 425,021
Increase (decrease) in:
Accounts payable and accrued expenses...... (166,144) (505,071) 2,557,828 3,611,923 2,832,004
Payables to affiliates..................... 2,595,718 10,735,939 13,580,394 5,021,907 (27,093,203)
Accrued income taxes....................... (227,434) (133,272) 1,258,240 (193,560) (1,451,800)
Deferred compensation and other
liabilities.............................. 1,112,568 1,492,281 (930,194) (879,801) 449,714
----------- ----------- ----------- ------------ -----------
Net cash provided (used) by operating
activities................................... 18,122,895 21,189,574 (390,536) (10,214,437) 3,925,769
----------- ----------- ----------- ------------ -----------
Cash flows from investing activities:
Dividends received from unconsolidated
entities................................... 45,329 79,354 207,756 207,756 530,950
Purchases of investments..................... (494,834) (211,359) (54,064,398) (33,785,074) (38,036)
Purchases of property and equipment.......... (4,234,732) (7,755,066) (12,658,218) (9,063,727) (4,025,369)
Proceeds from sale of property and
equipment.................................. 693,690 110,161 20,577,821 20,228,937 26,081
Proceeds from sale of investments............ -- 283,884 200,939 200,939 1,507
----------- ----------- ----------- ------------ -----------
Net cash provided (used) by investing
activities................................... (3,990,547) (7,493,026) (45,736,100) (22,211,169) (3,504,867)
----------- ----------- ----------- ------------ -----------
Cash flows from financing activities:
Net proceeds from (payments on) lines of
credit..................................... (960,000) (600,000) 21,300,000 18,049,999 820,000
Proceeds from issuance of long-term debt..... 6,000,000 -- 73,050,000 62,100,000 --
Principal payments on long-term debt and
capital lease obligations.................. (13,274,534) (13,468,913) (44,342,069) (49,673,901) (10,913,799)
Dividends paid............................... (1,615,957) (1,767,453) (1,868,450) (1,868,450) (1,868,450)
----------- ----------- ----------- ------------ -----------
Net cash provided (used) by financing
activities................................... (9,850,491) (15,836,366) 48,139,481 28,607,648 (11,962,249)
----------- ----------- ----------- ------------ -----------
Net increase (decrease) in cash and cash
equivalents.................................. 4,281,857 (2,139,818) 2,012,845 (3,817,958) (11,541,347)
Cash and cash equivalents at beginning of
period....................................... 11,880,098 16,161,955 14,022,137 14,022,137 16,034,982
----------- ----------- ----------- ------------ -----------
Cash and cash equivalents at end of period..... $16,161,955 $14,022,137 $16,034,982 $ 10,204,179 $ 4,493,635
=========== =========== =========== ============ ===========
Supplemental disclosures of cash flow
information:
Interest paid.................................. $ 7,797,182 $ 7,933,279 $ 5,685,765 $ 2,862,813 $ 6,380,474
Income taxes paid.............................. 5,251,412 4,770,515 9,478,180 7,076,480 5,123,850
Supplemental schedule of noncash investing and
financing activities:
Increase in investments in unconsolidated
entities and long-term debt.................. -- -- $ 8,222,144 $ 13,838,728 --
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 1760
BELK ENTERPRISES, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The consolidated financial statements of Belk Enterprises, Inc. and
Subsidiaries, (hereafter referred to as "the Company") include the following
majority owned subsidiaries:
Belk of Statesboro, Ga., Inc. and Subsidiary
Belk's Department Store of Mount Airy, North Carolina, Incorporated
Belk-Lindsey Stores, Inc.
Parks-Belk Company of Clarksville, Tennessee
Belk Investment Company
All significant intercompany accounts and transactions have been eliminated
in consolidation.
The Company operates retail department stores in North Carolina, Florida,
Georgia, Tennessee, and South Carolina.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR
Starting in fiscal year 1996, the Company's fiscal year ends on the
Saturday closest to each January 31. Fiscal years 1996 and 1997 ended on
February 3, 1996 and February 1, 1997 and included 368 and 365 days,
respectively. Fiscal year 1995 ended on Tuesday, January 31, 1995 and included
364 days.
UNAUDITED FINANCIAL STATEMENTS
The consolidated financial statements as of February 3, 1996 and for the
years ended January 31, 1995 and February 3, 1996 and as of and for the periods
ended November 2, 1996 and November 1, 1997 are unaudited. In the opinion of
management, such consolidated financial statements reflect all adjustments
necessary to present fairly the Company's financial position and results of
operations and cash flows, but the consolidated financial statements for the
interim periods ended November 2, 1996 and November 1, 1997 are not necessarily
indicative of the results of operations for a full fiscal year.
REVENUES
Revenues include sales from retail operations and leased departments, net
of returns.
COSTS OF GOODS SOLD
Cost of goods sold includes occupancy and buying expenses. Occupancy
expenses include rent, utilities and real estate taxes. Buying expenses include
the payroll and travel expenses associated with the buying function.
MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market as
determined by the retail inventory method.
FINANCE CHARGES
Selling, general and administrative expenses in the consolidated statements
of income are reduced by finance charge revenue arising from customer accounts
receivable. Finance charge revenue amounted to approximately $7,920,000,
$7,087,000 and $7,667,000 in fiscal years 1995, 1996 and 1997, respectively.
F-7
<PAGE> 1761
BELK ENTERPRISES, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY AND EQUIPMENT, NET
Property and equipment owned by the Company is stated at cost less
accumulated depreciation. Property and equipment leased by the Company under
capital leases is stated at an amount equal to the present value of the minimum
lease payments less accumulated amortization. Depreciation and amortization are
provided utilizing straight-line and various accelerated methods over the
shorter of estimated asset lives or related lease terms.
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred income tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement bases
and the respective tax bases of the assets and liabilities and operating loss
and tax credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized.
PRE-OPENING COSTS
Store pre-opening costs are expensed as incurred.
CASH EQUIVALENTS
Cash equivalents include liquid investments with an original maturity of 90
days or less.
ADVERTISING
Advertising costs are expensed as incurred and amounted to $11,732,086,
$11,654,668 and $11,562,024 in fiscal years 1995, 1996 and 1997, respectively.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company utilizes various derivative financial instruments (interest
rate swap agreements) to manage the interest rate risk associated with its
borrowings. The counterparties to these instruments are major financial
institutions. These agreements are used to reduce the potential impact of
increases in interest rates on variable rate long-term debt. The differential to
be paid or received is accrued as interest rates change and is recognized as an
adjustment to interest expense. The fair values of the swap agreements are not
recognized in the consolidated financial statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF
The Company adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
during the first quarter of fiscal year 1997. This
F-8
<PAGE> 1762
BELK ENTERPRISES, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Statement requires that long-lived assets and certain identifiable intangibles
be reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
any asset to future net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.
(3) ACCOUNTS RECEIVABLE, NET
Customer receivables arise primarily under open-end revolving credit
accounts used to finance purchases of merchandise from the Company. These
accounts have various billing and payment structures, including varying minimum
payment levels and finance charge rates. Installments of deferred payment
accounts receivable maturing after one year are included in current assets in
accordance with industry practice.
The Company provides an allowance for doubtful accounts which is determined
based on a number of factors, including the risk characteristics of the
portfolio, historical charge-off patterns and management judgment.
Accounts receivable, net consists of:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
------------ ------------ -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Customer receivables............................ $56,926,594 $61,602,187 $59,273,044
Other........................................... 1,346,740 1,131,187 998,766
Less allowance for doubtful accounts............ (1,427,181) (1,593,428) (1,983,211)
----------- ----------- -----------
Accounts receivable, net........................ $56,846,153 $61,139,946 $58,288,599
=========== =========== ===========
</TABLE>
Changes in allowance for doubtful accounts are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
--------------------------------------- -------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance, beginning of
period..................... $1,533,720 $1,487,501 $1,427,181 $1,427,181 $1,593,428
Charged to expense........... 1,576,301 1,479,075 2,275,345 1,480,757 2,310,889
Net uncollectible balances
written off................ (1,622,520) (1,539,395) (2,109,098) (1,485,857) (1,921,106)
---------- ---------- ---------- ---------- ----------
Balance, end of period....... $1,487,501 $1,427,181 $1,593,428 $1,422,081 $1,983,211
========== ========== ========== ========== ==========
</TABLE>
(4) INVESTMENTS IN UNCONSOLIDATED ENTITIES
The Company's investments in the following unconsolidated entities include
the unamortized excess of the Company's investment over its equity in the
investments' net assets, if applicable. The excess was $548,000 at February 1,
1997, and is being amortized on a straight-line basis over a period of 15 years.
F-9
<PAGE> 1763
BELK ENTERPRISES, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The investments in unconsolidated entities and percentage owned are:
<TABLE>
<S> <C>
Belk's Department Store, Incorporated of Aiken, South
Carolina.................................................. 26.7%
Belk's Department Store of Boone, North Carolina,
Incorporated.............................................. 28.8
Belk Brothers Company and Subsidiaries...................... 26.6
Belk's Department Store of Columbia, South Carolina,
Incorporated.............................................. 36.3
Belk of Miss., Inc.......................................... 22.2
Belk of Dawson, Ga., Inc.................................... 21.6
Belk Department Store of Eden, N.C., Inc.................... 22.8
Belk Department Store of Edenton, N.C., Inc................. 25.1
Belk Department Store of Elkin, N.C., Inc................... 25.3
Belk's Department Store of Florence, S.C., Incorporated..... 25.4
Belk Department Store of Greenville, N.C., Inc.............. 20.7
Belk of Lawrenceville, Ga., Inc............................. 21.6
Belk of Virginia, Inc. and Subsidiaries..................... 40.6
Belk of Thomaston, Ga., Inc. and Subsidiary................. 41.6
Belk of Thomasville, N.C., Inc.............................. 28.3
Belk of Thomson, Ga., Inc................................... 30.8
Belk of Washington, Ga., Inc................................ 23.2
Belk Department Store of Waynesville, N.C., Inc............. 37.7
Belk of Canton, Ga., Inc.................................... 24.7
</TABLE>
Condensed combined financial information of the unconsolidated entities is
as follows:
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Current assets............................... $157,927,992 $155,905,182 $266,587,263
Noncurrent assets............................ 139,666,899 233,295,082 313,645,412
Current liabilities.......................... 52,491,215 149,054,703 191,313,687
Noncurrent liabilities....................... 94,742,451 82,901,207 141,466,865
Shareholders' equity ........................ 150,361,225 157,244,354 247,452,123
Revenues..................................... 373,189,328 367,937,180 682,269,208
Net income................................... 10,257,625 9,119,486 57,579,336
</TABLE>
(5) INVESTMENTS
In accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Investments in Debt and Equity Securities," the Company
classifies all equity securities with a readily determinable market value as
available-for-sale securities.
Details of the equity investments in available-for-sale securities are as
follows:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cost................................................. $ 6,117 $ 6,117 $ 6,117
Gross unrealized gains............................... 605,695 900,269 1,061,661
-------- -------- ----------
Fair value of securities............................. $611,812 $906,386 $1,067,778
======== ======== ==========
</TABLE>
Gains and losses on sales of securities are recognized when realized on a
specific identification basis. Gross realized gains (losses) included in income
at February 3, 1996, February 1, 1997 and November 1, 1997 were $86,511, $46,447
and $(1,890), respectively.
F-10
<PAGE> 1764
BELK ENTERPRISES, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values are recorded at original cost
when ownership is less than 20%. Any such investments owned 20% or more but not
greater than 50% are accounted for on the equity method of accounting.
Investments that were previously accounted for on the cost method may become
qualified for use of the equity method. The carrying amount of those investments
are adjusted to reflect the investor's share of the income, losses and dividends
received from the investees.
The Company owns 10.9% of TAGS Stores, LLC (TAGS) and, accordingly,
accounts for its investment in TAGS on a cost basis. In September 1997, the
managers and the advisory board of TAGS adopted a formal plan to liquidate its
operation during the 1997 Christmas retailing season. During the nine months
ended November 1, 1997 the Company reduced its investment in TAGS by $1,147,267
to the estimated net realizable value of its investment.
(6) PROPERTY AND EQUIPMENT, NET
Details of property and equipment are as follows:
<TABLE>
<CAPTION>
ESTIMATED FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
LIVES 1996 1997 1997
--------- ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Land................................ N/A $ 3,439,192 $ 3,375,261 $ 3,375,261
Buildings........................... 30-50 74,637,761 73,390,279 75,055,702
Furniture, fixtures and equipment... 5-7 61,865,269 63,582,415 65,015,017
Construction in progress............ N/A 1,915,052 1,021,061 1,423,749
------------ ------------ ------------
141,857,274 141,369,016 144,869,729
Less accumulated depreciation and
amortization...................... (77,429,524) (76,460,947) (82,195,001)
------------ ------------ ------------
Property and equipment, net......... $ 64,427,750 $ 64,908,069 $ 62,674,728
============ ============ ============
</TABLE>
(7) ACCRUED EXPENSES
Accrued expenses are comprised of the following:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Salaries, wages and employee benefits............. $4,303,864 $3,517,555 $ 2,613,753
Interest.......................................... 285,609 1,969,875 1,713,075
Rent.............................................. 1,052,716 1,026,864 981,339
Taxes, other than income.......................... 997,580 621,500 1,267,218
Other............................................. 2,471,848 1,861,086 3,523,193
---------- ---------- -----------
$9,111,617 $8,996,880 $10,098,578
========== ========== ===========
</TABLE>
F-11
<PAGE> 1765
BELK ENTERPRISES, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(8) BORROWINGS
Long-term debt, principally due to banks, and capital lease obligations
consist of the following:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
7.5% unsecured notes payable in installments,
through March 2000......................... $ -- $ 8,222,144 $ 6,166,608
Variable rate unsecured term loan payable in
installments through October 2003; interest
payable at 125 basis points above LIBOR
(5.65% at November 1, 1997)................ -- 76,600,000 68,976,640
Unsecured term loan agreement with a related
party, payable in installments through
2006, (interest payable at 100 basis points
above secondary market 30 day CD rate)..... -- 2,147,022 2,147,022
Unsecured term loan agreements, (interest
payable at 50 basis points above LIBOR).... 52,941,718 3,056,672 -
Unsecured term loan agreement due 2002
(interest payable at 80 basis points above
LIBOR)..................................... -- - 1,950,000
Capital lease obligations.................... 1,525,453 1,371,408 1,243,177
------------ ------------ ------------
54,467,171 91,397,246 80,483,447
Less current installments.................... (11,177,072) (13,396,733) (11,155,795)
------------ ------------ ------------
Long-term debt and capital lease obligations,
excluding current installments............. $ 43,290,099 $ 78,000,513 $ 69,327,652
============ ============ ============
</TABLE>
The annual maturities of long-term debt and capital lease obligations over
the next five years as of February 1, 1997 are $13,396,733, $11,158,852,
$12,054,808, $12,427,856 and $12,748,011.
The Company's term loan agreements contain, among other provisions and
covenants, restrictions relating to the creation of additional funded debt,
except as permitted, and the disposal, expansion or purchase of fixed assets,
except as permitted. In addition, the Company must maintain at the end of any
fiscal year a maximum ratio of consolidated debt to consolidated total tangible
capital, as defined and a minimum consolidated tangible net worth, as defined.
The Company must also maintain at the end of each fiscal quarter, a minimum
fixed charge coverage ratio, as defined. The Company was in compliance with the
provisions and covenants of the term loan agreements as of February 1, 1997.
The covenants also include a restriction on dividend payments. The Company
can only declare dividends from operating profits from the preceding fiscal
year. At February 1, 1997, the Company had $125,283,793 of retained earnings
unavailable for dividend payments.
The Company is a guarantor on two term loan agreements with a bank for two
other companies in the Belk organization totaling approximately $149 million as
of February 1, 1997.
The Company has entered into an interest rate swap agreement with a
financial institution to manage the exposure to changes in interest rates on its
LIBOR based indebtedness. The amount of indebtedness covered by the interest
rate swap is $25 million through April 1999.
At February 1, 1997, the Company has unsecured line of credit agreements
totaling $51,150,000 with banks at interest rates quoted by the banks (which
historically have been approximately 80 basis points above LIBOR). Amounts
outstanding at February 3, 1996, February 1, 1997 and November 1, 1997 were
$1,000,000, $22,300,000, and $23,120,000, respectively.
F-12
<PAGE> 1766
BELK ENTERPRISES, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(9) LEASES
The Company leases certain of its stores, warehouse facilities and
equipment. The majority of these leases will expire over the next 10 years. The
leases usually contain renewal options and provide for payment by the lessee of
real estate and other expenses and, in certain instances, increased rentals
based on percentages of sales.
Future minimum lease payments under noncancelable leases as of February 1,
1997 were as follows:
<TABLE>
<CAPTION>
FISCAL YEAR CAPITAL OPERATING
- ----------- ---------- -----------
<S> <C> <C>
1998........................................................ $ 304,408 $ 3,950,619
1999........................................................ 304,408 3,707,902
2000........................................................ 304,408 3,418,559
2001........................................................ 304,408 3,208,955
2002........................................................ 304,408 3,163,710
After 2002.................................................. 304,408 19,676,164
---------- -----------
Total....................................................... 1,826,448 $37,125,909
===========
Less imputed interest....................................... (455,040)
----------
Present value of minimum lease payments..................... 1,371,408
Less current portion........................................ (170,975)
----------
Obligation under capital lease, excluding current portion... $1,200,433
==========
</TABLE>
Rental expense for all operating leases consists of the following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Buildings:
Minimum rentals.................................. $4,625,436 $4,211,578 $4,329,000
Contingent rentals............................... 507,152 770,559 824,626
Equipment.......................................... 474,766 469,708 349,438
---------- ---------- ----------
Total rental expense............................... $5,607,354 $5,451,845 $5,503,064
========== ========== ==========
</TABLE>
Contingent rentals are determined on the basis of a percentage of sales in
excess of stipulated minimums for certain store facilities.
F-13
<PAGE> 1767
BELK ENTERPRISES, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(10) INCOME TAXES
Federal and state income tax expense (benefit) was as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
--------------------------------------- -------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
Federal................... $3,276,493 $2,840,677 $ 8,288,942 $5,603,000 $1,073,000
State..................... 1,094,400 788,719 1,515,192 895,000 194,000
---------- ---------- ----------- ---------- ----------
4,370,893 3,629,396 9,804,134 6,498,000 1,267,000
Deferred:
Federal................... (986,351) (52,619) 821,277 302,000 93,000
State..................... (163,617) (104,994) 328,502 173,000 39,000
---------- ---------- ----------- ---------- ----------
(1,149,968) (157,613) 1,149,779 475,000 132,000
---------- ---------- ----------- ---------- ----------
Income taxes................ $3,220,925 $3,471,783 $10,953,913 $6,973,000 $1,399,000
========== ========== =========== ========== ==========
</TABLE>
A reconciliation between income taxes computed using the effective income
tax rate and the federal statutory income tax rate of 34% is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Income tax at the statutory federal rate.......... $3,178,904 $3,533,025 $ 9,995,036
State income taxes, net of federal income tax
benefit......................................... 614,317 451,259 1,198,401
Other............................................. (572,296) (512,501) (239,524)
---------- ---------- -----------
Income taxes...................................... $3,220,925 $3,471,783 $10,953,913
========== ========== ===========
</TABLE>
F-14
<PAGE> 1768
BELK ENTERPRISES, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred taxes based upon differences between the financial statement and
tax bases of assets and liabilities and available tax carryforwards consists of:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
(UNAUDITED)
<S> <C> <C>
Deferred tax assets:
Benefit plan costs........................................ $3,895,481 $3,564,877
Tax carryovers............................................ 1,573,989 833,262
Inventory capitalization.................................. 666,711 696,692
Allowance for doubtful accounts........................... 533,710 606,693
Developer incentives...................................... 276,955 400,718
Capital leases............................................ 354,871 328,212
---------- ----------
Gross deferred tax assets................................... 7,301,717 6,430,454
Less valuation allowance.................................... (812,413) (783,121)
---------- ----------
Net deferred tax assets..................................... 6,489,304 5,647,333
Deferred tax liabilities:
Property and equipment.................................... 2,819,936 2,492,431
Prepaid pension costs..................................... 497,736 355,822
Investment securities..................................... 236,944 352,163
Other..................................................... -- 662,008
---------- ----------
Gross deferred tax liabilities.............................. 3,554,616 3,862,424
---------- ----------
Net deferred tax assets..................................... $2,934,688 $1,784,909
========== ==========
</TABLE>
The change in the valuation allowance was an increase (decrease) of $18,501
and $(29,292) in the years ended February 3, 1996 and February 1, 1997,
respectively. In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the temporary differences becoming deductible.
Management considers the scheduled reversal of deferred tax liabilities,
projected future taxable income, and tax planning strategies in making this
assessment.
At February 1, 1997, the Company has gross operating loss carryforwards for
state income tax purposes of $13,556,000, offset by a gross valuation allowance
of $13,052,000, which are available to offset future state taxable income, if
any, through 2011. In addition, the Company has alternative minimum tax credit
carry forwards of $25,000 which are available to reduce future federal regular
income taxes, if any, over an indefinite period.
(11) BENEFIT PLANS
The Company participates in the Belk Pension Plan, a defined benefit
multi-employer plan that covers substantially all of the employees of the Belk
companies. Pension expense allocated to the Company was $367,667, $443,563 and
$408,095 for fiscal years 1995, 1996 and 1997, respectively. Because the Belk
Pension Plan is a multi-employer plan, allocation of plan assets to the Company
is not practical.
The Company also participates in the Belk Employees' Group Medical Plan
that provides medical benefits to substantially all employees of the Belk
companies. This Plan is "self-funded" for medical benefits through a 501(c)(9)
Trust. The Company participates in the Group Life Insurance Plan that provides
life insurance to its employees, and is fully insured through a contract issued
by an insurance company. Contributions by the Company under the Belk Employees'
Group Medical Plan and the Group Life Insurance Plan amounted to approximately
$2,635,000, $2,597,000 and $2,608,000 in fiscal years 1995, 1996 and 1997,
respectively.
F-15
<PAGE> 1769
BELK ENTERPRISES, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company participates in the Belk Profit Sharing Plan, a contributory,
defined contribution multi-employer plan that provides benefits for
substantially all employees of the Belk companies. The costs of the plan
generally represent 10% of profits, as defined, and amounted to $1,566,017,
$1,252,218 and $1,319,964 in fiscal years 1995, 1996 and 1997, respectively.
The Company participates in the Supplemental Executive Retirement Plan
(SERP), a non-qualified defined benefit retirement plan that provides retirement
and death benefits to certain qualified executives of the Company. Total SERP
costs charged to operations were $642,722, $752,403 and $335,225, in fiscal
years 1995, 1996 and 1997, respectively. The effective discount rate used in
determining the net periodic SERP cost was 8.5% for fiscal years 1995 and 1996,
and 7.25% for fiscal year 1997. Actuarial gains and losses are amortized over
the average remaining service lives of the participants.
Certain eligible employees also participate in a non-qualified Deferred
Compensation Plan (DCP). Participants in the plan have elected to defer a
portion of their regular compensation subject to certain limitations prescribed
by the DCP. The Company is required to pay interest on the employees' deferred
compensation at various rates between 9% and 15%. Total interest expense related
to this plan and charged to operations was $651,958, $715,697 and $630,010, in
fiscal years 1995, 1996 and 1997, respectively.
The Company provides postretirement benefits to certain retired employees
in the form of medical and life insurance premiums. The Company recorded
approximately $372,000, $358,000 and $342,000 as selling, general and
administrative expense in fiscal years 1995, 1996 and 1997, respectively.
(12) RELATED PARTY TRANSACTIONS
The Belk Center, Inc. services the Company's customer accounts receivable.
The Company paid The Belk Center, Inc. approximately $3,939,000, $4,136,000 and
$4,075,000 during 1995, 1996 and 1997, respectively, for these services.
Various other selling, general, administrative and transaction processing
services are provided by Belk Store Services, Inc. ("BSS"). The Company paid BSS
approximately $7,242,000, $7,904,000 and $6,482,000 during 1995, 1996 and 1997,
respectively, for these services, not including transaction processing services.
The Company paid approximately $4,698,000, $4,973,000 and $5,118,000 during
1995, 1996 and 1997, respectively, for transaction processing fees.
The Company had a demand deposit with an affiliated company at January 31,
1995, February 3, 1996 and February 1, 1997 of $9,100,000, $9,193,267 and
$6,122,703, respectively, which is included in cash and cash equivalents in the
accompanying consolidated balance sheets.
The Company may participate in operational, investing and financing
activities with other Belk companies. Receivables from and payables to
affiliates within the consolidated entity have been eliminated.
(13) FAIR VALUE OF FINANCIAL INSTRUMENTS
For financial instruments which are short-term in nature, such as cash and
cash equivalents, accounts receivable, receivables from affiliates, accounts
payable, payables to affiliates, accrued expenses and lines of credit, carrying
values approximate fair values.
The carrying values of the Company's fixed and variable rate long-term debt
and notes payable are reasonable estimates of fair value.
The fair value of interest rate swap agreements is the estimated amount
that the Company would pay to terminate the swap agreement, taking into account
current credit worthiness of the swap counterparties. The fair value of these
agreements was ($1,647,527) at November 1, 1997. The interest rate swap
agreements have no carrying value.
F-16
<PAGE> 1770
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
A-1
<PAGE> 1771
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares; (ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (iv) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes; (v)
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional shares so created is to be acquired by cash under
G.S. 55-6-04; (vi) changes the corporation into a nonprofit corporation or
cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 1772
SEC.SEC. 55-13-04 TO 55-13-19. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 1773
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 1774
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 1775
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 1776
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
------------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement......... $ 347,885,356 $ 18,938,851 $ 37,270,794 $ 45,678,923 $145,866,827
Adjustments to eliminate less than
wholly-owned subsidiaries......... (137,111,162) (12,313,084) (21,523,198) (25,055,933) (44,240,353)
Less: Leased sales.................. (5,091,457) -- -- -- --
------------- ------------ ------------ ------------ ------------
Adjusted Shareholders' Statement.... $ 205,682,737 6,625,767 15,747,596 20,622,990 101,626,474
============= ------------ ------------ ------------ ------------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E..... (213,405) (333,116) (333,116)
Gain/loss on sale of securities... (29,756) (46,448) (46,448)
Impairment loss................... -- -- --
Equity in earnings of
unconsolidated subsidiaries..... -- -- --
Gain/loss on discontinued
operations...................... -- -- --
Adjustment to tax expense......... -- -- --
------------ ------------ ------------
Total non-operating items........... (243,161) (379,564) (379,564)
------------ ------------ ------------
Other Adjustments:
Adjustment for dividends received
from other Belk entities........ (480,565) (750,139) (750,139) --
Adjustment for ownership in other
Belk entities................... -- -- -- (92,916,264)
------------ ------------ ------------ ------------
Per Model........................... $ 5,902,041 $ 14,617,893 $ 19,493,287 $ 8,710,210
============ ============ ============ ============
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents......... $ (16,034,980)
Negative cash balances
reclassified to accounts
payable....................... --
Receivables from affiliates,
net........................... --
Loans receivable from
affiliates, net............... (27,991,442)
Liabilities
Notes payable................... 24,490,262
Current installments of
long-term debt................ 11,131,672
Current portion of obligations
under capital leases.......... 170,975
Payables to affiliates, net..... 19,442,192
Long-term debt, excluding
current installments.......... 74,691,608
Obligations under capital
leases, excluding current
portion....................... 1,200,433
Loans payable to affiliates,
net........................... --
-------------
Net debt (cash)..................... 87,100,720
Adjustments to eliminate less than
wholly-owned subsidiaries......... 11,063,741
-------------
Per Model........................... $ 98,164,461
=============
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 1777
SUPPLEMENT NO. 41
<PAGE> 1778
BELK ENTERPRISES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 12:30 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
-------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 41
<PAGE> 1779
BELK-MATTHEWS COMPANY OF CHERRYVILLE, N.C., INCORPORATED
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk-Matthews Company of Cherryville, N.C.,
Incorporated (the "Company"), to be held on April 15, 1998, at 12:00 p.m., local
time, at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road,
Charlotte, North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 27.9259 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 24,686 shares of New Belk Class A Common Stock which
will represent approximately 0.0411% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(42)
<PAGE> 1780
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 1781
BELK-MATTHEWS COMPANY OF CHERRYVILLE, N.C., INCORPORATED
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK-MATTHEWS COMPANY OF CHERRYVILLE, N.C., INCORPORATED:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk-Matthews Company of Cherryville, N.C., Incorporated (the
"Company") will be held on April 15, 1998, at 12:00 p.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 27.9259 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 1782
BELK-MATTHEWS COMPANY OF CHERRYVILLE, N.C., INCORPORATED
SUPPLEMENT NO. 42
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 42 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK-MATTHEWS
COMPANY OF CHERRYVILLE, N.C., INCORPORATED (THE "COMPANY"), THE DISCUSSION
HEREIN SUPERSEDES THE DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE
INFORMATION CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE
IN THE REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN
THE REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY
AND THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT
BE ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL
CAPITALIZED TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE
MEANINGS SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 1783
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1936. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 12:00 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 27.9259 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 1,117 shares of Common Stock
outstanding held of record by 39 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 66.9% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 1784
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. In addition, the Reorganization is expected to have
certain other benefits for the Company and the Shareholders, including the
ability to share the risk associated with the uncertain prospects for the
Company's store in its current location. The store is located in a relatively
small market that is also close to larger markets with larger Belk stores and
other competitors. The prospects for growth of the Company's store may be
limited because of the size of its market and its close proximity to such
competitors. The Merger would allow the Company to share with New Belk the risk
associated with the Company's current market situation and to participate in the
growth of other Belk stores located in markets with better growth prospects.
There can be no assurance, however, that any of these benefits will be
achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 2,000 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer
3
<PAGE> 1785
restrictions in respect of New Belk Class A Common Stock. The holders of New
Belk Class A Common Stock are entitled to 10 votes per share. The holders of New
Belk Class B Common Stock are entitled to one vote per share. Shares of New Belk
Class A Common Stock may be owned only by Class A Permitted Holders. If a share
of New Belk Class A Common Stock is transferred to any person other than a Class
A Permitted Transferee, whether by sale, assignment, gift, bequest, appointment
or otherwise, such share will be converted automatically into a share of New
Belk Class B Common Stock. Shares of New Belk Class A Common Stock are
convertible into New Belk Class B Common Stock, in whole or in part, at any time
and from time to time at the option of the holder, on the basis of one share of
New Belk Class B Common Stock for each share of New Belk Class A Common Stock
converted. Shares of New Belk Class A Common Stock held by a New Belk
Stockholder who is a Class A Permitted Holder will also automatically convert
into New Belk Class B Common Stock in the event that such New Belk Stockholder
no longer meets the requirements of a Class A Permitted Holder. New Belk Class B
Common Stock has no conversion rights. The Company Articles provide for only one
class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same
4
<PAGE> 1786
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them
5
<PAGE> 1787
adversely. If any proposed amendment would alter or change the powers,
preferences or special rights of one or more series of any class so as to affect
them adversely, but would not so affect the entire class, then only the shares
of the series so affected by the amendment will be considered a separate class
for purposes of voting by classes. The New Belk Certificate is consistent with
the foregoing provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the shareholders and approved (i) by a majority
(unless the articles of incorporation, a bylaw adopted by the shareholders or
the board of directors require a greater vote or a vote by voting groups) of the
votes entitled to be cast on the amendment by any voting group with respect to
which the amendment would create dissenters' rights and (ii) when a quorum is
present, by all other voting groups entitled to vote on the amendment through
casting more affirmative than opposing votes. As under the DGCL, the holders of
the outstanding shares of a class or series are entitled to vote as a separate
voting group (if shareholder voting is otherwise required by the NCBCA) on a
proposed amendment if the amendment would change certain fundamental rights and
preferences of that class or series. The Company Articles do not specify a
greater voting requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power, nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has power, by
vote of a majority of all the directors, and without the assent or vote of the
shareholders, to make, alter, amend and rescind the bylaws of the Company.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without
6
<PAGE> 1788
prior notice, if all holders of outstanding shares entitled to vote on such
action sign the written consent(s) describing such action. The Company Bylaws
and Company Articles do not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more
7
<PAGE> 1789
than 30% during any 12-month period. The articles of incorporation or bylaws may
establish a variable range for the size of the board of directors by fixing a
minimum and maximum number of directors. If a variable range is established, the
number of directors may be fixed or changed from time to time, within the
minimum and maximum, by the shareholders or (unless the articles of
incorporation or a shareholders' agreement shall otherwise provide) the board of
directors. After shares are issued, only the shareholders may change the range
for the size of the board or change from a fixed to a variable-range size board
or vice versa. The Company Bylaws require the Company Board to consist of at
least three, but no more than 15, members.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
8
<PAGE> 1790
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the disinterested directors or committee authorized, approved or
ratified the transaction; (ii) the material facts of the transaction and the
director's interest were disclosed or known to the shareholders entitled to vote
and the disinterested shares authorized, approved or ratified the transaction;
or (iii) the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
9
<PAGE> 1791
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any transaction from which the director derived an improper
personal benefit or (iv) acts or omissions occurring prior to the date the
provisions became effective.
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which
10
<PAGE> 1792
results in the issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder, except in certain circumstances; (iv)
any transaction involving the corporation which has the effect of increasing the
proportionate share of the stock of any class or series, or securities
convertible into the stock of any class or series, of the corporation which is
owned by the interested stockholder, except in certain circumstances; or (v) any
receipt by the interested stockholder of the benefit of any loans, advances,
guarantees, pledges or other financial benefits (other than those expressly
permitted in (i) through (iv) above) provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) an
affiliate or associate of the corporation who within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a
11
<PAGE> 1793
preemptive right to purchase, subscribe for or otherwise acquire stock of any
class or series of New Belk or any security convertible into or exchangeable
for, or any warrant, option or right to purchase, subscribe for or otherwise
acquire, stock of any class or series of New Belk, whether now or hereafter
authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if the (i) shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any final action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
12
<PAGE> 1794
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates must be deposited,
(iii) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the Payment Demand is received, (iv) set a date
by which the Surviving Corporation must receive the Payment Demand, which date
may not be fewer than 30 nor more than 60 days after the date the Dissenters'
Notice is mailed and (v) be accompanied by a copy of Article 13. A Shareholder
who is sent a Dissenters' Notice and who wishes to assert dissenters' rights
must demand payment and deposits his certificates in accordance with the terms
of the Dissenters' Notice. A Shareholder who demands payment and deposit his
certificates in accordance with the terms of the Dissenters' Notice retains all
other rights of a Shareholder until these rights are canceled or modified by the
consummation and effectiveness of the Merger. A Shareholder who does not demand
payments or deposit his certificates in accordance with the terms of the
Dissenters' Notice will not be entitled to payment for his shares under the
NCBCA. If any such holder of Common Stock fails to perfect or shall have
effectively withdrawn or lost such right, each share of such holder's Common
Stock will thereupon be deemed to have been converted into and to have become,
as of the Effective Time, the right to receive, without any interest thereon,
the number of shares of New Belk Class A Common Stock such Shareholder is
otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
13
<PAGE> 1795
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such Shareholder dissents and such
Shareholder's other shares were registered in the names of different
shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
14
<PAGE> 1796
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- -------- -------- -------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............... $755,919 $755,919 0.6 $(147,567) $601,119
EBITDA.................. 40,291 37,901 7 (147,567) 412,874
EBIT.................... 32,184 29,794 10 (147,567) 445,507
Net Income.............. 27,974 26,081 15 -- 391,215
Book Equity............. 545,467 545,262 1 -- 545,262
</TABLE>
15
<PAGE> 1797
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
N/A N/A% X $N/A = N$/A
--------
Total N$/A
========
Relative Operating Value of Company $601,119
Relative Operating Value of Other Companies Owned by Company + --
--------
Total Relative Value of Company = $601,119
========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Brothers Company 11.6831% X $601,119 = $ 70,229
Belk Enterprises,
Inc. .1343 X 601,119 = 807
Mathews-Belk Company 9.0421 X 601,119 = 54,354
--------
Total $125,390
========
Total Relative Value of Company $601,119
Total Relative Value of Company Owned by Other Belk Companies - 125,390
--------
Net Relative Value of Company = $475,728
========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$475,728 / $1,156,226,577 = .0411%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON APPLICABLE EXCHANGE
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) RATIO
<S> <C> <C> <C> <C> <C> <C>
(.0411% X 59,998,834) / 884 = 27.9259
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 1798
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 25.04
Dividends(2).............................................. 15.00
Book value per share(3)................................... 488.33
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 26.81
Dividends(2).............................................. 7.26
Book value per share...................................... 349.63
</TABLE>
- ---------------
(1) Based on 1,117 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 1,117 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for New Belk Company is computed
by multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
17
<PAGE> 1799
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 833 $ 780 $ 756
Net income.................................................. 37 13 28
Per common share
Net income (loss)(1)...................................... 33.47 11.39 25.04
Dividends................................................. 25.00 25.00 15.00
Book value(2)............................................. 491.90 478.29 488.33
Total assets................................................ 602 602 616
Shareholders' equity........................................ 549 534 545
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $521 $513
Income from operations...................................... 5 5
</TABLE>
- ---------------
(1) Based on 1,117 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 1,117 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 1800
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in downtown
Cherryville, North Carolina. The Company's store operates in a manner consistent
with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is managed out of the Matthews group office in
Gastonia, North Carolina.
Facilities. The Company owns a portion of the store property and building,
which contains 12,000 square foot of floor area. The Company leases the
remaining portion of the store building. The Company has no lease renewal
options remaining, and the Company is currently evaluating the prospects of
continuing operations in this market.
Competition. The Company's principal competitor is Wal-Mart in Lincolnton,
North Carolina; but it also competes with larger Belk stores and other
competitors in nearby Gastonia, Lincolnton and Shelby.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 1801
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d).............................................. 402.0 36.0%
Thomas M. Belk, Jr. (Director and Executive Officer)
(a)(c)(d)................................................. 290.0 26.0%
H. W. McKay Belk (Director and Executive Officer)
(a)(c)(d)................................................. 290.0 26.0%
John R. Belk (Director and Executive Officer) (a)(c)(d)..... 290.0 26.0%
Henderson Belk (Director) (b)............................... 50.0 4.5%
Sarah Belk Gambrell (b)..................................... 135.5 12.1%
David Belk Cannon (Director) (f)............................ 88.0 7.9%
James K. Glenn, Jr. (Director) (e).......................... 93.0 8.3%
Leroy Robinson (Director) (a)............................... 57.0 5.1%
B. Frank Matthews, II (Director and Executive Officer)
(g)(h).................................................... 139.5 12.5%
Eugene Robinson Matthews (Director and Executive Officer)... 25.0 2.2%
Katherine McKay Belk (a).................................... 57.0 5.1%
Katherine Belk Morris (a)................................... 60.0 5.4%
Elizabeth Matthews Welton Family Limited Partnership Phase
II........................................................ 80.0 7.2%
Annabelle Z. Royster (g).................................... 64.0 5.7%
Milburn Investment Company.................................. 57.0 5.1%
J.V. Properties............................................. 130.5 11.7%
Matthews-Belk Company....................................... 101.0 9.0%
First Union National Bank of N.C., B. Frank Matthews, II and
Annabelle Z. Royster, Co-Trustees under the will of J.H.
Matthews, Jr. ............................................ 62.0 5.6%
All Directors and Executive Officers as a group (10
persons).................................................. 747.5 66.9%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson, Katherine McKay Belk and Katherine Belk
Morris -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk
Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28210; David Belk Cannon -- 1607
W. Floyd Baker Blvd., Gaffney, S.C. 29341; James K. Glenn, Jr. -- P.O. Box 2736,
Winston-Salem, N.C. 27102; B. Frank Matthews, II and Eugene Robinson
Matthews -- 2240 Remount Road, Gastonia, N.C. 28054; Annabelle Z.
Royster -- 3621 Club Colony Drive West, Gastonia, N.C. 28052; Milburn Investment
Company, J.V. Properties and Matthews-Belk Company -- 2801 West Tyvola Road,
Charlotte, N.C. 28217-4500; First Union National Bank -- Sherry Ross, 2 First
Union Center (NC-1159), Charlotte, N.C. 28288-1159.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 57 shares held by Milburn Investment Company, of which the Estate
of Thomas M. Belk is the sole shareholder. Voting and investment power is
shared by the Executors of the Estate of Thomas M.
20
<PAGE> 1802
Belk, who are Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk,
Jr., H. W. McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(b) Includes 50 shares held in several Trusts established by the Will of Mary
I. Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(c) Includes 1.5 shares held by Belk Enterprises, Inc. and 101 shares held by
Matthews-Belk Company, which shares are voted by the members of the
Executive Committee of the Board of Directors of each such Corporation,
under authority given by the directors of each such Corporation at the
annual meeting of directors held in March, 1997. The Executive Committee of
each such Corporation consists of John M. Belk, Thomas M. Belk, Jr., H. W.
McKay Belk and John R. Belk.
(d) Includes 130.5 shares held by J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
(e) Includes 55 shares held by James K. Glenn, Jr., Trustee under will of Daisy
Belk Mattox and 36 shares held by John Belk Stevens Trust U/W ITEM III,
Section C f/b/o James Kirk Glenn, Jr., et al. Voting and investment power
is vested in James K. Glenn, Jr., the Trustee of each Trust.
(f) Includes 8 shares held by Residuary Trust U/W of Mrs. Henry Belk Cannon.
The Trustees, David Belk Cannon and John C. Daughtridge, have voting and
investment power with respect to such shares.
(g) Includes 62 shares held by First Union National Bank of N.C., B. Frank
Matthews, II and Annabelle Z. Royster, Co-Trustees under the will of J.H.
Matthews, Jr. The named Trustees have voting and investment power with
respect to such shares.
(h) Includes 4 shares held by B. Frank Matthews, II's wife, Betty Choate
Matthews.
21
<PAGE> 1803
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 1804
BELK-MATTHEWS COMPANY OF CHERRYVILLE, N.C., INCORPORATED
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 15,293 $ 15,691
Accounts receivable, net.................................. 110,449 123,897
Merchandise inventory..................................... 239,973 244,137
Receivable from affiliates, net........................... 124,582 131,877
Refundable income taxes................................... 43 --
Deferred income taxes..................................... 1,600 --
Other..................................................... 8,074 7,061
-------- --------
Total current assets........................................ 500,014 522,663
Investments................................................. 205 205
Property, plant and equipment, net.......................... 96,349 88,242
Deferred income taxes....................................... -- 242
Other noncurrent assets..................................... 4,955 4,300
-------- --------
$601,523 $615,652
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 54,498 $ 51,596
Deferred income taxes..................................... -- 955
Accrued income taxes...................................... 217 4,899
-------- --------
Total current liabilities................................... 54,715 57,450
Deferred income taxes....................................... 909 --
Other noncurrent liabilities................................ 11,651 12,735
-------- --------
Total liabilities........................................... 67,275 70,185
Shareholders' equity:
Common stock.............................................. 111,700 111,700
Retained earnings......................................... 422,548 433,767
-------- --------
Total shareholders' equity.................................. 534,248 545,467
-------- --------
$601,523 $615,652
======== ========
</TABLE>
F-2
<PAGE> 1805
BELK-MATTHEWS COMPANY OF CHERRYVILLE, N.C., INCORPORATED
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales................................................... $833,071 $780,119 $755,919
Operating costs and expenses................................ 788,295 767,256 726,386
-------- -------- --------
Income from operations...................................... 44,776 12,863 29,533
-------- -------- --------
Other income (expense):
Interest, net............................................. 3,922 4,200 3,132
Gain (loss) on sale of securities......................... -- -- 2,388
Miscellaneous, net........................................ (1,144) (945) 263
-------- -------- --------
Total other expense, net.................................... 2,778 3,255 5,783
-------- -------- --------
Earnings from continuing operations before income taxes, and
equity in earnings of unconsolidated entities............. 47,554 16,118 35,316
Income tax expense (benefit)................................ 10,173 3,395 7,342
-------- -------- --------
Earnings from continuing operations before equity in
earnings of unconsolidated entities....................... 37,381 12,723 27,974
-------- -------- --------
Net earnings................................................ 37,381 12,723 27,974
Retained earnings at beginning of period.................... 428,294 437,750 422,548
Dividends paid.............................................. (27,925) (27,925) (16,755)
-------- -------- --------
Retained earnings at end of period.......................... $437,750 $422,548 $433,767
======== ======== ========
</TABLE>
F-3
<PAGE> 1806
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 1807
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 1808
ANNEX A
DISSENTER'S RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13.
DISSENTERS' RIGHTS.
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
A-1
<PAGE> 1809
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares; (ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (iv) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes; (v)
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional shares so created is to be acquired by cash under
G.S. 55-6-04; (vi) changes the corporation into a nonprofit corporation or
cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 1810
SEC.SEC. 55-13-04 TO 55-13-19. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 1811
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 1812
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 1813
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 1814
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
--------- ---------- ------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement..................... $ 755,919 $27,974 $32,182 $40,289 $545,467
Adjustments to eliminate less than wholly-owned
subsidiaries.................................. -- -- -- -- --
--------- ------- ------- ------- --------
Adjusted Shareholders' Statement................ $ 755,919 27,974 32,182 40,289 545,467
========= ------- ------- ------- --------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E................. -- -- --
Gain/loss on sale of securities............... (1,893) (2,388) (2,388)
Impairment loss............................... -- -- --
Equity in earnings of unconsolidated
subsidiaries................................ -- -- --
Gain/loss on discontinued operations.......... -- -- --
Adjustment to tax expense..................... -- -- -- --
------- ------- -------
Total non-operating items....................... (1,893) (2,388) (2,388)
------- ------- -------
Other Adjustments:
Adjustment for dividends received from other
Belk entities............................... -- -- --
Adjustment for ownership in other Belk
entities.................................... (205)
------- ------- ------- --------
Per Model....................................... $26,081 $29,794 $37,901 $545,262
======= ======= ======= ========
COMPONENTS OF NET DEBT (CASH) PER SHAREHOLDERS'
STATEMENT
Assets
Cash & cash equivalents..................... $ (15,690)
Negative cash balances reclassified to
accounts payable.......................... --
Receivables from affiliates, net............ (131,877)
Loans receivable from affiliates, net....... --
Liabilities
Notes payable............................... --
Current installments of long-term debt...... --
Current portion of obligations under capital
leases.................................... --
Payables to affiliates, net................. --
Long-term debt, excluding current
installments.............................. --
Obligations under capital leases, excluding
current portion........................... --
Loans payable to affiliates, net............ --
---------
Net debt (cash)................................. (147,567)
Adjustments to eliminate less than wholly-owned
subsidiaries.................................. --
---------
Per Model....................................... $(147,567)
=========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 1815
SUPPLEMENT NO. 42
<PAGE> 1816
BELK-MATTHEWS COMPANY OF CHERRYVILLE, N.C., INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 12:00 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 42
<PAGE> 1817
BELK DEPARTMENT STORE OF CLINTON, N.C., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk Department Store of Clinton, N.C., Inc.
(the "Company"), to be held on April 16, 1998, at 2:00 p.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 110.8714 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 409,836 shares of New Belk Class A Common Stock which
will represent approximately 0.6831% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(43)
<PAGE> 1818
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 1819
BELK DEPARTMENT STORE OF CLINTON, N.C., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK DEPARTMENT STORE OF CLINTON, N.C., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk Department Store of Clinton, N.C., Inc. (the "Company") will
be held on April 16, 1998, at 2:00 p.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-
4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 110.8714 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 1820
BELK DEPARTMENT STORE OF CLINTON, N.C., INC.
SUPPLEMENT NO. 43
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 43 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK DEPARTMENT
STORE OF CLINTON, N.C., INC. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES
THE DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION
CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE IN THE
REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN THE
REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND
THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE
ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED
TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS
SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION.................................. B-1
</TABLE>
<PAGE> 1821
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1928. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 2:00 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 110.8714 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 5,169 shares of Common Stock
outstanding held of record by 59 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 60.1% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 1822
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
" -- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
New Belk has entered into an agreement dated February 27, 1998 (the
"Hanahan Agreement") with Mary E.S. Hanahan ("Mrs. Hanahan"), who is the owner
of 2 shares of Common Stock of the Company (the "Hanahan Shares"). In the
Hanahan Agreement, Mrs. Hanahan granted to certain employees of BSS her
irrevocable proxy to vote the Hanahan Shares in favor of the Merger, agreed to
withdraw her appeal in certain litigation instituted by Belk of Spartanburg,
S.C., Inc. against Mrs. Hanahan and another party and released New Belk and the
Belk Companies from any and all claims which Mrs. Hanahan has or may have
against New Belk and the Belk Companies. New Belk agreed, among other things, to
purchase from Mrs. Hanahan, at her election at any time prior to December 31,
1999, all of the shares of New Belk Common Stock received by Mrs. Hanahan in
exchange for the Hanahan Shares and shares in other Belk Companies in the
Reorganization for an aggregate purchase price of $3.85 million.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 6,000 shares of
Common Stock.
3
<PAGE> 1823
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock held by a New Belk Stockholder who is a Class A Permitted
Holder will also automatically convert into New Belk Class B Common Stock in the
event that such New Belk Stockholder no longer meets the requirements of a Class
A Permitted Holder. New Belk Class B Common Stock has no conversion rights. The
Company Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the
4
<PAGE> 1824
holders of New Belk Class B Common Stock upon the same terms and conditions
applicable to the conversion of New Belk Class A Common Stock into New Belk
Class B Common Stock and must have the same restrictions on transfer and
ownership applicable to the transfer and ownership of the New Belk Class A
Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. DGCL requires that
an amendment of the certificate of incorporation of a corporation be adopted by
the board of directors and the holders of a majority of the outstanding shares
of stock entitled to vote thereon. The holders of the outstanding shares of a
class are entitled to vote as a separate class on a proposed amendment that
would increase or decrease the aggregate
5
<PAGE> 1825
number of authorized shares of such class, increase or decrease the par value of
the shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the shareholders and approved (i) by a majority
(unless the articles of incorporation, a bylaw adopted by the shareholders or
the board of directors require a greater vote or a vote by voting groups) of the
votes entitled to be cast on the amendment by any voting group with respect to
which the amendment would create dissenters' rights and (ii) when a quorum is
present, by all other voting groups entitled to vote on the amendment through
casting more affirmative than opposing votes. As under the DGCL, the holders of
the outstanding shares of a class or series are entitled to vote as a separate
voting group (if shareholder voting is otherwise required by the NCBCA) on a
proposed amendment if the amendment would change certain fundamental rights and
preferences of that class or series. The Company Articles do not specify a
greater voting requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power, nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has power, by
vote of a majority of all the directors, and without the assent or vote of the
shareholders, to make, alter, amend and rescind the bylaws of the Company.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
6
<PAGE> 1826
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without prior notice, if all
holders of outstanding shares entitled to vote on such action sign the written
consent(s) describing such action. The Company Bylaws and Company Articles do
not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of
7
<PAGE> 1827
incorporation or bylaws to fix or change the number of directors and if the
shareholders do not have the right to cumulate their votes for directors, the
board may increase or decrease the number of directors by not more than 30%
during any 12-month period. The articles of incorporation or bylaws may
establish a variable range for the size of the board of directors by fixing a
minimum and maximum number of directors. If a variable range is established, the
number of directors may be fixed or changed from time to time, within the
minimum and maximum, by the shareholders or (unless the articles of
incorporation or a shareholders' agreement shall otherwise provide) the board of
directors. After shares are issued, only the shareholders may change the range
for the size of the board or change from a fixed to a variable-range size board
or vice versa. The Company Bylaws require the Company Board to consist of at
least three, but no more than 15, members.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares
8
<PAGE> 1828
entitled to vote thereon consents; or (iii) the transaction is fair to the
corporation at the time it is authorized by the board of directors, a committee
of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the disinterested directors or committee authorized, approved or
ratified the transaction; (ii) the material facts of the transaction and the
director's interest were disclosed or known to the shareholders entitled to vote
and the disinterested shares authorized, approved or ratified the transaction;
or (iii) the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
9
<PAGE> 1829
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any transaction from which the director derived an improper
personal benefit or (iv) acts or omissions occurring prior to the date the
provisions became effective.
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested stockholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder,
except in certain circumstances; (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested stockholder, except
in certain
10
<PAGE> 1830
circumstances; or (v) any receipt by the interested stockholder of the benefit
of any loans, advances, guarantees, pledges or other financial benefits (other
than those expressly permitted in (i) through (iv) above) provided by or through
the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) an
affiliate or associate of the corporation who within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
11
<PAGE> 1831
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any final action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization
12
<PAGE> 1832
Agreement as described above. The Dissenters' Notice will (i) supply a form for
demanding payment (a "Payment Demand"), (ii) state where the Payment Demand must
be sent and where and when certificates must be deposited, (iii) inform holders
of uncertificated shares to what extent transfer of the shares will be
restricted after the Payment Demand is received, (iv) set a date by which the
Surviving Corporation must receive the Payment Demand, which date may not be
fewer than 30 nor more than 60 days after the date the Dissenters' Notice is
mailed and (v) be accompanied by a copy of Article 13. A Shareholder who is sent
a Dissenters' Notice and who wishes to assert dissenters' rights must demand
payment and deposit his certificates in accordance with the terms of the
Dissenters' Notice. A Shareholder who demands payment and deposit his
certificates in accordance with the terms of the Dissenters' Notice retains all
other rights of a Shareholder until these rights are canceled or modified by the
consummation and effectiveness of the Merger. A Shareholder who does not demand
payments or deposit his certificates in accordance with the terms of the
Dissenters' Notice will not be entitled to payment for his shares under the
NCBCA. If any such holder of Common Stock fails to perfect or shall have
effectively withdrawn or lost such right, each share of such holder's Common
Stock will thereupon be deemed to have been converted into and to have become,
as of the Effective Time, the right to receive, without any interest thereon,
the number of shares of New Belk Class A Common Stock such Shareholder is
otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine
13
<PAGE> 1833
the fair value of the shares and accrued interest. A dissenting Shareholder who
takes no action within such 60-day period is deemed to have withdrawn his
dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such Shareholder dissents and such
Shareholder's other shares were registered in the names of different
shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
14
<PAGE> 1834
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
The following table shows the method used to calculate the Relative
Operating Value for the Company, based on each separate methodology:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ----------- ----------- -------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $12,053,150 $12,053,150 0.6 $(516,907) $ 7,748,798
EBITDA............... 1,135,124 1,135,125 7 (516,907) 8,462,783
EBIT................. 1,015,375 1,015,376 10 (516,907) 10,670,668
Net Income........... 609,592 609,592 15 -- 9,143,880
Book Equity.......... 4,768,068 4,588,134 1 -- 4,588,134
</TABLE>
15
<PAGE> 1835
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk Department Store
of Greenville,
N.C., Inc. .2866% X $25,446,468 = $ 72,930
Belk's Department
Store of
Jacksonville, N.C.,
Inc. .5453 X 29,859,959 = 162,826
Belk's Department
Store of
Rockingham, N.C.,
Incorporated 4.8242 X 2,851,585 = 137,566
-----------
Total $ 373,322
===========
Relative Operating Value of Company $10,670,668
Relative Operating Value of Other Companies Owned by Company + 373,322
-----------
Total Relative Value of Company = $11,043,990
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Department Store
of Ahoskie, N.C.,
Inc. 3.5403% X $11,043,990 = $ 390,990
Belk's Department
Store of Asheville,
North Carolina,
Incorporated 1.2575 X 11,043,990 = 138,878
Belk Brothers Company 10.4372 X 11,043,990 = 1,152,683
Belk Enterprises,
Inc. 4.9526 X 11,043,990 = 546,965
Belk Finance Company 2.6698 X 11,043,990 = 294,852
Belk's Department
Store of Morehead
City, N.C., Inc. 5.6297 X 11,043,990 = 621,744
-----------
Total $ 3,146,113
===========
Total Relative Value of Company $11,043,990
Total Relative Value of Company Owned by Other Belk Companies - 3,146,113
Net Relative Value of Company = $ 7,897,878
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$7,897,878 / $1,156,226,577 = .6831%
</TABLE>
16
<PAGE> 1836
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.6831% X 59,998,834) / 3,696.5 = 110.8714
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
17
<PAGE> 1837
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 117.93
Dividends(2).............................................. 22.50
Book value per share(3)................................... 922.44
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Diviends(2)............................................... 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 106.44
Dividends(2).............................................. 28.83
Book value per share...................................... 1,388.11
</TABLE>
- ---------------
(1) Based on 5,169 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 5,169 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
18
<PAGE> 1838
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $10,736 $11,412 $12,053
Net income.................................................. 390 454 610
Per common share
Net income (loss)(1)...................................... 75.31 87.76 117.93
Dividends................................................. 15.09 20.00 22.50
Book value(2)............................................. 751.38 822.96 922.44
Total assets................................................ 4,564 5,142 6,060
Shareholders' equity........................................ 3,884 4,254 4,768
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $8,225 $8,494
Income from operations...................................... 561 655
</TABLE>
- ---------------
(1) Based on 5,169 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 5,169 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
19
<PAGE> 1839
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates two retail department stores in the
following locations in North Carolina: Coharie Plaza in Clinton and Riverbirch
Corner in Sanford. The Company's stores operate in a manner consistent with the
business of the Belk Companies described in the Proxy Statement/Prospectus. The
stores are managed out of the Howard group office in Fayetteville, North
Carolina.
Facilities. The Company operates two stores, both of which are leased
under long-term leases. The store leases have termination dates of 2002 and
2004. The floor area of the leased buildings is 36,000 and 42,000 square feet.
The Company believes these facilities are adequate to meet its current needs.
Competition. Specific competitors in the Company's market include
Wal-Mart, Penney and Goody's.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
20
<PAGE> 1840
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)........................................... 2,117.25 41.0%
Thomas M. Belk, Jr. (Director and Executive Officer)
(a)(b)(d)(e).............................................. 1,743.25 33.7%
H. W. McKay Belk (Director and Executive Officer)
(a)(b)(d)(e).............................................. 1,747.25 33.8%
John R. Belk (Director and Executive Officer)
(a)(b)(d)(e).............................................. 1,743.25 33.7%
Henderson Belk (Director) (c)............................... 168.00 3.3%
David Belk Cannon (Director) (g)............................ 378.00 7.3%
James K. Glenn, Jr. (Director) (f).......................... 258.00 5.0%
Leroy Robinson (Director) (a)(b)............................ 252.75 4.9%
Troy M. Howard (Director and Executive Officer)............. 0 *
W. B. Beery, III (Director)................................. 0 *
Sarah Belk Gambrell (c)..................................... 464.00 9.0%
Katherine Belk Morris (a)(b)................................ 274.75 5.3%
William B. Beery, IV (j).................................... 345.00 6.7%
Martha B. Dineen (j)........................................ 345.00 6.7%
Katherine E. Beery (j)...................................... 345.00 6.7%
Andrew Hoyt Borland......................................... 360.00 7.0%
William R. Young (Executive Officer)........................ 0 *
Belk Enterprises, Inc. ..................................... 256 5.0%
Belk's Department Store of Morehead City, N.C., Inc......... 291.00 5.6%
J.V. Properties............................................. 539.50 10.4%
William B. Beery, III and Martha B. Beery Irrevocable
Trust..................................................... 345.00 6.7%
NationsBank, N.A. .......................................... 373 7.2%
All Directors and Executive Officers as a group (10
persons).................................................. 3,107.25 60.1%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson and Katherine Belk Morris -- 2801 West Tyvola
Road, Charlotte, N.C. 28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road,
Charlotte, N.C. 28270; David Belk Cannon -- 1607 W. Floyd Baker Blvd., Gaffney,
S.C. 29341; James K. Glenn, Jr. -- P.O. Box 2736, Winston-Salem, N.C. 27102; W.
B. Beery, III, W. B. Beery, IV, Martha B. Dineen and Katherine E. Beery -- 1919
Brookhaven Road, Wilmington, N.C. 28403; Troy M. Howard and William R.
Young -- 4525 Camp Ground Road, Fayetteville, N.C. 28314; Andrew Hoyt
Borland -- 18 Severn River Road, Round Bay, Severn Park, Md. 24116; Belk's
Department Store of Morehead City, N.C., Inc., Belk Enterprises, Inc. and J.V.
Properties -- 2801 West Tyvola Road, Charlotte, N.C. 28217-45; William B. Beery,
III and Martha B. Beery Irrevocable Trust -- 1919 Brookhaven Road, Wilmington,
N.C. 28403; NationsBank, N.A. -- Sara McDonnell (NC1-002-07-13), Charlotte, N.C.
28255.
21
<PAGE> 1841
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 21.75 shares held by Brothers Investment Company, which
Corporation is equally owned by John M. Belk and the Estate of Thomas M.
Belk. Voting and investment power is shared by John M. Belk, Katherine
McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W. McKay Belk,
John R. Belk and Leroy Robinson.
(b) Includes 231 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(c) Includes 168 shares held in several Trusts established by the Will of Mary
I. Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(d) Includes 256 shares held by Belk Enterprises, Inc., 138 shares held by Belk
Finance Company, 65 shares held by Belk's Department Store of Asheville,
North Carolina, Inc., 183 shares held by Belk Department Store of Ahoskie,
North Carolina, Inc. and 291 shares held by Belk's Department Store of
Morehead City, N.C., Inc., which shares are voted by the members of the
Executive Committee of the Board of Directors of each such corporation,
under authority given by the directors of each such Corporation at the
annual meeting of directors held in March, 1997. The Executive Committee of
each such Corporation consists of John M. Belk, Thomas M. Belk, Jr., H. W.
McKay Belk and John R. Belk.
(e) Includes 539.5 shares held by J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
(f) Includes 256 shares held by James K. Glenn, Jr., Trustee under will of
Daisy Belk Mattox and 1 share held by John Belk Stevens Trust U/W ITEM III,
Section C f/b/o James Kirk Glenn, Jr., et al. Voting and investment power
is vested in James K. Glenn, Jr., the Trustee of each Trust.
(g) Includes 114 shares held by Residuary Trust U/W of Mrs. Henry Belk Cannon.
The Trustees, David Belk Cannon and John C. Daughtridge, have voting and
investment power with respect to such shares.
(h) Includes 8 shares held by NationsBank as Trustee for the Daisy Belk
Doughton Lange Revocable Trust dated 3/25/97, 122 shares held by Sara Dew
Misner and North Carolina National Bank, Co-Trustees for Daisy Doughton
Lange U/A dated November 5, 1965 and 115 shares held by J.L. Green, Jr. and
N.C. National Bank, Trustees U/A 7/9/65 -- Sadie Belk Cummings, Grantor.
NationsBank has sole voting and investing power with respect to such
shares.
(i) Includes 128 shares held by Daisy Doughton Lange and North Carolina
National Bank, Trustees for Robert L. Doughton, II under Agreement dated
July 21, 1965. The named Trustees have voting and investment power with
respect to such shares.
(j) Represented by 345 shares held by William B. Beery, III and Martha B. Beery
Irrevocable Trust. The Trustees, who are William B. Beery, IV, Martha B.
Dineen and Katherine E. Beery, share voting and investment power with
respect to such shares.
22
<PAGE> 1842
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 1843
BELK DEPARTMENT STORE OF CLINTON, N.C., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 121,132 $ 133,098
Accounts receivable, net.................................. 1,787,037 2,044,313
Merchandise inventory..................................... 2,078,799 2,366,270
Receivable from affiliates, net........................... 18,547 253,454
Deferred income taxes..................................... 39,930 43,140
Other..................................................... 83,899 81,023
---------- ----------
Total current assets........................................ 4,129,344 4,921,298
Loans receivable from affiliates, net....................... 251,378 251,378
Investments................................................. 106,299 319,782
Property, plant and equipment, net.......................... 617,821 542,488
Other noncurrent assets..................................... 37,226 25,139
---------- ----------
$5,142,068 $6,060,085
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current installments of long-term debt.................... $ -- $ 40,293
Accounts payable and accrued expenses..................... 753,219 917,089
Accrued income taxes...................................... 19,982 116,645
---------- ----------
Total current liabilities................................... 773,201 1,074,027
Deferred income taxes....................................... 80,519 95,848
Long-term debt, excluding current installments.............. -- 80,586
Other noncurrent liabilities................................ 34,443 41,556
---------- ----------
Total liabilities........................................... 888,163 1,292,017
Shareholders' equity:
Common stock.............................................. 516,900 516,900
Net unrealized gain (loss) on investments, net of income
taxes.................................................. 63,714 84,588
Retained earnings......................................... 3,673,291 4,166,580
---------- ----------
Total shareholders' equity.................................. 4,253,905 4,768,068
---------- ----------
$5,142,068 $6,060,085
========== ==========
</TABLE>
F-2
<PAGE> 1844
BELK DEPARTMENT STORE OF CLINTON, N.C., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ------------ ------------
<S> <C> <C> <C>
Net sales............................................. $10,735,920 $11,411,909 $12,053,150
Operating costs and expenses.......................... 10,072,665 10,655,353 11,041,069
----------- ----------- -----------
Income from operations................................ 663,255 756,556 1,012,081
----------- ----------- -----------
Other income (expense):
Interest, net....................................... (14,693) (8,903) (17,172)
Dividend income..................................... 2,671 3,104 3,609
Gain (loss) on disposal of property, plant and
equipment........................................ (658) 503 --
Miscellaneous, net.................................. (8,997) (7,593) (315)
----------- ----------- -----------
Total other expense, net.............................. (21,677) (12,889) (13,878)
----------- ----------- -----------
Earnings from continuing operations before income
taxes, and equity in earnings of unconsolidated
entities............................................ 641,578 743,667 998,203
Income tax expense (benefit).......................... 251,147 290,052 388,611
----------- ----------- -----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities................. 390,431 453,615 609,592
----------- ----------- -----------
Net earnings.......................................... 390,431 453,615 609,592
Retained earnings at beginning of period.............. 3,027,690 3,323,056 3,673,291
Dividends paid........................................ (77,985) (103,380) (116,303)
Purchase of treasury stock............................ (17,080) -- --
----------- ----------- -----------
Retained earnings at end of period.................... $ 3,323,056 $ 3,673,291 $ 4,166,580
=========== =========== ===========
</TABLE>
F-3
<PAGE> 1845
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 1846
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 1847
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares;
A-1
<PAGE> 1848
(ii) creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares; (iii) alters or abolishes a preemptive right of
the holder of the shares to acquire shares or other securities; (iv)
excludes or limits the right of the shares to vote on any matter, or to
cumulate votes; (v) reduces the number of shares owned by the shareholder
to a fraction of a share if the fractional shares so created is to be
acquired by cash under G.S. 55-6-04; (vi) changes the corporation into a
nonprofit corporation or cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 1849
SEC.SEC. 55-13-04 TO 55-13-19. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 1850
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 1851
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 1852
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 1853
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................. $12,053,150 $609,592 $1,015,376 $1,135,125 $4,768,068
Adjustments to eliminate less than
wholly-owned subsidiaries................. -- -- -- -- --
----------- -------- ---------- ---------- ----------
Adjusted Shareholders' Statement............ $12,053,150 609,592 1,015,376 1,135,125 4,768,068
=========== -------- ---------- ---------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............. -- -- --
Gain/loss on sale of securities........... -- -- --
Impairment loss........................... -- -- --
Equity in earnings of unconsolidated
subsidiaries............................ -- -- --
Gain/loss on discontinued operations...... -- -- --
Adjustment to tax expense................. -- -- -- --
-------- ---------- ----------
Total non-operating items................... -- -- --
-------- ---------- ----------
Other Adjustments:
Adjustment for dividends received from
other Belk entities..................... -- -- --
Adjustment for ownership in other Belk
entities................................ (179,934)
-------- ---------- ---------- ----------
Per Model................................... $609,592 $1,015,376 $1,135,125 $4,588,134
======== ========== ========== ==========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................. $ (133,098)
Negative cash balances reclassified to
accounts payable...................... 143
Receivables from affiliates, net........ (253,454)
Loans receivable from affiliates, net... (251,378)
Liabilities
Notes payable........................... --
Current installments of long-term
debt.................................. 40,293
Current portion of obligations under
capital leases........................ --
Payables to affiliates, net............. --
Long-term debt, excluding current
installments.......................... 80,586
Obligations under capital leases,
excluding current portion............. --
Loans payable to affiliates, net........ --
-----------
Net debt (cash)............................. (516,908)
Adjustments to eliminate less than
wholly-owned subsidiaries................. --
-----------
Per Model................................... $ (516,908)
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 1854
SUPPLEMENT NO. 43
<PAGE> 1855
BELK DEPARTMENT STORE OF CLINTON, N.C., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 2:00 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 43
<PAGE> 1856
BELK'S DEPARTMENT STORE OF DUNN, NORTH CAROLINA, INCORPORATED
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk's Department Store of Dunn, North
Carolina, Incorporated (the "Company"), to be held on April 16, 1998, at 3:10
p.m., local time, at the offices of Belk Stores Services, Inc., 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 69.7358 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 617,859 shares of New Belk Class A Common Stock which
will represent approximately 1.0298% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(44)
<PAGE> 1857
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 1858
BELK'S DEPARTMENT STORE OF DUNN, NORTH CAROLINA, INCORPORATED
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK'S DEPARTMENT STORE OF DUNN, NORTH CAROLINA,
INCORPORATED:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk's Department Store of Dunn, North Carolina, Incorporated (the
"Company") will be held on April 16, 1998, at 3:10 p.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 69.7358 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 1859
BELK'S DEPARTMENT STORE OF DUNN, NORTH CAROLINA, INCORPORATED
SUPPLEMENT NO. 44
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 44 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK'S DEPARTMENT
STORE OF DUNN, NORTH CAROLINA, INCORPORATED (THE "COMPANY"), THE DISCUSSION
HEREIN SUPERSEDES THE DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE
INFORMATION CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE
IN THE REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN
THE REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY
AND THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT
BE ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL
CAPITALIZED TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE
MEANINGS SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 1860
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1934. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 3:10 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of Class A Common
Stock, par value $100 per share, of the Company (the "Class A Common Stock"),
and the Class B Common Stock, par value $100 per share, of the Company (the
"Class B Common Stock"; together with the Class A Common Stock, the "Common
Stock") (except for shares of Common Stock owned by other Belk Companies and
shares of Common Stock owned by a Shareholder who perfects his dissenters'
rights of appraisal under North Carolina law), will be converted, without any
action on the part of the Shareholder, into the right to receive 69.7358 shares
(the "Exchange Ratio") of Class A Common Stock, par value $.01 per share, of New
Belk (the "New Belk Class A Common Stock"). All of the shares of New Belk Class
A Common Stock received by each Existing Belk Shareholder in the Reorganization
will be aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 10,560 shares of Common Stock
outstanding held of record by 28 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 35.3% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock
2
<PAGE> 1861
vote in favor of the Merger, the vote of such persons, corporations and trusts
in favor of the Merger would be sufficient to approve the Merger under the
governing documents of the Company and applicable state law.
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
New Belk has entered into an agreement dated February 27, 1998 (the
"Hanahan Agreement") with Mary E.S. Hanahan ("Mrs. Hanahan"), who is the owner
of 800 shares of Common Stock of the Company (the "Hanahan Shares"). In the
Hanahan Agreement, Mrs. Hanahan granted to certain employees of BSS her
irrevocable proxy to vote the Hanahan Shares in favor of the Merger, agreed to
withdraw her appeal in certain litigation instituted by Belk of Spartanburg,
S.C., Inc. against Mrs. Hanahan and another party and released New Belk and the
Belk Companies from any and all claims which Mrs. Hanahan has or may have
against New Belk and the Belk Companies. New Belk agreed, among other things, to
purchase from Mrs. Hanahan, at her election at any time prior to December 31,
1999, all of the shares of New Belk Common Stock received by Mrs. Hanahan in
exchange for the Hanahan Shares and shares in other Belk Companies in the
Reorganization for an aggregate purchase price of $3.85 million.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per
3
<PAGE> 1862
share, of New Belk Class B Common Stock; and (iii) 20,000,000 shares, par value
$.01 per share, of New Belk Preferred Stock. There are no current plans to issue
New Belk Preferred Stock. The authorized capital stock of the Company consists
of 19,200 shares of Class A Common Stock, and 1,920 shares of Class B Common
Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock held by a New Belk Stockholder who is a Class A Permitted
Holder will also automatically convert into New Belk Class B Common Stock in the
event that such New Belk Stockholder no longer meets the requirements of a Class
A Permitted Holder. New Belk Class B Common Stock has no conversion rights. The
Company Articles provide for two classes of Common Stock. The holders of Class B
capital stock of the Company are not entitled to vote, but otherwise the holders
of Class A capital stock of the Company and of Class B capital stock of the
Company have the same rights and powers.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting
4
<PAGE> 1863
securities of New Belk or voting securities of another corporation which is a
wholly-owned subsidiary of New Belk, such convertible or exchangeable securities
and the underlying securities must be identical in all respects (including,
without limitation, the conversion or exchange rate), except that (i) the voting
rights of each security underlying the convertible or exchangeable security paid
to the holders of New Belk Class B Common Stock must be one-tenth of the voting
rights of each security underlying the convertible or exchangeable security paid
to the holders of the New Belk Class A Common Stock and (ii) such underlying
securities paid to the holders of New Belk Class A Common Stock must convert
into the underlying securities paid to the holders of New Belk Class B Common
Stock upon the same terms and conditions applicable to the conversion of New
Belk Class A Common Stock into New Belk Class B Common Stock and must have the
same restrictions on transfer and ownership applicable to the transfer and
ownership of the New Belk Class A Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the
5
<PAGE> 1864
corporate action exceed the votes cast in opposition to the corporate action at
a duly held meeting at which a quorum is present, the corporate action is deemed
to be approved by the stockholders. The Company Articles do not specify a
different voting requirement.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the shareholders and approved (i) by a majority
(unless the articles of incorporation, a bylaw adopted by the shareholders or
the board of directors require a greater vote or a vote by voting groups) of the
votes entitled to be cast on the amendment by any voting group with respect to
which the amendment would create dissenters' rights and (ii) when a quorum is
present, by all other voting groups entitled to vote on the amendment through
casting more affirmative than opposing votes. As under the DGCL, the holders of
the outstanding shares of a class or series are entitled to vote as a separate
voting group (if shareholder voting is otherwise required by the NCBCA) on a
proposed amendment if the amendment would change certain fundamental rights and
preferences of that class or series. The Company Articles do not specify a
greater voting requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power, nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has power, by
vote of a majority of all the directors, and without the assent or vote of the
shareholders, to make, alter, amend and rescind the bylaws of the Company.
6
<PAGE> 1865
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without prior notice, if all
holders of outstanding shares entitled to vote on such action sign the written
consent(s) describing such action. The Company Bylaws and Company Articles do
not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to
7
<PAGE> 1866
time exclusively by the New Belk Board pursuant to a resolution adopted by a
majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more than 30% during any 12-month period. The
articles of incorporation or bylaws may establish a variable range for the size
of the board of directors by fixing a minimum and maximum number of directors.
If a variable range is established, the number of directors may be fixed or
changed from time to time, within the minimum and maximum, by the shareholders
or (unless the articles of incorporation or a shareholders' agreement shall
otherwise provide) the board of directors. After shares are issued, only the
shareholders may change the range for the size of the board or change from a
fixed to a variable-range size board or vice versa. The Company Bylaws require
the Company Board to consist of at least three, but no more than 15, members.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
8
<PAGE> 1867
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the disinterested directors or committee authorized, approved or
ratified the transaction; (ii) the material facts of the transaction and the
director's interest were disclosed or known to the shareholders entitled to vote
and the disinterested shares authorized, approved or ratified the transaction;
or (iii) the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
9
<PAGE> 1868
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation, or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any transaction from which the director derived an improper
personal benefit or (iv) acts or omissions occurring prior to the date the
provisions became effective.
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
10
<PAGE> 1869
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested stockholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder,
except in certain circumstances; (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested stockholder, except
in certain circumstances; or (v) any receipt by the interested stockholder of
the benefit of any loans, advances, guarantees, pledges or other financial
benefits (other than those expressly permitted in (i) through (iv) above)
provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) an
affiliate or associate of the corporation who within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
11
<PAGE> 1870
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any final action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
12
<PAGE> 1871
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates must be deposited,
(iii) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the Payment Demand is received, (iv) set a date
by which the Surviving Corporation must receive the Payment Demand, which date
may not be fewer than 30 nor more than 60 days after the date the Dissenters'
Notice is mailed and (v) be accompanied by a copy of Article 13. A Shareholder
who is sent a Dissenters' Notice and who wishes to assert dissenters' rights
must demand payment and deposit his certificates in accordance with the terms of
the Dissenters' Notice. A Shareholder who demands payment and deposit his
certificates in accordance with the terms of the Dissenters' Notice retains all
other rights of a Shareholder until these rights are canceled or modified by the
consummation and effectiveness of the Merger. A Shareholder who does not demand
payments or deposit his certificates in accordance with the terms of the
Dissenters' Notice will not be entitled to payment for his shares under the
NCBCA. If any such holder of Common Stock fails to perfect or shall have
effectively withdrawn or lost such right, each share of such holder's Common
Stock will thereupon be deemed to have been converted into and to have become,
as of the Effective Time, the right to receive, without any interest thereon,
the number of shares of New Belk Class A Common Stock such Shareholder is
otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
13
<PAGE> 1872
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such Shareholder dissents and such
Shareholder's other shares were registered in the names of different
shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period")multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
14
<PAGE> 1873
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ----------- ----------- -------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $10,071,386 $10,071,386 0.6 $(2,630,794) $ 8,673,626
EBITDA............... 1,348,364 1,348,365 7 (2,630,794) 12,069,350
EBIT................. 1,156,039 1,156,040 10 (2,630,794) 14,191,195
Net Income........... 762,435 762,435 15 -- 11,436,525
Book Equity.......... 6,536,839 6,536,177 1 -- 6,536,177
</TABLE>
15
<PAGE> 1874
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
N/A N/A% X $ N/A = $ N/A
-----------
Total $ N/A
===========
Relative Operating Value of Company $14,191,195
Relative Operating Value of Other Companies Owned by Company + --
-----------
Total Relative Value of Company = $14,191,195
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Enterprises,
Inc. .909% X $14,191,195 = $ 128,998
Belk Department Store
of Greenville,
N.C., Inc. 13.3712 X 14,191,195 = 1,897,533
Belk Brothers of
Monroe, North
Carolina,
Incorporated 1.8181 X 14,191,195 = 258,010
-----------
Total $ 2,284,541
===========
Total Relative Value of Company $14,191,195
Total Relative Value of Company Owned by Other Belk Companies - 2,284,541
-----------
Net Relative Value of Company = $11,906,653
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$11,906,653 / $1,156,226,577 = 1.0298%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(1.0298% X 59,998,834) / 8,860 = 69.7358
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 1875
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 72.20
Dividends(2).............................................. 15.00
Book value per share(3)................................... 619.02
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 66.95
Dividends(2).............................................. 18.13
Book value per share...................................... 873.09
</TABLE>
- ---------------
(1) Based on 10,560 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 10,560 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
17
<PAGE> 1876
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 9,402 $ 9,756 $10,071
Net income.................................................. 514 660 762
Per common share
Net income (loss)(1)...................................... 48.65 62.50 72.20
Dividends................................................. 12.50 14.00 15.00
Book value(2)............................................. 513.32 561.82 619.02
Total assets................................................ 5,967 6,797 7,416
Shareholders' equity........................................ 5,421 5,933 6,537
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $7,015 $6,967
Income from operations...................................... 744 813
</TABLE>
- ---------------
(1) Based on 10,560 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding for the years ended January 31, 1995,
February 3, 1996 and February 1, 1997.
(2) Based on 10,560 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 1877
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Harnett
Crossing in Dunn, North Carolina. The Company's store operates in a manner
consistent with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is managed out of the Howard group office in
Fayetteville, North Carolina.
Facilities. The Company owns the store property and building, which
contains approximately 68,000 square feet of floor area, together with an
adjacent parking area. The Company believes the building is adequate to meet its
current needs.
Competition. The Company's principal competitor in the market is Wal-Mart.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 1878
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer) (a)(b)........ 2,334 22.1%
Thomas M. Belk, Jr. (Director and Executive Officer)
(a)(b).................................................... 2,202 20.9%
H. W. McKay Belk (Director and Executive Officer) (a)(b).... 2,142 20.3%
John R. Belk (Director and Executive Officer) (a)(b)........ 2,142 20.3%
Henderson Belk (Director)................................... 0 *
Sarah Belk Gambrell (Director).............................. 324 3.1%
Leroy Robinson (Director) (a)............................... 106 1.0%
Troy M. Howard (Director and Executive Officer)............. 0 *
William R. Young (Executive Officer)........................ 0 *
Richard L. Hensdale......................................... 800 7.6%
Frances H. Autry............................................ 800 7.6%
Dorothy H. Gardner.......................................... 800 7.6%
Lucy Simpson Kuhne (c)...................................... 1,000 7.6%
Mary E. S. Hanahan.......................................... 800 7.6%
W. M. Raynor................................................ 960 9.1%
Belk Department Store of Greenville, N.C., Inc.............. 1,412 13.4%
All Directors and Executive Officers as a group (8
persons).................................................. 3,726 35.3%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk and Leroy Robinson -- 2801 West Tyvola Road, Charlotte, N.C.
28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207;
Troy M. Howard and William R. Young -- 4525 Camp Ground Road, Fayetteville, N.C.
28314; Richard L. Hensdale -- P. O. Box 53344, Fayetteville, N.C. 28305; Frances
Hensdale Autry -- 1203 Longleaf Drive, Fayetteville, N.C. 28305; Dorothy H.
Gardner -- 1609 Pugh Street, Fayetteville, N.C. 28305; Lucy Simpson Kuhne -- 14
S. Main Street, Greenville, S.C. 29601; Mary E. S. Hanahan -- P.O. Box 1294,
Charleston, S.C. 29402; W. M. Raynor -- 226 Edgedale Drive, High Point, N. C.
27262; Belk Department Store of Greenville, N.C., Inc. -- 2801 West Tyvola Road,
Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 106 shares held by Milburn Investment Company, of which the Estate
of Thomas M. Belk is the sole shareholder. Voting and investment power is
shared by the Executors of the Estate of Thomas M. Belk who are Katherine
McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W. McKay Belk,
John R. Belk, John M. Belk and Leroy Robinson.
(b) Includes 1,412 shares held by Belk Department Store of Greenville, N.C.,
Inc., 96 shares held by Belk Enterprises, Inc. and 192 shares held by Belk
Brothers of Monroe, North Carolina, Incorporated, which shares are voted by
the members of the Executive Committee of the Board of Directors of each
such
20
<PAGE> 1879
Corporation, under authority given by the directors of each such
Corporation at the annual meeting of directors held in March, 1997. The
Executive Committee consists of John M. Belk, Thomas M. Belk, Jr., H. W.
McKay Belk and John R. Belk.
(c) Includes 200 shares held by the Estate of William Henry Belk Simpson.
Voting and investment power is shared by the Personal Representatives, who
are Kate Simpson, Lucy Kuhne and Claire Russo.
21
<PAGE> 1880
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
</TABLE>
F-1
<PAGE> 1881
BELK'S DEPARTMENT STORE OF DUNN, NORTH CAROLINA, INCORPORATED
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 91,197 $ 173,939
Accounts receivable, net.................................. 1,652,344 1,798,995
Merchandise inventory..................................... 1,726,400 1,837,523
Receivable from affiliates, net........................... 793,583 952,697
Refundable income taxes................................... -- 27,692
Deferred income taxes..................................... 44,761 44,607
Other..................................................... 74,036 71,248
---------- ----------
Total current assets........................................ 4,382,321 4,906,701
Loans receivable from affiliates, net....................... 1,254,159 1,504,159
Investments................................................. 2,662 2,662
Property, plant and equipment, net.......................... 1,121,819 961,670
Deferred income taxes....................................... -- 9,580
Other noncurrent assets..................................... 36,181 31,177
---------- ----------
$6,797,142 $7,415,949
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... 639,830 770,018
Accrued income taxes...................................... 123,256 14,112
---------- ----------
Total current liabilities................................... 763,086 784,130
Deferred income taxes....................................... 8,099 --
Other noncurrent liabilities................................ 93,152 94,980
---------- ----------
Total liabilities........................................... 864,337 879,110
Shareholders' equity:
Common stock.............................................. 1,056,000 1,056,000
Retained earnings......................................... 4,876,805 5,480,839
---------- ----------
Total shareholders' equity.................................. 5,932,805 6,536,839
---------- ----------
$6,797,142 $7,415,949
========== ==========
</TABLE>
F-2
<PAGE> 1882
BELK'S DEPARTMENT STORE OF DUNN, NORTH CAROLINA, INCORPORATED
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales................................................. $9,401,565 $9,756,305 $10,071,385
Operating costs and expenses.............................. 8,635,519 8,765,605 8,914,623
---------- ---------- -----------
Income from operations.................................... 766,046 990,700 1,156,762
---------- ---------- -----------
Other income (expense):
Interest, net........................................... 38,146 72,457 83,309
Dividend income......................................... -- 500 500
Gain (loss) on disposal of property, plant and
equipment............................................ 125 -- --
Miscellaneous, net...................................... (11,545) (8,512) (1,223)
---------- ---------- -----------
Total other expense, net.................................. 26,726 64,445 82,586
---------- ---------- -----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities....... 792,772 1,055,145 1,239,348
Income tax expense (benefit).............................. 279,057 395,131 476,914
---------- ---------- -----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities..................... 513,715 660,014 762,434
---------- ---------- -----------
Net earnings.............................................. 513,715 660,014 762,434
Retained earnings at beginning of period.................. 3,982,916 4,364,631 4,876,805
Dividends paid............................................ (132,000) (147,840) (158,400)
---------- ---------- -----------
Retained earnings at end of period........................ $4,364,631 $4,876,805 $ 5,480,839
========== ========== ===========
</TABLE>
F-3
<PAGE> 1883
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 1884
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 1885
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13.
DISSENTERS' RIGHTS.
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
A-1
<PAGE> 1886
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares; (ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (iv) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes; (v)
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional shares so created is to be acquired by cash under
G.S. 55-6-04; (vi) changes the corporation into a nonprofit corporation or
cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 1887
SEC.SEC. 55-13-04 TO 55-13-19. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 1888
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 1889
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 1890
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 1891
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................ $10,071,386 $762,435 $ 1,156,039 $1,348,364 $6,536,839
Adjustments to eliminate less than
wholly-owned subsidiaries................ -- -- -- -- --
----------- -------- ----------- ---------- ----------
Adjusted Shareholders' Statement........... $10,071,386 762,435 1,156,039 1,348,364 6,536,839
=========== -------- ----------- ---------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............ -- -- --
Gain/loss on sale of securities.......... -- -- --
Impairment loss.......................... -- -- --
Equity in earnings of unconsolidated
subsidiaries........................... -- -- --
Gain/loss on discontinued operations..... -- -- --
Adjustment to tax expense................ -- -- -- --
-------- ----------- ----------
Total non-operating items.................. -- -- --
-------- ----------- ----------
Other Adjustments:
Adjustment for dividends received from
other Belk entities.................... -- -- --
Adjustment for ownership in other Belk
entities............................... (662)
-------- ----------- ---------- ----------
Per Model.................................. $762,435 $ 1,156,039 $1,348,364 $6,536,177
======== =========== ========== ==========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................ $ (173,938)
Negative cash balances reclassified to
accounts payable..................... --
Receivables from affiliates, net....... (952,697)
Loans receivable from affiliates,
net.................................. (1,504,159)
Liabilities
Notes payable.......................... --
Current installments of long-term
debt................................. --
Current portion of obligations under
capital leases....................... --
Payables to affiliates, net............ --
Long-term debt, excluding current
installments......................... --
Obligations under capital leases,
excluding current portion............ --
Loans payable to affiliates, net....... --
-----------
Net debt (cash)............................ (2,630,794)
Adjustments to eliminate less than
wholly-owned subsidiaries................ --
-----------
Per Model.................................. $(2,630,794)
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 1892
SUPPLEMENT NO. 44
<PAGE> 1893
BELK'S DEPARTMENT STORE OF DUNN, NORTH CAROLINA, INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 3:10 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: ,1998
------------------
-----------------------------
Signature
-----------------------------
Signature
Name(s) should be signed
exactly as shown to the left
hereof. Title should be added
if signing as executor,
administrator, trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 44
<PAGE> 1894
BELK DEPARTMENT STORE OF EDEN, N.C., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk Department Store of Eden, N.C., Inc. (the
"Company"), to be held on April 15, 1998, at 8:30 a.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 75.1865 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 96,615 shares of New Belk Class A Common Stock which
will represent approximately 0.1610% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(45)
<PAGE> 1895
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 1896
BELK DEPARTMENT STORE OF EDEN, N.C., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK DEPARTMENT STORE OF EDEN, N.C., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk Department Store of Eden, N.C., Inc. (the "Company") will be
held on April 15, 1998, at 8:30 a.m., local time, at the offices of Belk Stores
Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for
the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 75.1865 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 1897
BELK DEPARTMENT STORE OF EDEN, N.C., INC.
SUPPLEMENT NO. 45
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 45 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK DEPARTMENT
STORE OF EDEN, N.C., INC. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE
DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED
HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION.
IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE
INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICALS FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 1898
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1943. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 8:30 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 75.1865 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 2,078 shares of Common Stock
outstanding held of record by 44 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 75.2% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 1899
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. In addition, the Reorganization is expected to have
certain other benefits for the Company and the Shareholders, including the
ability to share the risk associated with the uncertain prospects for the
Company's store in its current location. The store is located in a relatively
small market that is also close to larger markets with larger Belk stores and
other competitors. The prospects for growth of the Company's store may be
limited because of the size of its market and its close proximity to such
competition. The Merger would allow the Company to share with New Belk the risk
associated with the Company's current market and participate in the growth of
other Belk stores located in markets with better growth prospects.
There can be no assurance, however, that any of these benefits will be
achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 5,520 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common
3
<PAGE> 1900
Stock are entitled to 10 votes per share. The holders of New Belk Class B Common
Stock are entitled to one vote per share. Shares of New Belk Class A Common
Stock may be owned only by Class A Permitted Holders. If a share of New Belk
Class A Common Stock is transferred to any person other than a Class A Permitted
Holder, whether by sale, assignment, gift, bequest, appointment or otherwise,
such share will be converted automatically into a share of New Belk Class B
Common Stock. Shares of New Belk Class A Common Stock are convertible into New
Belk Class B Common Stock, in whole or in part, at any time and from time to
time at the option of the holder, on the basis of one share of New Belk Class B
Common Stock for each share of New Belk Class A Common Stock converted. Shares
of New Belk Class A Common Stock held by a New Belk Stockholder who is a Class A
Permitted Holder will also automatically convert into New Belk Class B Common
Stock in the event that such New Belk Stockholder no longer meets the
requirements of a Class A Permitted Holder. New Belk Class B Common Stock has no
conversion rights. The Company Articles provide for only one class of common
stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same
4
<PAGE> 1901
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. DGCL requires that
an amendment of the certificate of incorporation of a corporation be adopted by
the board of directors and the holders of a majority of the outstanding shares
of stock entitled to vote thereon. The holders of the outstanding shares of a
class are entitled to vote as a separate class on a proposed amendment that
would increase or decrease the aggregate number of authorized shares of such
class, increase or decrease the par value of the shares of such class or alter
or change the powers, preferences or special rights of the shares of such class
so as to affect them
5
<PAGE> 1902
adversely. If any proposed amendment would alter or change the powers,
preferences or special rights of one or more series of any class so as to affect
them adversely, but would not so affect the entire class, then only the shares
of the series so affected by the amendment will be considered a separate class
for purposes of voting by classes. The New Belk Certificate is consistent with
the foregoing provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the shareholders and approved (i) by a majority
(unless the articles of incorporation, a bylaw adopted by the shareholders or
the board of directors require a greater vote or a vote by voting groups) of the
votes entitled to be cast on the amendment by any voting group with respect to
which the amendment would create dissenters' rights and (ii) when a quorum is
present, by all other voting groups entitled to vote on the amendment through
casting more affirmative than opposing votes. As under the DGCL, the holders of
the outstanding shares of a class or series are entitled to vote as a separate
voting group (if shareholder voting is otherwise required by the NCBCA) on a
proposed amendment if the amendment would change certain fundamental rights and
preferences of that class or series. The Company Articles do not specify a
greater voting requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power, nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has power, by
vote of a majority of all the directors and without the assent or vote of the
shareholders, to make, alter, amend and rescind the bylaws of the Company.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without
6
<PAGE> 1903
prior notice, if all holders of outstanding shares entitled to vote on such
action sign the written consent(s) describing such action. The Company Bylaws
and Company Articles do not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more
7
<PAGE> 1904
than 30% during any 12-month period. The articles of incorporation or bylaws may
establish a variable range for the size of the board of directors by fixing a
minimum and maximum number of directors. If a variable range is established, the
number of directors may be fixed or changed from time to time, within the
minimum and maximum, by the shareholders or (unless the articles of
incorporation or a shareholders' agreement shall otherwise provide) the board of
directors. After shares are issued, only the shareholders may change the range
for the size of the board or change from a fixed to a variable-range size board
or vice versa. The Company Bylaws require the Company Board to consist of at
least three, but no more than 15, members.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
8
<PAGE> 1905
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the disinterested directors or committee authorized, approved or
ratified the transaction; (ii) the material facts of the transaction and the
director's interest were disclosed or known to the shareholders entitled to vote
and the disinterested shares authorized, approved or ratified the transaction;
or (iii) the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
9
<PAGE> 1906
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any transaction from which the director derived an improper
personal benefit or (iv) acts or omissions occurring prior to the date the
provisions became effective.
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which
10
<PAGE> 1907
results in the issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder, except in certain circumstances; (iv)
any transaction involving the corporation which has the effect of increasing the
proportionate share of the stock of any class or series, or securities
convertible into the stock of any class or series, of the corporation which is
owned by the interested stockholder, except in certain circumstances; or (v) any
receipt by the interested stockholder of the benefit of any loans, advances,
guarantees, pledges or other financial benefits (other than those expressly
permitted in (i) through (iv) above) provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) an
affiliate or associate of the corporation who within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a
11
<PAGE> 1908
preemptive right to purchase, subscribe for or otherwise acquire stock of any
class or series of New Belk or any security convertible into or exchangeable
for, or any warrant, option or right to purchase, subscribe for or otherwise
acquire, stock of any class or series of New Belk, whether now or hereafter
authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action by
the board of directors, records of any final action of a committee of the board
of directors while acting in place of the board of directors on behalf of the
corporation, minutes of any meeting of the shareholders and records of action
taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
12
<PAGE> 1909
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates must be deposited,
(iii) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the Payment Demand is received, (iv) set a date
by which the Surviving Corporation must receive the Payment Demand, which date
may not be fewer than 30 nor more than 60 days after the date the Dissenters'
Notice is mailed and (v) be accompanied by a copy of Article 13. A Shareholder
who is sent a Dissenters' Notice and who wishes to assert dissenters' rights
must demand payment and deposits his certificates in accordance with the terms
of the Dissenters' Notice. A Shareholder who demands payment and deposit his
certificates in accordance with the terms of the Dissenters' Notice retains all
other rights of a Shareholder until these rights are canceled or modified by the
consummation and effectiveness of the Merger. A Shareholder who does not demand
payments or deposit his certificates in accordance with the terms of the
Dissenters' Notice will not be entitled to payment for his shares under the
NCBCA. If any such holder of Common Stock fails to perfect or shall have
effectively withdrawn or lost such right, each share of such holder's Common
Stock will thereupon be deemed to have been converted into and to have become,
as of the Effective Time, the right to receive, without any interest thereon,
the number of shares of New Belk Class A Common Stock such Shareholder is
otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
13
<PAGE> 1910
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such Shareholder dissents and such
Shareholder's other shares were registered in the names of different
shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
14
<PAGE> 1911
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $5,472,959 $5,472,959 0.6 $272,950 $3,010,826
EBITDA............... 343,948 343,948 7 272,950 2,134,687
EBIT................. 311,143 311,144 10 272,950 2,838,491
Net Income........... 176,230 176,230 15 -- 2,643,450
Book Equity.......... 1,663,410 1,662,718 1 -- 1,662,718
</TABLE>
15
<PAGE> 1912
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
N/A N/A% X $ N/A = $ N/A
----------
Total N/A
==========
Relative Operating Value of Company $3,010,826
Relative Operating Value of Other Companies Owned by Company + --
----------
Total Relative Value of Company = $3,010,826
==========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Brothers Company 5.0048% X $ 3,010,826 = $ 150,686
Belk Enterprises,
Inc. 13.4745 X 3,010,826 = 405,694
Belk-Beck Company of
Burlington, North
Carolina, Inc. 2.6949 X 3,010,826 = 81,139
Belk's Department
Store of Mount
Airy, North
Carolina,
Incorporated 16.9875 X 3,010,826 = 511,464
----------
Total $1,148,982
==========
Total Relative Value of Company $3,010,826
Total Relative Value of Company Owned by Other Belk Companies - 1,148,982
----------
Net Relative Value of Company = $1,861,844
==========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$1,861,844 / $1,156,226,577 = .1610%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.1610% X 59,998,834) / 1,285 = 75.1865
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 1913
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 84.81
Dividends(2).............................................. 5.00
Book value per share(3)................................... 800.49
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 72.18
Dividends(2).............................................. 19.55
Book value per share...................................... 941.33
</TABLE>
- ---------------
(1) Based on 2,078 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 2,078 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
17
<PAGE> 1914
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 6,048 $ 5,657 $ 5,473
Net income.................................................. 261 166 176
Per common share
Net income (loss)(1)...................................... 125.69 79.92 84.81
Dividends................................................. -- 5.00 5.00
Book value(2)............................................. 645.76 720.68 800.49
Total assets................................................ 2,431 2.324 2,408
Shareholders' equity........................................ 1,342 1,498 1,663
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $3,824 $3,827
Income from operations...................................... 150 228
</TABLE>
- ---------------
(1) Based on 2,078 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended as of January 31, 1995,
February 3, 1996 and February 1, 1997.
(2) Based on 2,078 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 1915
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Eden Mall in
Eden, North Carolina. The Company's store operates in a manner consistent with
the business of the Belk Companies described in the Proxy Statement/Prospectus.
The store is managed out of the Huffstetler group office in Greensboro, North
Carolina.
Facilities. The Company leases its store building, which contains
approximately 58,000 square feet of floor area. The current term of the lease
expires in 2005. The Company believes the building is adequate to meet its
current needs.
Competition. Specific competitors in the Company's market include Wal-Mart
and Peebles.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 1916
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Office) (a)(b)(c)(d)... 1,159 55.8%
Thomas M. Belk, Jr. (Director and Executive
Officer)(a)(c)(d)......................................... 955 46.0%
H. W. McKay Belk (Director and Executive Officer)
(a)(c)(d)................................................. 953 45.9%
John R. Belk (Director and Executive Officer) (a)(c)(d)..... 955 46.0%
Henderson Belk (Director) (b)............................... 22 1.1%
Sarah Belk Gambrell (Director) (b).......................... 216 10.4%
David Belk Cannon (Director)................................ 0 *
James K. Glenn, Jr. (Director) (e).......................... 80 3.8%
Leroy Robinson (a).......................................... 118 5.7%
Katherine McKay Belk (a).................................... 158 7.6%
Katherine Belk Morris (a)................................... 160 7.7%
Sarah Gambrell Knight....................................... 155 7.5%
Pete Huffstetler (Executive Officer)........................ 0 *
Gordon J. Tendler (Executive Officer)....................... 0 *
Darrell Murphy (Executive Officer).......................... 0 *
Thomas M. Belk, Trustee U/A dated September 15, 1993........ 118 5.7%
Belk Enterprises, Inc....................................... 280 13.5%
Belk's Department Store of Mount Airy, North Carolina,
Incorporated.............................................. 353 17.0%
J.V. Properties............................................. 104 5.0%
All Directors and Executive Officers as a group (9
persons).................................................. 1,563 75.2%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson, Katherine McKay Belk and Katherine Belk
Morris -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk Gambrell
300 Cherokee Road, Charlotte, N.C. 28207; Sarah Gambrell Knight -- 810 Colville
Road, Charlotte, N.C. 28207; David Belk Cannon -- 1607 W. Floyd Baker Blvd.,
Gaffney, S.C. 29341; James K. Glenn, Jr. -- P.O. Box 2736, Winston-Salem, N.C.
27102; Pete Huffstetler, Darrell Murphy and Gordon J. Tendler -- 1-104 Carolina
Circle Mall, Greensboro, N.C. 27405; Belk Enterprises, Inc., Belk's Department
Store of Mount Airy, North Carolina, Incorporated and J.V. Properties -- 2801
West Tyvola Road, Charlotte, N.C. 28217-4500; Thomas M. Belk, Trustee U/A dated
September 15, 1993 -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 118 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
20
<PAGE> 1917
(b) Includes 22 shares held in several Trusts established by the Will of Mary
I. Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(c) Included are 280 shares held by Belk Enterprises, Inc., 353 shares held by
Belk's Department Store of Mount Airy, North Carolina, Incorporated and 56
shares held by Belk-Beck Company of Burlington, North Carolina, Inc., which
shares are voted by the members of the Executive Committee of the Board of
Directors of each such Corporation, under authority given by the directors
of each such Corporation at the annual meeting of directors held in March,
1997. The Executive Committee of each such Corporation consists of John M.
Belk, Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(d) Included are 104 shares held by J. V. Properties, a partnership. The Board
of Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay
Belk and John R. Belk, have voting and investment power with respect to
such shares.
(e) Included are 70 shares held by John Belk Stevens Trust U/W ITEM III,
Section C f/b/o James Kirk Glenn, Jr., et al. Voting and investment power
is vested in James K. Glenn, Jr., the Trustee.
21
<PAGE> 1918
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 1919
BELK DEPARTMENT STORE OF EDEN, N.C., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 44,852 $ 70,151
Accounts receivable, net.................................. 995,900 1,109,049
Merchandise inventory..................................... 1,001,272 1,026,750
Receivable from affiliates, net........................... 37,208 --
Deferred income taxes..................................... 22,201 14,999
Other..................................................... 60,803 52,582
---------- ----------
Total current assets........................................ 2,162,236 2,273,531
Investments................................................. 692 692
Property, plant and equipment, net.......................... 136,425 112,561
Other noncurrent assets..................................... 24,928 21,016
---------- ----------
$2,324,281 $2,407,800
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable............................................. $ 475,000 $ --
Accounts payable and accrued expenses..................... 285,682 332,287
Payables to affiliates, net............................... -- 343,099
Accrued income taxes...................................... 30,162 34,060
---------- ----------
Total current liabilities................................... 790,844 709,446
Deferred income taxes....................................... 16,842 8,928
Other noncurrent liabilities................................ 19,025 26,016
---------- ----------
Total liabilities........................................... 826,711 744,390
Shareholders' equity:
Common stock.............................................. 207,800 207,800
Retained earnings......................................... 1,289,770 1,455,610
---------- ----------
Total shareholders' equity.................................. 1,497,570 1,663,410
---------- ----------
$2,324,281 $2,407,800
========== ==========
</TABLE>
F-2
<PAGE> 1920
BELK DEPARTMENT STORE OF EDEN, N.C., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ------------ ------------
<S> <C> <C> <C>
Net sales.................................................. $6,048,442 $5,656,610 $5,472,959
Operating costs and expenses............................... 5,566,021 5,332,347 5,161,496
---------- ---------- ----------
Income from operations..................................... 482,421 324,263 311,463
---------- ---------- ----------
Other income (expense):
Interest, net............................................ (47,846) (54,458) (35,671)
Gain (loss) on disposal of property, plant and
equipment............................................. 35 100 --
Miscellaneous, net....................................... (6,356) (10,095) (320)
---------- ---------- ----------
Total other expense, net................................... (54,167) (64,453) (35,991)
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 428,254 259,810 275,472
Income tax expense (benefit)............................... 167,072 93,741 99,242
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 261,182 166,069 176,230
---------- ---------- ----------
Net earnings............................................... 261,182 166,069 176,230
Retained earnings at beginning of period................... 872,909 1,134,091 1,289,770
Dividends paid............................................. -- (10,390) (10,390)
---------- ---------- ----------
Retained earnings at end of period......................... $1,134,091 $1,289,770 $1,455,610
========== ========== ==========
</TABLE>
F-3
<PAGE> 1921
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996, AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 1922
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 1923
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13.
DISSENTERS' RIGHTS.
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares;
A-1
<PAGE> 1924
(ii) creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares; (iii) alters or abolishes a preemptive right of
the holder of the shares to acquire shares or other securities; (iv)
excludes or limits the right of the shares to vote on any matter, or to
cumulate votes; (v) reduces the number of shares owned by the shareholder
to a fraction of a share if the fractional shares so created is to be
acquired by cash under G.S. 55-6-04; (vi) changes the corporation into a
nonprofit corporation or cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 1925
SEC.SEC. 55-13-04 TO 55-13-19. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 1926
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 1927
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 1928
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 1929
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
---------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement.................... $5,472,959 $176,230 $311,143 $343,948 $1,663,410
Adjustments to eliminate less than wholly-owned
subsidiaries................................. -- -- -- -- --
---------- -------- -------- -------- ----------
Adjusted Shareholders' Statement............... $5,472,959 176,230 311,143 343,948 1,663,410
========== -------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E................ -- -- --
Gain/loss on sale of securities.............. -- -- --
Impairment loss.............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries............................... -- -- --
Gain/loss on discontinued operations......... -- -- --
Adjustment to tax expense.................... -- -- -- --
-------- -------- --------
Total non-operating items...................... -- -- --
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities.............................. -- -- --
Adjustment for ownership in other Belk
entities................................... (692)
-------- -------- -------- ----------
Per Model...................................... $176,230 $311,143 $343,948 $1,662,718
======== ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER SHAREHOLDERS'
STATEMENT
Assets
Cash & cash equivalents.................... $ (70,149)
Negative cash balances reclassified to
accounts payable......................... --
Receivables from affiliates, net........... --
Loans receivable from affiliates, net...... --
Liabilities
Notes payable.............................. --
Current installments of long-term debt..... --
Current portion of obligations under
capital leases........................... --
Payables to affiliates, net................ 343,099
Long-term debt, excluding current
installments............................. --
Obligations under capital leases, excluding
current portion.......................... --
Loans payable to affiliates, net........... --
----------
Net debt (cash)................................ 272,950
Adjustments to eliminate less than wholly-owned
subsidiaries................................. --
----------
Per Model...................................... $ 272,950
==========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 1930
SUPPLEMENT NO. 45
<PAGE> 1931
BELK DEPARTMENT STORE OF EDEN, N.C., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 8:30 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 45
<PAGE> 1932
BELK DEPARTMENT STORE OF ELKIN, N.C., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk Department Store of Elkin, N.C., Inc. (the
"Company"), to be held on April 16, 1998, at 9:40 a.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 46.7109 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 40,498 shares of New Belk Class A Common Stock which
will represent approximately 0.0675% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(46)
<PAGE> 1933
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 1934
BELK DEPARTMENT STORE OF ELKIN, N.C., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK DEPARTMENT STORE OF ELKIN, N.C., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk Department Store of Elkin, N.C., Inc. (the "Company") will be
held on April 16, 1998, at 9:40 a.m., local time, at the offices of Belk Stores
Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for
the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 46.7109 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 1935
BELK DEPARTMENT STORE OF ELKIN, N.C., INC.
SUPPLEMENT NO. 46
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 46 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK DEPARTMENT
STORE OF ELKIN, N.C., INC. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE
DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED
HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION.
IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE
INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 16
SELECTED HISTORICAL FINANCIAL INFORMATION................... 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 18
BUSINESS OF THE COMPANY..................................... 18
SECURITY OWNERSHIP OF THE COMPANY........................... 190
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION.................................. B-1
</TABLE>
<PAGE> 1936
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1938. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 9:40 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 46.7109 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 1,520 shares of Common Stock
outstanding held of record by 17 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 79.5% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 1937
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 2,000 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock
3
<PAGE> 1938
held by a New Belk Stockholder who is a Class A Permitted Holder will also
automatically convert into New Belk Class B Common Stock in the event that such
New Belk Stockholder no longer meets the requirements of a Class A Permitted
Holder. New Belk Class B Common Stock has no conversion rights. The Company
Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving
4
<PAGE> 1939
the distribution. The Company Bylaws provide that the Board of Directors of the
Company (the "Company Board") may from time to time declare dividends on the
Company's outstanding shares in the manner and upon the terms and conditions
provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. DGCL requires that
an amendment of the certificate of incorporation of a corporation be adopted by
the board of directors and the holders of a majority of the outstanding shares
of stock entitled to vote thereon. The holders of the outstanding shares of a
class are entitled to vote as a separate class on a proposed amendment that
would increase or decrease the aggregate number of authorized shares of such
class, increase or decrease the par value of the shares of such class or alter
or change the powers, preferences or special rights of the shares of such class
so as to affect them adversely. If any proposed amendment would alter or change
the powers, preferences or special rights of one or more series of any class so
as to affect them adversely, but would not so affect the entire class, then only
the shares of the series so affected by the amendment will be considered a
separate class for purposes of voting by classes. The New Belk Certificate is
consistent with the foregoing provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the
5
<PAGE> 1940
shareholders and approved (i) by a majority (unless the articles of
incorporation, a bylaw adopted by the shareholders or the board of directors
require a greater vote or a vote by voting groups) of the votes entitled to be
cast on the amendment by any voting group with respect to which the amendment
would create dissenters' rights and (ii) when a quorum is present, by all other
voting groups entitled to vote on the amendment through casting more affirmative
than opposing votes. As under the DGCL, the holders of the outstanding shares of
a class or series are entitled to vote as a separate voting group (if
shareholder voting is otherwise required by the NCBCA) on a proposed amendment
if the amendment would change certain fundamental rights and preferences of that
class or series. The Company Articles do not specify a greater voting
requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power, nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has power, by
vote of a majority of all the directors, and without the assent or vote of the
shareholders, to make, alter, amend and rescind the bylaws of the Company.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without prior notice, if all
holders of outstanding shares entitled to vote on such action sign the written
consent(s) describing such action. The Company Bylaws and Company Articles do
not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding
6
<PAGE> 1941
having the right to vote for such directors, order an election to be held to
fill any such vacancies or newly created directorships or to replace the
directors chosen by the directors then in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more than 30% during any 12-month period. The
articles of incorporation or bylaws may establish a variable range for the size
of the board of directors by fixing a minimum and maximum number of directors.
If a variable range is established, the number of directors may be fixed or
changed from time to time, within the minimum and maximum, by the shareholders
or (unless the articles of incorporation or a shareholders' agreement shall
otherwise provide) the board of directors. After shares are issued, only the
shareholders may change the range for the size of the board or change from a
fixed to a variable-range size board or vice versa. The Company Bylaws require
the Company Board to consist of at least three, but no more than 15, members.
7
<PAGE> 1942
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the
8
<PAGE> 1943
disinterested directors or committee authorized, approved or ratified the
transaction; (ii) the material facts of the transaction and the director's
interest were disclosed or known to the shareholders entitled to vote and the
disinterested shares authorized, approved or ratified the transaction; or (iii)
the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any transaction from which the director derived an improper
personal benefit or (iv) acts or omissions occurring prior to the date the
provisions became effective.
9
<PAGE> 1944
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder,
except in certain circumstances; (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested stockholder, except
in certain circumstances; or (v) any receipt by the interested stockholder of
the benefit of any loans, advances, guarantees, pledges or other financial
benefits (other than those expressly permitted in (i) through (iv) above)
provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation
10
<PAGE> 1945
or (ii) an affiliate or associate of the corporation who within three years of
the date in question was the direct or indirect owner of at least 15% of the
voting power of any class or series of the then outstanding stock of the
corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other
11
<PAGE> 1946
books and records and to make copies or extracts therefrom. A proper purpose
means a purpose reasonably related to such person's interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any final action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates must be deposited,
(iii) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the Payment Demand is received, (iv) set a date
by which the Surviving Corporation must receive the Payment Demand, which date
may not be fewer than 30 nor more than 60 days after the date the
12
<PAGE> 1947
Dissenters' Notice is mailed and (v) be accompanied by a copy of Article 13. A
Shareholder who is sent a Dissenters' Notice and who wishes to assert
dissenters' rights must demand payment and deposits his certificates in
accordance with the terms of the Dissenters' Notice. A Shareholder who demands
payment and deposit his certificates in accordance with the terms of the
Dissenters' Notice retains all other rights of a Shareholder until these rights
are canceled or modified by the consummation and effectiveness of the Merger. A
Shareholder who does not demand payments or deposit his certificates in
accordance with the terms of the Dissenters' Notice will not be entitled to
payment for his shares under the NCBCA. If any such holder of Common Stock fails
to perfect or shall have effectively withdrawn or lost such right, each share of
such holder's Common Stock will thereupon be deemed to have been converted into
and to have become, as of the Effective Time, the right to receive, without any
interest thereon, the number of shares of New Belk Class A Common Stock such
Shareholder is otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such
13
<PAGE> 1948
Shareholder dissents and such Shareholder's other shares were registered in the
names of different shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............. $3,000,781 $3,000,781 0.6 $667,599 $1,132,871
EBITDA................ 290,764 290,834 7 667,599 1,368,240
EBIT.................. 185,038 185,107 10 667,599 1,183,472
Net Income............ 85,476 85,522 15 -- 1,282,830
Book Equity........... 1,215,088 1,214,762 1 -- 1,214,762
</TABLE>
14
<PAGE> 1949
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
N/A N/A% X $ N/A = $ N/A
----------
Total $ N/A
==========
Relative Operating Value of Company $1,368,240
Relative Operating Value of Other Companies Owned by Company + --
----------
Total Relative Value of Company = $1,368,240
==========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Brothers Company 12.8289% X $ 1,368,240 = $ 175,530
Belk Enterprises,
Inc. 25.2632% X 1,368,240 = 345,661
Belk Department Store
of Greenville,
N.C., Inc. 4.8684% X 1,368,240 = 66,611
----------
Total $ 587,803
==========
Total Relative Value of Company $1,368,240
Total Relative Value of Company Owned by Other Belk Companies - 587,803
----------
Net Relative Value of Company = $ 780,437
==========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$780,437 / $1,156,226,577 = .0675%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON APPLICABLE EXCHANGE
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) RATIO
<S> <C> <C> <C> <C> <C> <C>
(.0675% X 59,998,834) / 867 = 46.7109
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
15
<PAGE> 1950
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 56.23
Dividends(2).............................................. 2.50
Book value per share(3)................................... 799.40
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 44.84
Dividends(2).............................................. 12.14
Book value per share...................................... 584.82
</TABLE>
- ---------------
(1) Based on 1,520 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 1,520 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
16
<PAGE> 1951
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 2,846 $ 2,868 $ 3,001
Net income.................................................. 39 6 85
Per common share
Net income (loss)(1)...................................... 25.98 4.21 56.23
Dividends................................................. 0.00 5.00 2.50
Book value(2)............................................. 746.45 745.67 799.40
Total assets................................................ 2,409 2,206 2,250
Shareholders' equity........................................ 1,135 1,133 1,215
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $1,986 $2,167
Income from operations...................................... 52 160
</TABLE>
- ---------------
(1) Based on 1,520 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 1,520 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
17
<PAGE> 1952
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
To the extent a discussion of the financial condition and results of
operations of the Company for any of the fiscal years ended January 31, 1995,
February 3, 1996 or February 1, 1997 or for either of the nine-month periods
ended November 2, 1996 or November 1, 1997 is necessary to identify certain
trends or conditions that differ from the combined Belk Companies and that are
material to Shareholders' understanding of the financial condition or results of
operations of the Company, such discussion is included below. The discussion
which follows is based upon and should be read in conjunction with the
historical financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus Supplement.
Income from operations increased in fiscal year 1997 and for the nine
months ended November 1, 1997 primarily as a result of better inventory
management. Comparable store sales have increased due to steady growth in the
local economy and the relocation of two new employers to Elkin, North Carolina.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Ridgeview
Crossing in Elkin, North Carolina. The Company's store operates in a manner
consistent with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is managed out of the Huffstetler group office
in Greensboro, North Carolina.
Facilities. The Company leases the land upon which it built its store
building, which contains approximately 27,000 square feet of floor area. The
current term of the lease expires in 2009. The Company believes the building is
adequate to meet its current needs.
Competition. Specific competitors in the Company's market include Wal-Mart
and Goody's.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
18
<PAGE> 1953
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d).............................................. 977 64.3%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(c)(d)................................................. 795 52.3%
H. W. McKay Belk (Director and Executive Officer)
(b)(c)(d)................................................. 795 52.3%
John R. Belk (Director and Executive Officer) (b)(c)(d)..... 817 53.8%
Henderson Belk (Director)................................... 0 *
Sarah Belk Gambrell (Director).............................. 179 11.8%
Leroy Robinson (b).......................................... 132 8.7%
Katherine McKay Belk (b).................................... 132 8.7%
Katherine Belk Morris (b)................................... 140 9.2%
Pete Huffstetler (Executive Officer)........................ 0 *
Gordon J. Tendler (Executive Officer)....................... 0 *
Darrell Murphy (Executive Officer).......................... 0 *
North Carolina National Bank, Successor Trustee u/w J.
Horton Doughton for Virginia D. P. Doughton............... 120 7.9%
Thomas M. Belk, Trustee U/A dated September 15, 1993........ 132 8.7%
Belk Enterprises, Inc....................................... 384 25.3%
J.V. Properties............................................. 195 8.7%
All Directors and Executive Officers as a group (13
persons).................................................. 1,208 79.5%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson, Katherine McKay Belk and Katherine Belk
Morris -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk
Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207; Pete Huffstetler, Darrell
Murphy and Gordon J. Tendler -- 1-104 Carolina Circle Mall, Greensboro, N.C.
27405; Ms. Sara McDonnell (NC1-002-07-13), NationsBank, N. A., Charlotte, N.C.
28255; Thomas M. Belk, Trustee U/A dated September 15, 1993, Belk Enterprises,
Inc. and J.V. Properties -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 58 shares held by Montgomery Investment Company, of which John M.
Belk is the majority shareholder.
(b) Includes 132 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(c) Includes 384 shares held by Belk Enterprises, Inc. and 74 shares held by
Belk Department Store of Greenville, N.C., Inc., which shares are voted by
the members of the Executive Committee of the Board of Directors of each
such Corporation, under authority given by the directors of each such
Corporation
19
<PAGE> 1954
at the annual meeting of directors held in March, 1997. The Executive
Committee of each such Corporation consists of John M. Belk, Thomas M.
Belk, Jr., H. W. McKay Belk and John R. Belk.
(d) Includes 195 shares held by J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
20
<PAGE> 1955
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 1956
BELK DEPARTMENT STORE OF ELKIN, N.C., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 20,409 $ 42,621
Accounts receivable, net.................................. 454,268 523,988
Merchandise inventory..................................... 474,723 529,596
Deferred income taxes..................................... 4,644 7,866
Other..................................................... 24,127 22,486
---------- ----------
Total current assets........................................ 978,171 1,126,557
Investments................................................. 1,566 826
Property, plant and equipment, net.......................... 1,221,307 1,120,342
Other noncurrent assets..................................... 4,836 2,726
---------- ----------
$2,205,880 $2,250,451
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current installments of long-term debt.................... $ 241,704 $ 241,666
Accounts payable and accrued expenses..................... 129,904 205,165
Payables to affiliates, net............................... 367,160 468,552
Accrued income taxes...................................... 12,164 50,505
---------- ----------
Total current liabilities................................... 750,932 965,888
Deferred income taxes....................................... 66,239 52,309
Long-term debt, excluding current installments.............. 241,593 --
Other noncurrent liabilities................................ 13,704 17,166
---------- ----------
Total liabilities........................................... 1,072,468 1,035,363
Shareholders' equity:
Common stock.............................................. 152,000 152,000
Retained earnings......................................... 981,412 1,063,088
---------- ----------
Total shareholders' equity.................................. 1,133,412 1,215,088
---------- ----------
$2,205,880 $2,250,451
========== ==========
</TABLE>
F-2
<PAGE> 1957
BELK DEPARTMENT STORE OF ELKIN, N.C., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $2,846,409 $2,868,175 $3,000,780
Operating costs and expenses............................... 2,689,102 2,786,581 2,812,156
---------- ---------- ----------
Income from operations..................................... 157,307 81,594 188,624
---------- ---------- ----------
Other income (expense):
Interest, net............................................ (69,931) (69,360) (57,202)
Gain (loss) on disposal of property, plant and
equipment............................................. (344) (575) (151)
Gain (loss) on sale of securities........................ -- -- 82
Miscellaneous, net....................................... (3,679) (3,659) (3,518)
---------- ---------- ----------
Total other expense, net................................... (73,954) (73,594) (60,789)
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 83,353 8,000 127,835
Income tax expense (benefit)............................... 43,856 1,596 42,359
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 39,497 6,404 85,476
---------- ---------- ----------
Net earnings............................................... 39,497 6,404 85,476
Retained earnings at beginning of period................... 943,111 982,608 981,412
Dividends paid............................................. -- (7,600) (3,800)
---------- ---------- ----------
Retained earnings at end of period......................... $ 982,608 $ 981,412 $1,063,088
========== ========== ==========
</TABLE>
F-3
<PAGE> 1958
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 1959
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 1960
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13.
DISSENTERS' RIGHTS.
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares;
A-1
<PAGE> 1961
(ii) creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares; (iii) alters or abolishes a preemptive right of
the holder of the shares to acquire shares or other securities; (iv)
excludes or limits the right of the shares to vote on any matter, or to
cumulate votes; (v) reduces the number of shares owned by the shareholder
to a fraction of a share if the fractional shares so created is to be
acquired by cash under G.S. 55-6-04; (vi) changes the corporation into a
nonprofit corporation or cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 1962
SEC.SEC. 55-13-04 TO 55-13-19. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 1963
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 1964
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 1965
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 1966
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
---------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement.................... $3,000,781 $85,476 $185,038 $290,765 $1,215,088
Adjustments to eliminate less than wholly-owned
subsidiaries................................. -- -- -- -- --
---------- ------- -------- -------- ----------
Adjusted Shareholders' Statement............... $3,000,781 85,476 185,038 290,765 1,215,088
========== ------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E................ 101 151 151
Gain/loss on sale of securities.............. (55) (82) (82)
Impairment loss.............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries............................... -- -- --
Gain/loss on discontinued operations......... -- -- --
Adjustment to tax expense.................... -- -- -- --
------- -------- --------
Total non-operating items...................... 46 69 69
------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities.............................. -- -- --
Adjustment for ownership in other Belk
entities................................... (326)
------- -------- -------- ----------
Per Model...................................... $85,522 $185,107 $290,834 $1,214,762
======= ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER SHAREHOLDERS'
STATEMENT
Assets
Cash & cash equivalents.................... $ (42,619)
Negative cash balances reclassified to
accounts payable......................... --
Receivables from affiliates, net........... --
Loans receivable from affiliates, net...... --
Liabilities
Notes payable.............................. --
Current installments of long-term debt..... 241,666
Current portion of obligations under
capital leases........................... --
Payables to affiliates, net................ 468,552
Long-term debt, excluding current
installments............................. --
Obligations under capital leases, excluding
current portion.......................... --
Loans payable to affiliates, net........... (1)
----------
Net debt (cash)................................ 667,598
Adjustments to eliminate less than wholly-owned
subsidiaries................................. (1)
----------
Per Model...................................... $ 667,598
==========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 1967
SUPPLEMENT NO. 46
<PAGE> 1968
BELK DEPARTMENT STORE OF ELKIN, N.C., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 9:40 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 46
<PAGE> 1969
BELK DEPARTMENT STORE OF FOREST CITY, N.C., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk Department Store of Forest City, N.C.,
Inc. (the "Company"), to be held on April 16, 1998, at 8:20 a.m., local time, at
the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 35.8890 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 269,383 shares of New Belk Class A Common Stock which
will represent approximately 0.4490% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage paid
(47)
<PAGE> 1970
envelope. If you plan to attend the Special Meeting, you may vote in person if
you wish, even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 1971
BELK DEPARTMENT STORE OF FOREST CITY, N.C., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK DEPARTMENT STORE OF FOREST CITY, N.C., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk Department Store of Forest City, N.C., Inc. (the "Company")
will be held on April 16, 1998, at 8:10 a.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 35.8890 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 1972
BELK DEPARTMENT STORE OF FOREST CITY, N.C., INC.
SUPPLEMENT NO. 47
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 47 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK DEPARTMENT
STORE OF FOREST CITY, N.C., INC. (THE "COMPANY"), THE DISCUSSION HEREIN
SUPERSEDES THE DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE
INFORMATION CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE
IN THE REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN
THE REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY
AND THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT
BE ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL
CAPITALIZED TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE
MEANINGS SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 16
SELECTED HISTORICAL FINANCIAL INFORMATION................... 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 18
BUSINESS OF THE COMPANY..................................... 18
SECURITY OWNERSHIP OF THE COMPANY........................... 19
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 1973
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1936. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 8:10 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 35.8890 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 10,464 shares of Common Stock
outstanding held of record by 35 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 68.9% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 1974
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus..
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 10,600 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock
3
<PAGE> 1975
held by a New Belk Stockholder who is a Class A Permitted Holder will also
automatically convert into New Belk Class B Common Stock in the event that such
New Belk Stockholder no longer meets the requirements of a Class A Permitted
Holder. New Belk Class B Common Stock has no conversion rights. The Company
Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving
4
<PAGE> 1976
the distribution. The Company Bylaws provide that the Board of Directors of the
Company (the "Company Board") may from time to time declare dividends on the
Company's outstanding shares in the manner and upon the terms and conditions
provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. DGCL requires that
an amendment of the certificate of incorporation of a corporation be adopted by
the board of directors and the holders of a majority of the outstanding shares
of stock entitled to vote thereon. The holders of the outstanding shares of a
class are entitled to vote as a separate class on a proposed amendment that
would increase or decrease the aggregate number of authorized shares of such
class, increase or decrease the par value of the shares of such class or alter
or change the powers, preferences or special rights of the shares of such class
so as to affect them adversely. If any proposed amendment would alter or change
the powers, preferences or special rights of one or more series of any class so
as to affect them adversely, but would not so affect the entire class, then only
the shares of the series so affected by the amendment will be considered a
separate class for purposes of voting by classes. The New Belk Certificate is
consistent with the foregoing provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the
5
<PAGE> 1977
shareholders and approved (i) by a majority (unless the articles of
incorporation, a bylaw adopted by the shareholders or the board of directors
require a greater vote or a vote by voting groups) of the votes entitled to be
cast on the amendment by any voting group with respect to which the amendment
would create dissenters' rights and (ii) when a quorum is present, by all other
voting groups entitled to vote on the amendment through casting more affirmative
than opposing votes. As under the DGCL, the holders of the outstanding shares of
a class or series are entitled to vote as a separate voting group (if
shareholder voting is otherwise required by the NCBCA) on a proposed amendment
if the amendment would change certain fundamental rights and preferences of that
class or series. The Company Articles do not specify a greater voting
requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power, nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has power, by
vote of a majority of all the directors and without the assent or vote of the
shareholders, to make, alter, amend and rescind the bylaws of the Company.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without prior notice, if all
holders of outstanding shares entitled to vote on such action sign the written
consent(s) describing such action. The Company Bylaws and Company Articles do
not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding
6
<PAGE> 1978
having the right to vote for such directors, order an election to be held to
fill any such vacancies or newly created directorships or to replace the
directors chosen by the directors then in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more than 30% during any 12-month period. The
articles of incorporation or bylaws may establish a variable range for the size
of the board of directors by fixing a minimum and maximum number of directors.
If a variable range is established, the number of directors may be fixed or
changed from time to time, within the minimum and maximum, by the shareholders
or (unless the articles of incorporation or a shareholders' agreement shall
otherwise provide) the board of directors. After shares are issued, only the
shareholders may change the range for the size of the board or change from a
fixed to a variable-range size board or vice versa. The Company Bylaws require
the Company Board to consist of at least three, but no more than 15, members.
7
<PAGE> 1979
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the
8
<PAGE> 1980
disinterested directors or committee authorized, approved or ratified the
transaction; (ii) the material facts of the transaction and the director's
interest were disclosed or known to the shareholders entitled to vote and the
disinterested shares authorized, approved or ratified the transaction; or (iii)
the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any transaction from which the director derived an improper
personal benefit or (iv) acts or omissions occurring prior to the date the
provisions became effective.
9
<PAGE> 1981
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested stockholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder,
except in certain circumstances; (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested stockholder, except
in certain circumstances; or (v) any receipt by the interested stockholder of
the benefit of any loans, advances, guarantees, pledges or other financial
benefits (other than those expressly permitted in (i) through (iv) above)
provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation
10
<PAGE> 1982
or (ii) an affiliate or associate of the corporation who within three years of
the date in question was the direct or indirect owner of at least 15% of the
voting power of any class or series of the then outstanding stock of the
corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other
11
<PAGE> 1983
books and records and to make copies or extracts therefrom. A proper purpose
means a purpose reasonably related to such person's interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any final action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates must be deposited,
(iii) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the Payment Demand is received, (iv) set a date
by which the Surviving Corporation must receive the Payment Demand, which date
may not be fewer than 30 nor more than 60 days after the date the
12
<PAGE> 1984
Dissenters' Notice is mailed and (v) be accompanied by a copy of Article 13. A
Shareholder who is sent a Dissenters' Notice and who wishes to assert
dissenters' rights must demand payment and deposit his certificates in
accordance with the terms of the Dissenters' Notice. A Shareholder who demands
payment and deposit his certificates in accordance with the terms of the
Dissenters' Notice retains all other rights of a Shareholder until these rights
are canceled or modified by the consummation and effectiveness of the Merger. A
Shareholder who does not demand payments or deposit his certificates in
accordance with the terms of the Dissenters' Notice will not be entitled to
payment for his shares under the NCBCA. If any such holder of Common Stock fails
to perfect or shall have effectively withdrawn or lost such right, each share of
such holder's Common Stock will thereupon be deemed to have been converted into
and to have become, as of the Effective Time, the right to receive, without any
interest thereon, the number of shares of New Belk Class A Common Stock such
Shareholder is otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such
13
<PAGE> 1985
Shareholder dissents and such Shareholder's other shares were registered in the
names of different shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $5,991,613 $5,991,613 0.6 $(853,147) $4,448,114
EBITDA............... 707,894 705,395 7 (853,147) 5,790,912
EBIT................. 632,304 629,805 10 (853,147) 7,151,197
Net Income........... 434,379 432,839 15 -- 6,492,585
Book Equity.......... 4,593,780 4,562,517 1 -- 4,562,517
</TABLE>
14
<PAGE> 1986
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk Department Store
of Shelby, N.C.,
Inc. .6470% X $13,623,329 = $ 85,814
-----------
Total $ 85,814
===========
Relative Operating Value of Company $ 7,151,197
Relative Operating Value of Other Companies Owned by Company + 85,814
-----------
Total Relative Value of Company = $ 7,237,011
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk's Department
Store of Boone,
North Carolina,
Incorporated 11.6208% X $ 7,237,011 = $ 840,999
Belk Department Store
of Shelby, N.C.,
Inc. 6.422% X 7,237,011 = 464,761
Belk Brothers Company .3823% X 7,237,011 = 27,667
Belk Enterprises,
Inc. 9.8433 X 7,237,011 = 712,361
-----------
Total $ 2,045,788
===========
Total Relative Value of Company $ 7,237,011
Total Relative Value of Company Owned by Other Belk Companies - 2,045,788
-----------
Net Relative Value of Company = $ 5,191,223
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 5,191,223 / $1,156,226,577 = .4490%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.4490% X 59,998,834) / 7,506 = 35.8890
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
15
<PAGE> 1987
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 41.51
Dividends(2).............................................. 16.00
Book value per share(3)................................... 439.01
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 34.45
Dividends(2).............................................. 9.33
Book value per share...................................... 449.33
</TABLE>
- ---------------
(1) Based on 10,464 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 10,464 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
16
<PAGE> 1988
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 6,060 $ 6,121 $ 5,992
Net income.................................................. 337 369 434
Per common share
Net income (loss)(1)...................................... 32.20 35.26 41.51
Dividends................................................. 12.00 14.00 16.00
Book value(2)............................................. 392.23 413.50 439.01
Total assets................................................ 4,656 4,813 5,060
Shareholders' equity........................................ 4,104 4,327 4,594
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $4,044 $4,042
Income from operations...................................... 388 417
</TABLE>
- ---------------
(1) Based on 10,464 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding for the years ended January 31, 1995,
February 3, 1996 and February 1, 1997.
(2) Based on 10,464 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
17
<PAGE> 1989
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Tri City Mall
in Forest City, North Carolina. The Company's store operates in a manner
consistent with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is managed out of the Matthews group in
Gastonia, North Carolina.
Facilities. The Company operates a 50,500 square foot store building. The
Company owns the main 44,000 square foot portion of the building along with an
adjacent parking area. The remaining 6,500 square feet of retail space are
leased. The current term of the lease expires in 2003. The Company believes the
building is adequate to meet its current needs.
Competition. Specific competitors in the Company's market include
Wal-Mart, Penney and Goody's.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
18
<PAGE> 1990
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)(f)........................................ 4,030 38.5%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(d)(e)................................................. 3,464 33.1%
H. W. McKay Belk (Director and Executive Officer)
(b)(d)(e)................................................. 3,458 33.0%
John R. Belk (Director and Executive Officer) (b)(d)(e)..... 3,446 32.9%
Henderson Belk (Director) (c)............................... 16 *
Sarah Belk Gambrell (c)..................................... 764 7.3%
David Belk Cannon (Director) (g)............................ 840 8.0%
Leroy Robinson (Director) (b)............................... 92 *
B. Frank Matthews, II (Director and Executive Officer)...... 0 *
Eugene Robinson Matthews (Executive Officer)................ 0 *
W. David Ellis (Director) (h)............................... 1,124 10.7%
Sarah Gambrell Knight....................................... 528 5.0%
Belk Enterprises, Inc....................................... 1,030 9.8%
Belk's Department Store of Boone, North Carolina,
Incorporated.............................................. 1,216 11.6%
Belk Department Store of Shelby, N.C., Inc.................. 672 6.4%
All Directors and Executive Officers as a group (10
persons).................................................. 7,212 68.9%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk and Leroy Robinson -- 2801 West Tyvola Road, Charlotte, N.C.
28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207;
Sarah Gambrell Knight -- 810 Colville Road, Charlotte, N.C. 28207; David Belk
Cannon -- 1607 W. Floyd Baker Blvd., Gaffney, S.C. 29341; B. Frank Matthews, II
and Eugene Robinson Matthews -- 2240 Remount Road, Gastonia, N.C. 28054; W.
David Ellis -- 114 Lomond Lane, Spartanburg, S.C. 29307; Belk Enterprises, Inc.,
Belk's Department Stores of Boone, North Carolina, Incorporated and Belk
Department Store of Shelby, N.C., Inc. -- 2801 West Tyvola Road, Charlotte, N.C.
28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 500 shares held by Montgomery Investment Company, of which John M.
Belk is the majority shareholder.
(b) Includes 92 shares held by Milburn Investment Company, of which the Estate
of Thomas M. Belk is the sole shareholder. Voting and investment power is
shared by the Executors of the Estate of Thomas M. Belk, who are Katherine
McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W. McKay Belk,
John R. Belk, John M. Belk and Leroy Robinson.
(c) Includes 16 shares held in several Trusts established by the Will of Mary
I. Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power
19
<PAGE> 1991
of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson Belk
is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H. Belk,
Jr. and Irwin Belk.
(d) Includes 1,030 shares held by Belk Enterprises, Inc., 1,216 shares held by
Belk's Department Store of Boone, North Carolina, Incorporated, and 672
shares held by Belk Department Store of Shelby, N.C., Inc., which shares
are voted by the members of the Executive Committee of the Board of
Directors of each such Corporation, under authority given by the directors
of each such Corporation at the annual meeting of directors held in March,
1997. The Executive Committee consists of John M. Belk, Thomas M. Belk,
Jr., H. W. McKay Belk and John R. Belk.
(e) Includes 40 shares held by J. V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr. , H. W. McKay
Belk and John R. Belk, have voting and investment power with respect to
such shares.
(f) Includes 86 shares held by Mary Claudia Belk Irrevocable Trust dated
1/4/94. The Trustee, Claudia W. Belk, is John M. Belk's wife.
(g) Includes 224 shares held by Residuary Trust U/W Mrs. Henry Belk Cannon. The
Trustees, David Belk Cannon and John C. Daughtridge, have voting and
investment power with respect to such shares.
(h) Includes 480 shares held by W. David Ellis, Trustee for Judith E. Pollander
U/A dated June 7, 1985. The Trustee of the trust, W. David Ellis, has sole
voting and investment power with respect to such shares.
20
<PAGE> 1992
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 1993
BELK DEPARTMENT STORE OF FOREST CITY, N.C., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $1,165,896 $ 422,140
Accounts receivable, net.................................. 943,960 1,068,924
Merchandise inventory..................................... 1,122,103 1,151,472
Receivable from affiliates, net........................... 320,673 427,372
Deferred income taxes..................................... 14,180 997
Other..................................................... 45,727 45,675
---------- ----------
Total current assets........................................ 3,612,539 3,116,580
Loans receivable from affiliates, net....................... 3,635 3,635
Investments................................................. 242,206 1,054,261
Property, plant and equipment, net.......................... 893,880 826,721
Deferred income taxes....................................... 21,806 23,934
Other noncurrent assets..................................... 38,766 34,562
---------- ----------
$4,812,832 $5,059,693
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 429,620 $ 407,090
Accrued income taxes...................................... 27,202 26,570
---------- ----------
Total current liabilities................................... 456,822 433,660
Other noncurrent liabilities................................ 29,186 32,253
---------- ----------
Total liabilities........................................... 486,008 465,913
Shareholders' equity:
Common stock.............................................. 1,046,400 1,046,400
Retained earnings......................................... 3,280,424 3,547,380
---------- ----------
Total shareholders' equity.................................. 4,326,824 4,593,780
---------- ----------
$4,812,832 $5,059,693
========== ==========
</TABLE>
F-2
<PAGE> 1994
BELK DEPARTMENT STORE OF FOREST CITY, N.C., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $6,059,619 $6,121,348 $5,991,614
Operating costs and expenses............................... 5,547,507 5,574,999 5,361,319
---------- ---------- ----------
Income from operations..................................... 512,112 546,349 630,295
---------- ---------- ----------
Other income (expense):
Interest, net............................................ 35,547 67,176 72,255
Dividend income.......................................... 2,000 2,400 2,500
Miscellaneous, net....................................... (2,393) (6,457) (490)
---------- ---------- ----------
Total other expense, net................................... 35,154 63,119 74,265
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 547,266 609,468 704,560
Income tax expense (benefit)............................... 210,320 240,479 270,180
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 336,946 368,989 434,380
---------- ---------- ----------
Net earnings............................................... 336,946 368,989 434,380
Retained earnings at beginning of period................... 2,846,553 3,057,931 3,280,424
Dividends paid............................................. (125,568) (146,496) (167,424)
---------- ---------- ----------
Retained earnings at end of period......................... $3,057,931 $3,280,424 $3,547,380
========== ========== ==========
</TABLE>
F-3
<PAGE> 1995
BELK DEPARTMENT STORE OF FOREST CITY, NC, INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31. Fiscal years 1997 and 1996 ended on February 1, 1997 and February 3,
1996, respectively.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
F-4
<PAGE> 1996
BELK DEPARTMENT STORE OF FOREST CITY, NC, INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) The Company's term loan agreement contains, among other provisions and
covenants, restrictions relating to the creation of additional debt, except as
permitted, the disposal, expansion or purchase of fixed assets, as permitted,
and the purchase of investments, except as permitted. Under the most restrictive
of these provisions, the Company must maintain a stated combined tangible net
worth, a stated minimum current ratio, a stated ratio of total liabilities to
tangible net worth, and may not exceed the cumulative prior year's depreciation
expense in net capital expenditures for the fiscal year. The Company was in
compliance with the combined tangible net worth restriction, the minimum current
ratio restriction and the total liabilities to tangible net worth restriction as
of February 1, 1997. The Company was not in compliance with the net capital
expenditures, the sale of property, the additional debt, the merger, the
dividends or the investment restrictions as of February 1, 1997. The Company has
obtained waivers for all out of compliance conditions.
(9) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(10) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
F-5
<PAGE> 1997
BELK DEPARTMENT STORE OF FOREST CITY, NC, INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(11) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(12) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-6
<PAGE> 1998
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13.
DISSENTERS' RIGHTS.
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares;
A-1
<PAGE> 1999
(ii) creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares; (iii) alters or abolishes a preemptive right of
the holder of the shares to acquire shares or other securities; (iv)
excludes or limits the right of the shares to vote on any matter, or to
cumulate votes; (v) reduces the number of shares owned by the shareholder
to a fraction of a share if the fractional shares so created is to be
acquired by cash under G.S. 55-6-04; (vi) changes the corporation into a
nonprofit corporation or cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 2000
SEC.SEC. 55-13-04 TO 55-13-19. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 2001
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 2002
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 2003
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 2004
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................... $ 5,991,613 $434,379 $632,304 $707,894 $4,593,780
Adjustments to eliminate less than
wholly-owned subsidiaries................... -- -- -- -- --
----------- -------- -------- -------- ----------
Adjusted Shareholders' Statement.............. $ 5,991,613 434,379 632,304 707,894 4,593,780
=========== -------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............... -- -- --
Gain/loss on sale of securities............. -- -- --
Impairment loss............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries.............................. -- -- --
Gain/loss on discontinued operations........ -- -- --
Adjustment to tax expense................... -- -- -- --
-------- -------- --------
Total non-operating items..................... -- -- --
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities............................. (1,541) (2,500) (2,500)
Adjustment for ownership in other Belk
entities.................................. (31,263)
-------- -------- -------- ----------
Per Model..................................... $432,838 $629,804 $705,394 $4,562,517
======== ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................... $ (422,140)
Negative cash balances reclassified to
accounts payable........................ --
Receivables from affiliates, net.......... (427,372)
Loans receivable from affiliates, net..... (3,635)
Liabilities
Notes payable............................. --
Current installments of long-term debt.... --
Current portion of obligations under
capital leases.......................... --
Payables to affiliates, net............... --
Long-term debt, excluding current
installments............................ --
Obligations under capital leases,
excluding current portion............... --
Loans payable to affiliates, net.......... --
-----------
Net debt (cash)............................... (853,147)
Adjustments to eliminate less than
wholly-owned subsidiaries................... --
-----------
Per Model..................................... $ (853,147)
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 2005
SUPPLEMENT NO. 47
<PAGE> 2006
BELK DEPARTMENT STORE OF FOREST CITY, N.C., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 8:10 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 47
<PAGE> 2007
HUDSON-BELK CO. OF FUQUAY-VARINA, N.C., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Hudson-Belk Co. of Fuquay-Varina, N.C., Inc.
(the "Company"), to be held on April 16, 1998, at 11:10 a.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 86.6147 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 207,962 shares of New Belk Class A Common Stock which
will represent approximately 0.3466% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(48)
<PAGE> 2008
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 2009
HUDSON-BELK CO. OF FUQUAY-VARINA, N.C., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF HUDSON-BELK CO. OF FUQUAY-VARINA, N.C., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Hudson-Belk Co. of Fuquay-Varina, N.C., Inc. (the "Company") will
be held on April 16, 1998, at 11:10 a.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 86.6147 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 2010
HUDSON-BELK CO. OF FUQUAY-VARINA, N.C., INC.
SUPPLEMENT NO. 48
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 48 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO HUDSON-BELK CO. OF
FUQUAY-VARINA, N.C., INC. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE
DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED
HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION.
IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE
INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 2011
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1949. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 11:10 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 86.6147 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 3,391 shares of Common Stock
outstanding held of record by 48 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 74.1% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 2012
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
" -- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 4,400 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock
3
<PAGE> 2013
held by a New Belk Stockholder who is a Class A Permitted Holder will also
automatically convert into New Belk Class B Common Stock in the event that such
New Belk Stockholder no longer meets the requirements of a Class A Permitted
Holder. New Belk Class B Common Stock has no conversion rights. The Company
Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving
4
<PAGE> 2014
the distribution. The Company Bylaws provide that the Board of Directors of the
Company (the "Company Board") may from time to time declare dividends on the
Company's outstanding shares in the manner and upon the terms and conditions
provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the
5
<PAGE> 2015
shareholders and approved (i) by a majority (unless the articles of
incorporation, a bylaw adopted by the shareholders or the board of directors
require a greater vote or a vote by voting groups) of the votes entitled to be
cast on the amendment by any voting group with respect to which the amendment
would create dissenters' rights and (ii) when a quorum is present, by all other
voting groups entitled to vote on the amendment through casting more affirmative
than opposing votes. As under the DGCL, the holders of the outstanding shares of
a class or series are entitled to vote as a separate voting group (if
shareholder voting is otherwise required by the NCBCA) on a proposed amendment
if the amendment would change certain fundamental rights and preferences of that
class or series. The Company Articles do not specify a greater voting
requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power, nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has power, by
vote of a majority of all the directors, and without the assent or vote of the
shareholders, to make, alter, amend and rescind the bylaws of the Company. The
bylaws enacted by the Shareholders may be affected by action of the Company
Board, and the bylaws enacted by the Company Board may be affected by the
Shareholders; but the Company Board may not re-enact, substantially or
otherwise, a bylaw which the Shareholders have repealed or altered, nor may it
repeal a bylaw enacted by the Shareholders which limits the powers of the
Company Board or enhances or protects the rights of the Shareholders, without
the consent of the Shareholders.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide for otherwise, any action that may be taken by an annual or special
meeting of shareholders may be taken without a meeting and without prior notice,
if all holders of outstanding shares entitled to vote on such action sign the
written consent(s) describing such action. The Company Bylaws and Company
Articles do not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be
6
<PAGE> 2016
filled by a majority of the directors then in office, although less than a
quorum, or by a sole remaining director. If at the time of filling any vacancy
or newly created directorship, the directors then in office constitute less than
a majority of the whole board as constituted immediately prior to such increase,
the Delaware Court of Chancery may, upon application of stockholders holding at
least 10% of the total number of shares outstanding having the right to vote for
such directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more than 30% during any 12-month period. The
articles of incorporation or bylaws may establish a variable range for the size
of the board of directors by fixing a minimum and maximum number of directors.
If a variable range is established, the number of directors may be fixed or
changed from time to time, within the minimum and maximum, by the shareholders
or (unless the articles of incorporation or a shareholders' agreement shall
7
<PAGE> 2017
otherwise provide) the board of directors. After shares are issued, only the
shareholders may change the range for the size of the board or change from a
fixed to a variable-range size board or vice versa. The Company Bylaws require
the Company Board to consist of at least three, but no more than 15, members.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
8
<PAGE> 2018
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the disinterested directors or committee authorized, approved or
ratified the transaction; (ii) the material facts of the transaction and the
director's interest were disclosed or known to the shareholders entitled to vote
and the disinterested shares authorized, approved or ratified the transaction;
or (iii) the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly
9
<PAGE> 2019
in conflict with the best interests of the corporation, (ii) any liability under
unlawful distributions, (iii) any transaction from which the director derived an
improper personal benefit or (iv) acts or omissions occurring prior to the date
the provisions became effective.
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested stockholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder,
except in certain circumstances; (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested stockholder, except
in certain circumstances; or (v) any receipt by the interested stockholder of
the benefit of any loans, advances,
10
<PAGE> 2020
guarantees, pledges or other financial benefits (other than those expressly
permitted in (i) through (iv) above) provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) an
affiliate or associate of the corporation who within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting share of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
11
<PAGE> 2021
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any final action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates
12
<PAGE> 2022
must be deposited, (iii) inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the Payment Demand is received,
(iv) set a date by which the Surviving Corporation must receive the Payment
Demand, which date may not be fewer than 30 nor more than 60 days after the date
the Dissenters' Notice is mailed and (v) be accompanied by a copy of Article 13.
A Shareholder who is sent a Dissenters' Notice and who wishes to assert
dissenters' rights must demand payment and deposit his certificates in
accordance with the terms of the Dissenters' Notice. A Shareholder who demands
payment and deposit his certificates in accordance with the terms of the
Dissenters' Notice retains all other rights of a Shareholder until these rights
are canceled or modified by the consummation and effectiveness of the Merger. A
Shareholder who does not demand payments or deposit his certificates in
accordance with the terms of the Dissenters' Notice will not be entitled to
payment for his shares under the NCBCA. If any such holder of Common Stock fails
to perfect or shall have effectively withdrawn or lost such right, each share of
such holder's Common Stock will thereupon be deemed to have been converted into
and to have become, as of the Effective Time, the right to receive, without any
interest thereon, the number of shares of New Belk Class A Common Stock such
Shareholder is otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
13
<PAGE> 2023
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such Shareholder dissents and such
Shareholder's other shares were registered in the names of different
shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
14
<PAGE> 2024
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $4,326,879 $4,326,879 0.6 $ (763,278) $3,359,405
EBITDA............... 538,387 538,387 7 (763,278) 4,531,987
EBIT................. 488,241 488,241 10 (763,278) 5,645,688
Net Income........... 300,596 300,596 15 -- 4,508,940
Book Equity.......... 2,684,715 2,673,438 1 -- 2,673,438
</TABLE>
15
<PAGE> 2025
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Hudson-Belk Company .0202% X $71,085,804 = $ 14,359
-----------
Total $ 14,359
===========
Relative Operating Value of Company $ 5,645,688
Relative Operating Value of Other Companies Owned by Company + 14,359
-----------
Total Relative Value of Company = $ 5,660,048
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Enterprises,
Inc. 4.7184% X $ 5,660,048 = $ 267,064
Belk Department Store
of Greenville,
N.C., Inc. 23.8868% X 5,660,048 = 1,352,004
Hudson-Belk Company .5898% X 5,660,048 = 33,383
-----------
Total $ 1,652,451
===========
Total Relative Value of Company $ 5,660,047
Total Relative Value of Company Owned by Other Belk Companies - 1,652,451
-----------
Net Relative Value of Company = $ 4,007,597
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 4,007,597 / $1,156,226,577 = .3466%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.3466% X 59,998,834) / 2,401 = 86.6147
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 2026
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 88.64
Dividends(2).............................................. 14.50
Book value per share(3)................................... 791.72
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 83.15
Dividends(2).............................................. 22.52
Book value per share...................................... 1,084.42
</TABLE>
- ---------------
(1) Based on 3,391 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 3,391 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
17
<PAGE> 2027
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 4,294 $ 4,154 $ 4,327
Net income.................................................. 221 200 301
Per common share
Net income (loss)(1)...................................... 65.14 58.86 88.64
Dividends................................................. 12.50 12.50 14.50
Book value(2)............................................. 673.21 717.57 791.72
Total assets................................................ 2,594 2,681 2,996
Shareholders' equity........................................ 2,283 2,433 2,685
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $2,936 $3,154
Income from operations...................................... 268 349
</TABLE>
- ---------------
(1) Based on 3,391 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 3,391 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 2028
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates two retail department stores in the
following locations in North Carolina: downtown Fuquay-Varina and Triangle East
Center in Zebulon. The Company's stores operate in a manner consistent with the
business of the Belk Companies described in the Proxy Statement/Prospectus. The
stores are managed out of the Hudson group office in Raleigh, North Carolina.
Facilities. The Company owns each store property and building, which
contains 11,000 and 21,000 square feet of floor area, respectively. The Company
believes that the Zebulon facility (which is accompanied by an adjacent parking
area) is adequate for its current needs. The Company believes that a relocation
of the existing downtown Fuquay-Varina store to a shopping center site may be
necessary to the long-term viability of the Company's business in Fuquay-Varina.
Competition. Specific competitors in the Company's market include Rose's
and the nearby Raleigh retail market.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 2029
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)........................................... 1,802 53.1%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(e)(f)................................................. 1,293 38.1%
H. W. McKay Belk (Director and Executive Officer)
(b)(e)(g)................................................. 1,293 38.1%
John R. Belk (Director and Executive Officer) (b)(e)(h)..... 1,289 38.0%
Sarah Belk Gambrell (Director) (c)(d)....................... 564 16.7%
Karl G. Hudson, Jr. (Director and Executive Officer)........ * *
Karl G. Hudson, III (Director and Executive Officer)........ 116 3.4%
Richard W. Hudson (Director)................................ 116 3.4%
Katherine McKay Belk (b).................................... 330 9.7%
Katherine Belk Morris (b)(i)................................ 300 8.8%
Leroy Robinson (b).......................................... 285 8.4%
Belk Department Store of Greenville, N.C., Inc.............. 810 23.9%
Milburn Investment Company.................................. 285 8.4%
Virginia Hudson Beaman (j).................................. 221 6.5%
All Directors and Executive Officers as a group (8
persons).................................................. 2,516 74.1%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Leroy Robinson, Katherine McKay and Katherine Belk Morris -- 2801 West Tyvola
Road, Charlotte, N.C. 28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road,
Charlotte, N.C. 28207; Karl G. Hudson, Jr. -- 2416 White Oak Road, Raleigh, N.C.
27609; Karl G. Hudson, III -- Hudson-Belk Group Office, 5025 Edwards Mill Road,
Raleigh, N.C. 27612; Richard W. Hudson -- 4325 Glenwood Avenue, Raleigh, N.C.
27612; Belk Department Store of Greenville, N.C., Inc. and Milburn Investment
Company -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; Virginia Hudson
Beaman -- 2412 Lake Drive, Raleigh, N.C. 27609.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 165 shares held by Montgomery Investment Company, of which John M.
Belk is the majority shareholder.
(b) Includes 285 shares held by Milburn Investment Company, of which the Estate
of Thomas M. Belk is the sole shareholder. Voting and investment power is
shared by the Executors of the Estate of Thomas M. Belk, who are Katherine
McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W. McKay Belk,
John R. Belk, John M. Belk and Leroy Robinson.
(c) Includes 120 shares held in several Trusts established by the Will of W. H.
Belk for the benefit of his children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power
20
<PAGE> 2030
of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson Belk
is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H. Belk,
Jr. and Irwin Belk.
(d) Includes 12 shares held in several Trusts established by the Will of Mary
I. Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(e) Includes 160 shares held by Belk Enterprises, Inc., 810 shares held by Belk
Department Store of Greenville, N.C., Inc. and 20 shares held by
Hudson-Belk Company which shares are voted by the members of the Executive
Committee of the Board of Directors of each such Corporation under
authority given by the directors of each such Corporation at the annual
meeting of directors held in March, 1997. The Executive Committee of each
such Corporation consists of John M. Belk, Thomas M. Belk, Jr. H. W. McKay
Belk and John R. Belk.
(f) Includes 18 shares held by Thomas M. Belk, Jr. as custodian for his minor
children.
(g) Includes 18 shares held by H. W. McKay Belk as custodian for his minor
children.
(h) Includes 14 shares held by John R. Belk as custodian for his minor
children.
(i) Includes 15 shares held by Katherine Belk Morris as custodian for her minor
children.
(j) Includes 31 shares held by James R. Tripp, Jr. Irrevocable Trust and 31
shares held by Marjorie L. Hudson Irrevocable Trust. Virginia H. Beaman
Co-Trustee votes such shares.
21
<PAGE> 2031
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
</TABLE>
F-1
<PAGE> 2032
HUDSON-BELK CO. OF FUQUAY-VARINA, N.C., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 232,607 $ 288,909
Accounts receivable, net.................................. 617,122 708,632
Merchandise inventory..................................... 839,783 833,113
Receivable from affiliates, net........................... 257,870 474,370
Refundable income taxes................................... 10,616 --
Deferred income taxes..................................... 17,443 14,222
Other..................................................... 34,333 31,603
---------- ----------
Total current assets........................................ 2,009,774 2,350,849
Investments................................................. 476 11,276
Property, plant and equipment, net.......................... 664,017 629,448
Other noncurrent assets..................................... 6,811 4,313
---------- ----------
$2,681,078 $2,995,886
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 191,200 $ 192,613
Accrued income taxes...................................... 2,280 70,859
---------- ----------
Total current liabilities................................... 193,480 263,472
Deferred income taxes....................................... 28,022 19,088
Other noncurrent liabilities................................ 26,287 28,611
---------- ----------
Total liabilities........................................... 247,789 311,171
Shareholders' equity:
Common stock.............................................. 339,100 339,100
Retained earnings......................................... 2,094,189 2,345,615
---------- ----------
Total shareholders' equity.................................. 2,433,289 2,684,715
---------- ----------
$2,681,078 $2,995,886
========== ==========
</TABLE>
F-2
<PAGE> 2033
HUDSON-BELK CO. OF FUQUAY-VARINA, N.C., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $4,293,565 $4,153,976 $4,326,879
Operating costs and expenses............................... 3,922,879 3,819,442 3,840,012
---------- ---------- ----------
Income from operations..................................... 370,686 334,534 486,867
---------- ---------- ----------
Other income (expense):
Interest, net............................................ (13,045) (3,056) 2,381
Miscellaneous, net....................................... (4,514) (4,843) 1,375
---------- ---------- ----------
Total other expense, net................................... (17,559) (7,899) 3,756
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 353,127 326,635 490,623
Income tax expense (benefit)............................... 132,223 127,043 190,027
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 220,904 199,592 300,596
---------- ---------- ----------
Net earnings............................................... 220,904 199,592 300,596
Retained earnings at beginning of period................... 1,765,251 1,943,767 2,094,189
Dividends paid............................................. (42,388) (49,170) (49,170)
---------- ---------- ----------
Retained earnings at end of period......................... $1,943,767 $2,094,189 $2,345,615
========== ========== ==========
</TABLE>
F-3
<PAGE> 2034
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 2035
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 2036
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13.
DISSENTERS' RIGHTS.
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares;
A-1
<PAGE> 2037
(ii) creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares; (iii) alters or abolishes a preemptive right of
the holder of the shares to acquire shares or other securities; (iv)
excludes or limits the right of the shares to vote on any matter, or to
cumulate votes; (v) reduces the number of shares owned by the shareholder
to a fraction of a share if the fractional shares so created is to be
acquired by cash under G.S. 55-6-04; (vi) changes the corporation into a
nonprofit corporation or cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 2038
SEC.SEC. 55-13-04 TO 55-13-19. Reserved for future codification purposes.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 2039
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 2040
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 2041
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 2042
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
---------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement.................... $4,326,879 $300,595 $488,241 $538,387 $2,684,715
Adjustments to eliminate less than wholly-owned
subsidiaries................................. -- -- -- -- --
---------- -------- -------- -------- ----------
Adjusted Shareholders' Statement............... $4,326,879 300,595 488,241 538,387 2,684,715
---------- -------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E................ -- -- --
Gain/loss on sale of securities.............. -- -- --
Impairment loss.............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries............................... -- -- --
Gain/loss on discontinued operations......... -- -- --
Adjustment to tax expense.................... -- -- -- --
-------- -------- --------
Total non-operating items...................... -- -- --
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities.............................. -- -- --
Adjustment for ownership in other Belk
entities................................... (11,276)
-------- -------- -------- ----------
Per Model...................................... $300,595 $488,241 $538,387 $2,673,439
======== ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER SHAREHOLDERS'
STATEMENT
Assets
Cash & cash equivalents.................... $ (288,908)
Negative cash balances reclassified to
accounts payable......................... --
Receivables from affiliates, net........... (474,370)
Loans receivable from affiliates, net...... --
Liabilities
Notes payable.............................. --
Current installments of long-term debt..... --
Current portion of obligations under
capital leases........................... --
Payables to affiliates, net................ --
Long-term debt, excluding current
installments............................. --
Obligations under capital leases, excluding
current portion.......................... --
Loans payable to affiliates, net........... --
----------
Net debt (cash)................................ (763,278)
Adjustments to eliminate less than wholly-owned
subsidiaries................................. --
----------
Per Model...................................... $ (763,278)
==========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 2043
SUPPLEMENT NO. 48
<PAGE> 2044
HUDSON-BELK CO. OF FUQUAY-VARINA, N.C., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 11:10 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 48
<PAGE> 2045
MATTHEWS-BELK COMPANY
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Matthews-Belk Company (the "Company"), to be
held on April 15, 1998, at 11:40 a.m., local time, at the offices of Belk Stores
Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 36.3001 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 1,459,409 shares of New Belk Class A Common Stock which
will represent approximately 2.4324% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage paid
(49)
<PAGE> 2046
envelope. If you plan to attend the Special Meeting, you may vote in person if
you wish, even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 2047
MATTHEWS-BELK COMPANY
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF MATTHEWS-BELK COMPANY:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Matthews-Belk Company (the "Company") will be held on April 15,
1998, at 11:40 a.m., local time, at the offices of Belk Stores Services, Inc.,
2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for the following
purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 36.3001 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 2048
MATTHEWS-BELK COMPANY
SUPPLEMENT NO. 49
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 49 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO MATTHEWS-BELK
COMPANY (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE DISCUSSION IN THE
PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED HEREIN ASSUMES THAT
ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION. IF ANY ONE OR MORE
BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE INFORMATION
CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED CONSOLIDATED HISTORICAL FINANCIAL
STATEMENTS................................................ F-1
Unaudited Consolidated Balance Sheets..................... F-2
Unaudited Consolidated Statements of Earnings and Retained
Earnings............................................... F-3
Condensed Notes to Unaudited Consolidated Historical
Financial Statements................................... F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION.................................. B-1
</TABLE>
<PAGE> 2049
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1901. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 11:40 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 36.3001 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 51,200 shares of Common Stock
outstanding held of record by 74 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 63.9% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 2050
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 51,200 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock
3
<PAGE> 2051
held by a New Belk Stockholder who is a Class A Permitted Holder will also
automatically convert into New Belk Class B Common Stock in the event that such
New Belk Stockholder no longer meets the requirements of a Class A Permitted
Holder. New Belk Class B Common Stock has no conversion rights. The Company
Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving
4
<PAGE> 2052
the distribution. The Company Bylaws provide that the Board of Directors of the
Company (the "Company Board") may from time to time declare dividends on the
Company's outstanding shares in the manner and upon the terms and conditions
provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the
5
<PAGE> 2053
shareholders and approved (i) by a majority (unless the articles of
incorporation, a bylaw adopted by the shareholders or the board of directors
require a greater vote or a vote by voting groups) of the votes entitled to be
cast on the amendment by any voting group with respect to which the amendment
would create dissenters' rights and (ii) when a quorum is present, by all other
voting groups entitled to vote on the amendment through casting more affirmative
than opposing votes. As under the DGCL, the holders of the outstanding shares of
a class or series are entitled to vote as a separate voting group (if
shareholder voting is otherwise required by the NCBCA) on a proposed amendment
if the amendment would change certain fundamental rights and preferences of that
class or series. The Company Articles do not specify a greater voting
requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without prior notice, if all
holders of outstanding shares entitled to vote on such action sign the written
consent(s) describing such action. The Company Bylaws and Company Articles do
not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
6
<PAGE> 2054
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more than 30% during any 12-month period. The
articles of incorporation or bylaws may establish a variable range for the size
of the board of directors by fixing a minimum and maximum number of directors.
If a variable range is established, the number of directors may be fixed or
changed from time to time, within the minimum and maximum, by the shareholders
or (unless the articles of incorporation or a shareholders' agreement shall
otherwise provide) the board of directors. After shares are issued, only the
shareholders may change the range for the size of the board or change from a
fixed to a variable-range size board or vice versa. The Company Bylaws require
the Company Board to consist of at least three, but no more than 15, members.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless
7
<PAGE> 2055
otherwise provided in the certificate of incorporation or the bylaws. The New
Belk Bylaws and the New Belk Certificate do not provide for any qualifications
for directors of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the disinterested directors or committee authorized, approved or
ratified the transaction; (ii) the material facts of the transaction and the
director's interest were disclosed or known to the shareholders entitled to vote
and the
8
<PAGE> 2056
disinterested shares authorized, approved or ratified the transaction; or (iii)
the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any transaction from which the director derived an improper
personal benefit or (iv) acts or omissions occurring prior to the date the
provisions became effective.
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers
9
<PAGE> 2057
against any and all liability and litigation expense, including reasonable
attorneys' fees, arising out of their status as such or their activities in
either of such capacities; provided, however, that the Company will not
indemnify a director or officer against liability or litigation expense that he
may incur on account of his activities which were, at the time taken, known or
believed by him to be clearly in conflict with the best interest of the Company.
The Company will likewise and to the same extent indemnify any person who, at
the request of the Company, is or was serving as a director or as an officer of
another corporation, joint venture, trust or other enterprise, as a partner of a
partnership or as a trustee or administrator under an employee benefit plan. The
Company will also indemnify the director or officer for reasonable costs,
expenses and attorneys' fees in connection with the enforcement of rights to
indemnification granted therein, if it is so determined in accordance with the
Company Articles that the director or officer is entitled to indemnification
thereunder. The Company Articles provide that to the fullest extent permitted by
the NCBCA a director will not be personally liable to the Company, or any of its
Shareholders or otherwise for monetary damages for breach of duty of care or
other duty as a director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder,
except in certain circumstances; (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested stockholder, except
in certain circumstances; or (v) any receipt by the interested stockholder of
the benefit of any loans, advances, guarantees, pledges or other financial
benefits (other than those expressly permitted in (i) through (iv) above)
provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) an
affiliate or associate of the corporation who within three years of the date in
question was the direct
10
<PAGE> 2058
or indirect owner of at least 15% of the voting power of any class or series of
the then outstanding stock of the corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
11
<PAGE> 2059
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any final action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates must be deposited,
(iii) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the Payment Demand is received, (iv) set a date
by which the Surviving Corporation must receive the Payment Demand, which date
may not be fewer than 30 nor more than 60 days after the date the Dissenters'
Notice is mailed and (v) be accompanied by a copy of Article 13. A Shareholder
who is sent a Dissenters' Notice and who wishes to assert dissenters' rights
must demand payment and deposits his certificates in accordance with the terms
of the Dissenters' Notice. A Shareholder who demands payment and
12
<PAGE> 2060
deposit his certificates in accordance with the terms of the Dissenters' Notice
retains all other rights of a Shareholder until these rights are canceled or
modified by the consummation and effectiveness of the Merger. A Shareholder who
does not demand payments or deposit his certificates in accordance with the
terms of the Dissenters' Notice will not be entitled to payment for his shares
under the NCBCA. If any such holder of Common Stock fails to perfect or shall
have effectively withdrawn or lost such right, each share of such holder's
Common Stock will thereupon be deemed to have been converted into and to have
become, as of the Effective Time, the right to receive, without any interest
thereon, the number of shares of New Belk Class A Common Stock such Shareholder
is otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such Shareholder dissents and such
Shareholder's other shares were registered in the names of different
shareholders.
13
<PAGE> 2061
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on the November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ----------- ----------- -------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales................. $36,481,781 $30,827,824 0.6 $(4,653,940) $23,150,634
EBITDA.................... 3,227,411 2,827,066 7 (4,653,940) 24,443,402
EBIT...................... 2,130,055 1,797,365 10 (4,653,940) 22,627,590
Net Income................ 1,459,908 1,184,288 15 -- 17,764,320
Book Equity............... 32,457,552 24,580,346 1 -- 24,580,346
</TABLE>
14
<PAGE> 2062
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Gallant-Belk Company,
Anderson, S.C. .2018% X $ 31,711,921 = $ 63,995
Belk Brothers Company .2087% X 262,130,313 = 547,066
Belk Enterprises,
Inc. .5481% X 358,369,404 = 1,964,223
Belk-Matthews
Company, Belmont,
N.C. 7.2539% X 833,990 = 60,497
Belk-Matthews Company
of Cherryville,
N.C., Incorporated 9.0421% X 601,119 = 54,354
Belk's Department
Store of Gaffney,
South Carolina,
Incorporated 13.0417% X 1,141,654 = 148,891
Belk Department Store
of Greenville,
Texas, Inc. 85.0000% X 1,266,060 = 1,076,151
Belk Department Store
of Hickory, N.C.,
Inc. .8864% X 26,225,818 = 232,466
Belk's Department
Store of Lenoir,
North Carolina,
Incorporated 1.4468% X 6,891,593 = 99,708
Belk Department Store
of Lincolnton,
N.C., Inc. 26.4722% X 7,914,848 = 2,095,234
Belk-Matthews Company
of Macon, Georgia .9467% X 14,496,059 = 137,234
Belk's Department
Store of Paris,
Texas, Inc. 85.0000% X 3,884,954 = 3,302,211
Hudson-Belk Company .1344% X 71,085,804 = 95,539
Tags Stores, LLC 8.9830% X 15,118,749 = 1,358,117
-----------
Total $11,235,685
===========
Relative Operating Value of Company $24,580,346
Relative Operating Value of Other Companies Owned by Company + 11,235,685
-----------
Total Relative Value of Company = $35,816,031
===========
</TABLE>
15
<PAGE> 2063
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Brothers Company 15.0117% X $35,816,031 = $ 5,376,595
Belk Enterprises,
Inc. 1.4844% X 35,816,031 = 531,653
Belk Department Store
of Lincolnton,
N.C., Inc. 3.3203% X 35,816,031 = 1,189,200
Belk-Harry Company-
Salisbury, N.C. .1953 X 35,816,031 = 69,949
Belk-Department Store
of Shelby, N.C.,
Inc. 1.4648 X 35,816,031 = 524,633
-----------
Total $ 7,692,030
===========
Total Relative Value of Company $35,816,031
Total Relative Value of Company Owned by Other Belk Companies - 7,692,030
-----------
Net Relative Value of Company = $28,124,001
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$28,124,001 / $1,156,226,577 = 2.4324%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(2.4324% X 59,998,834) / 40,204 = 36.3001
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 2064
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 28.51
Dividends(2).............................................. 12.50
Book value per share(3)................................... 633.94
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 34.85
Dividends(2).............................................. 9.44
Book value per share...................................... 454.48
</TABLE>
- ---------------
(1) Based on 51,200 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 51,200 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
17
<PAGE> 2065
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $40,191 $39,405 $36,482
Net income.................................................. 1,665 1,443 1,460
Per common share
Net income (loss)(1)...................................... 32.52 28.19 28.51
Dividends................................................. 11.50 12.50 12.50
Book value(2)............................................. 571.64 604.95 633.94
Total assets................................................ 36,108 38,418 43,072
Shareholders' equity........................................ 29,268 30,973 32,458
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $23,642 $23,312
Income from operations...................................... 978 718
</TABLE>
- ---------------
(1) Based on 51,200 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding for the years ended January 31, 1995,
February 3, 1996 and February 1, 1997.
(2) Based on 51,200 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 2066
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates two retail department stores in Dixie
Village Shopping Center and Eastridge Mall in Gastonia, North Carolina. The
Company's store operates in a manner consistent with the business of the Belk
Companies described in the Proxy Statement/Prospectus. The Company owns and
operates the Matthews group office and distribution center in Gastonia. The
stores are managed out of the Matthews group office. The Matthews group office
provides buying, advertising, accounting, personnel and other services to the
stores in the Matthews group area, and the distribution center provides
receiving, marking, and distribution services to the Company's stores in the
Gastonia area. The Company also owns 85% of the outstanding capital stock of
Belk Department Store of Greenville, Texas, Inc. and Belk Department Store of
Paris, Texas, Inc. In addition the Company owns a building and adjacent parking
area in Lincolnton, North Carolina that is leased to Belk Department Store of
Lincolnton, N.C., Inc. The current term of the lease expires in 2008. The annual
rental income to the Company is $256,000.
Facilities. The Company leases the property upon which it built its store
at Eastridge Mall, together with an adjacent parking area. The Company's
building at Eastridge Mall contains approximately 204,000 square feet of floor
area. The term of the lease expires in 2013. The Company leases its store
building at Dixie Village Shopping Center, which contains approximately 34,000
square feet of floor area. The current term of the lease expires in 2000. The
Company's Board has approved the remodeling of the Eastridge Mall store, which
is scheduled to take place in 1998. The Company believes that, following such
remodeling, both buildings will be adequate to meet its current needs.
Competition. Specific competitors in the Company's market include
Wal-Mart, Dillard, Penney, K-Mart, Upton's, Target, Sears and the retail stores
in Franklin Center in Gastonia.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 2067
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)(f)........................................ 17,122 33.4%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(c)(e)(f)(g)(h)........................................ 12,615 24.6%
H. W. McKay Belk (Director and Executive Officer)
(b)(c)(e)(f)(i)........................................... 12,573 24.6%
John R. Belk (Director and Executive Officer)
(b)(c)(e)(f)(j)........................................... 12,269 24.0%
Henderson Belk (Director) (d)............................... 2,136 4.2%
Sarah Belk Gambrell (d)..................................... 4,316 8.4%
David Belk Cannon (Director) (l)............................ 3,984 7.8%
James K. Glenn, Jr. (Director) (k).......................... 3,592 7.0%
Leroy Robinson (Director) (b)(c)............................ 1,414 2.8%
B. Frank Matthews, II (Director and Executive Officer)
(o)(q)(r)................................................. 7,282 14.2%
Eugene Robinson Matthews (Director and Executive Officer)... 170 *
Danny Crayton (Executive Officer)........................... 0 *
Elizabeth M. Welton (p)(q).................................. 4,468 8.7%
Annabelle Z. Royster (r).................................... 2,740 5.4%
Nations Bank, N.A. (m)(n)................................... 4,120 8.0%
Elizabeth Matthews Welton Family Limited Partnership Phase
II........................................................ 3,412 6.7%
First Union National Bank of N.C., B. Frank Matthews, II and
Annabelle Z. Royster, Co-Trustees under the Will of J. H.
Matthews, Jr.............................................. 2,640 5.2%
J.V. Properties............................................. 7,686 15.0%
All Directors and Executive Officers as a group (10
persons).................................................. 32,737 63.9%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk and Leroy Robinson -- 2801 West Tyvola Road, Charlotte, N.C.
28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207;
David Belk Cannon -- 1607 W. Floyd Baker Blvd., Gaffney, S.C. 29341; James K.
Glenn, Jr. -- P.O. Box 2736, Winston-Salem, N.C. 27102; B. Frank Matthews, II,
Eugene Robinson Matthews, Elizabeth Matthews Welton, Elizabeth Matthews Welton
Family Limited Partnership Phase II, and Danny Crayton -- 2240 Remount Road,
Gastonia, N.C. 28054; Annabelle Z. Royster -- 3621 Club Colony Drive West,
Gastonia, N.C. 28052; Nations Bank, N.A. -- Sara McDonnell (NCI-002-07-13),
Nations Bank, N.A., Charlotte, N.C. 28255; First Union National Bank of N.C., B.
Frank Matthews, II and Annabelle Z. Royster, Co-Trustees under the will of J. H.
Matthews, Jr. -- c/o Ms. Sherry Ross, 2 First Union Center (CMG-1159),
Charlotte, N.C. 28288-1159; and J.V. Properties -- 2801 West Tyvola Road,
Charlotte, N.C. 28217-4500.
20
<PAGE> 2068
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 2,480 shares held by Montgomery Investment Company, of which John
M. Belk is the majority shareholder.
(b) Includes 348 shares held by Brothers Investment Company, which Corporation
is equally owned by John M. Belk and the Estate of Thomas M. Belk. Voting
and investment power is shared by John M. Belk, Katherine McKay Belk,
Katherine Belk Morris, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk
and Leroy Robinson.
(c) Includes 1,066 shares held by Milburn Investment Company, of which the
Estate of Thomas M. Belk is the sole shareholder. Voting and investment
power is shared by the Executors of the Estate of Thomas M. Belk, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(d) Includes 2,136 shares held in several Trusts established by the Will of
Mary I. Belk for the benefit of her children. Voting and investment power
of the Trusts for John M. Belk and Thomas M. Belk is shared by John M.
Belk, Sarah Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and
investment power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and
Henderson Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson
Belk, W. H. Belk, Jr. and Irwin Belk.
(e) Includes 760 shares held by Belk Enterprises, Inc., 1,700 shares held by
Belk Department Store of Lincolnton, N.C., Inc., 100 shares held by
Belk-Harry Company and 750 shares held by Belk Department Store of Shelby,
N.C., Inc., which shares are voted by the members of the Executive
Committee of the Board of Directors of each such Corporation, under
authority given by the directors of each such Corporation at the annual
meeting of directors held in March, 1997. The Executive Committee of each
such Corporation consists of John M. Belk, Thomas M. Belk, Jr., H. W. McKay
Belk and John R. Belk.
(f) Includes 7,686 shares held by J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
(g) Includes 141 shares held by Thomas M. Belk, Jr. as custodian for the minor
children of his brother, H. W. McKay Belk.
(h) Includes 20 shares held by Thomas M. Belk, Jr.'s wife, Sarah F. Belk.
(i) Includes 20 shares held by held by H. W. McKay Belk's wife, Nina F. Belk.
(j) Includes 20 shares held by John R. Belk's wife, Kimberly D. Belk.
(k) Includes 1,944 shares held by James K. Glenn, Jr., Trustee under will of
Daisy Belk Mattox, 312 shares held by John Belk Stevens Trust U/W ITEM III,
Section C f/b/o James Kirk Glenn, Jr., et al, 628 shares held by John Belk
Stevens Trust U/W ITEM III, Section B f/b/o Mary S. Whelchel and 628 shares
held by John Belk Stevens Trust U/W ITEM III, Section A f/b/o Sara S.
Glenn. Voting and investment power is vested in James K. Glenn, Jr., the
Trustee of each Trust.
(l) Includes 328 shares held by Residuary Trust U/W Mrs. Henry Belk Cannon. The
Trustees, David Belk Cannon and John C. Daughtridge, have voting and
investment power with respect to such shares.
(m) Includes 380 shares held by NationsBank as Trustee for the Robert L.
Doughton II Revocable Trust dated 3/25/97 and 1,822 shares held by Sara Dew
Misner and North Carolina National Bank, Co-Trustees for Daisy Doughton
Lange U/A dated November 5, 1965.
(n) Includes 1,918 shares held by Daisy Doughton Lange and North Carolina
National Bank, Trustees for Robert L. Doughton, II under Agreement dated
July 21, 1965. The named Trustees have voting and investment power with
respect to such shares.
(o) Includes 656 shares held by B. Frank Matthews, II's wife, Betty Choate
Matthews.
(p) Includes 3,412 shares held by Elizabeth Matthews Welton Family Limited
Partnership Phase II. Elizabeth M. Welton has voting and investment power
with respect to such shares.
21
<PAGE> 2069
(q) Includes 1,056 shares held by Robinson Investment Company. B. Frank
Matthews, II and Elizabeth M. Welton share the voting and investment power
with respect to such shares.
(r) Includes 2,640 shares held by First Union National Bank of N.C., B. Frank
Matthews, II and Annabelle Z. Royster, Co-Trustees under the Will of J.H.
Matthews, Jr. The named Trustees have voting and investment power with
respect to such shares.
22
<PAGE> 2070
INDEX TO UNAUDITED CONSOLIDATED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Consolidated Balance Sheets....................... F-2
Unaudited Consolidated Statements of Earnings and Retained
Earnings.................................................. F-3
Condensed Notes to Unaudited Consolidated Historical
Financial Statements...................................... F-4
</TABLE>
F-1
<PAGE> 2071
MATTHEWS-BELK COMPANY
UNAUDITED CONSOLIDATED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 5,645,057 $ 5,044,766
Accounts receivable, net.................................. 7,361,429 7,749,569
Merchandise inventory..................................... 8,519,706 8,077,692
Deferred income taxes..................................... 196,721 359,166
Other..................................................... 915,539 586,430
----------- -----------
Total current assets........................................ 22,638,452 21,817,623
Loans receivable from affiliates, net....................... 3,215,099 3,215,099
Investments................................................. 3,714,213 8,281,914
Property, plant and equipment, net.......................... 8,481,360 9,370,223
Other noncurrent assets..................................... 368,631 387,459
----------- -----------
$38,417,755 $43,072,318
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 2,737,003 $ 3,874,827
Payables to affiliates, net............................... 1,274,471 1,932,212
Accrued income taxes...................................... 200,733 158,627
----------- -----------
Total current liabilities................................... 4,212,207 5,965,666
Deferred income taxes....................................... 856,230 1,464,911
Long-term debt, excluding current installments.............. -- 561,857
Other noncurrent liabilities................................ 1,706,531 1,922,323
----------- -----------
Total liabilities........................................... 6,774,968 9,914,757
Minority interest........................................... 669,601 700,009
Shareholders' equity:
Common stock.............................................. 5,120,000 5,120,000
Net unrealized gain (loss) on investments, net of income
taxes.................................................. 1,465,893 2,130,352
Retained earnings......................................... 24,387,293 25,207,200
----------- -----------
Total shareholders' equity.................................. 30,973,186 32,457,552
----------- -----------
$38,417,755 $43,072,318
=========== ===========
</TABLE>
F-2
<PAGE> 2072
MATTHEWS-BELK COMPANY
UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Total store sales....................................... $41,396,846 $40,648,643 $37,659,413
Less: Leased Sales...................................... 1,205,668 1,243,742 1,177,632
----------- ----------- -----------
Net sales............................................... 40,191,178 39,404,901 36,481,781
Operating costs and expenses............................ 37,697,218 37,664,373 34,624,104
----------- ----------- -----------
Income from operations.................................. 2,493,960 1,740,528 1,857,677
----------- ----------- -----------
Other income (expense):
Interest, net......................................... 50,199 217,509 119,299
Dividend income....................................... 95,939 92,908 111,014
Gain (loss) on disposal of property, plant and
equipment.......................................... (23,172) (8,648) 108
Gain (loss) on sale of securities..................... (20,095) -- --
Miscellaneous, net.................................... 61,886 139,059 48,272
----------- ----------- -----------
Total other expense, net................................ 164,757 440,828 278,693
----------- ----------- -----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities..... 2,658,717 2,181,356 2,136,370
Income tax expense (benefit)............................ 965,890 761,388 749,792
----------- ----------- -----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities................... 1,692,827 1,419,968 1,386,578
Equity in earnings (loss) of unconsolidated entity, net
of tax................................................ -- 57,298 103,738
Minority interest in (earnings) loss of unconsolidated
subsidiaries.......................................... 27,951 33,934 30,408
----------- ----------- -----------
Net earnings............................................ 1,664,876 1,443,332 1,459,908
Retained earnings at beginning of period................ 21,995,562 23,071,638 24,387,293
Dividends paid.......................................... (588,800) (640,000) (640,000)
Retained earnings adjustments........................... -- 512,323 (1)
----------- ----------- -----------
Retained earnings at end of period...................... $23,071,638 $24,387,293 $25,207,200
=========== =========== ===========
</TABLE>
F-3
<PAGE> 2073
MATTHEWS-BELK COMPANY -- GASTONIA, N.C. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED
HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company." The Company's fiscal year ends on the Saturday closest to each
January 31. Fiscal years 1997, 1996 and 1995 ended on February 1, 1997, February
3, 1996, and January 31, 1995 respectively.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
F-4
<PAGE> 2074
MATTHEWS-BELK COMPANY -- GASTONIA, N.C. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED
HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1995 and 1996 and amounts have been reclassified in order to be
consistent with classifications adopted in 1997. These reclassifications have no
effect on the Company's total shareholders' equity or net earnings as previously
reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements
F-5
<PAGE> 2075
MATTHEWS-BELK COMPANY -- GASTONIA, N.C. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED
HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
issued for all fiscal periods starting after December 15, 1995 and requires the
recognition of impairment losses on long-lived assets when book values exceed
expected future cash flows.
(12) RETAINED EARNINGS ADJUSTMENT
Adjustment to Retained Earnings of the Company at February 3, 1996, is due
to placing Belk Department Store of Lincolnton, N.C., Inc. on the equity method
of accounting.
F-6
<PAGE> 2076
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
A-1
<PAGE> 2077
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares; (ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (iv) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes; (v)
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional shares so created is to be acquired by cash under
G.S. 55-6-04; (vi) changes the corporation into a nonprofit corporation or
cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 2078
SEC.SEC. 55-13-04 TO 55-13-19. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 2079
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 2080
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision (a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions (a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 2081
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 2082
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................. $36,481,781 $1,459,908 $2,130,055 $3,227,411 $32,457,552
Adjustments to eliminate less than
wholly-owned subsidiaries................. (5,653,957) (259,645) (307,932) (375,587) (4,333,578)
----------- ---------- ---------- ---------- -----------
Adjusted Shareholders' Statement............ $30,827,824 1,200,263 1,822,123 2,851,824 28,123,974
=========== ---------- ---------- ---------- -----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............. (70) (108) (108)
Gain/loss on sale of securities........... -- -- --
Impairment loss........................... -- -- --
Equity in earnings of unconsolidated
subsidiaries............................ -- -- --
Gain/loss on discontinued operations...... -- -- --
Adjustment to tax expense................. -- -- -- --
---------- ---------- ----------
Total non-operating items................... (70) (108) (108)
---------- ---------- ----------
Other Adjustments:
Adjustment for dividends received from
other Belk entities..................... (15,905) (24,650) (24,650)
Adjustment for ownership in other Belk
entities................................ (3,543,628)
---------- ---------- ---------- -----------
Per Model................................... $1,184,288 $1,797,365 $2,827,066 $24,580,346
========== ========== ========== ===========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................. $(5,044,766)
Negative cash balances reclassified to
accounts payable...................... --
Receivables from affiliates, net........ --
Loans receivable from affiliates, net... (3,215,099)
Liabilities
Notes payable........................... --
Current installments of long-term
debt.................................. --
Current portion of obligations under
capital leases........................ --
Payables to affiliates, net............. 1,932,212
Long-term debt, excluding current
installments.......................... 561,857
Obligations under capital leases,
excluding current portion............. --
Loans payable to affiliates, net........ --
-----------
Net debt (cash)............................. (5,765,796)
Adjustments to eliminate less than
wholly-owned subsidiaries................. 1,111,856
-----------
Per Model................................... $ 4,653,940
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 2083
SUPPLEMENT NO. 49
<PAGE> 2084
MATTHEWS-BELK COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 11:40 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 49
<PAGE> 2085
BELK DEPARTMENT STORE OF GREENVILLE, N.C., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk Department Store of Greenville, N.C., Inc.
(the "Company"), to be held on April 16, 1998, at 9:20 a.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 157.6685 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 914,162 shares of New Belk Class A Common Stock which
will represent approximately 1.5236% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(50)
<PAGE> 2086
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 2087
BELK DEPARTMENT STORE OF GREENVILLE, N.C., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK DEPARTMENT STORE OF GREENVILLE, N.C., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk Department Store of Greenville, N.C., Inc. (the "Company")
will be held on April 16, 1998, at 9:20 a.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 157.6685 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 2088
BELK DEPARTMENT STORE OF GREENVILLE, N.C., INC.
SUPPLEMENT NO. 50
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 50 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK DEPARTMENT
STORE OF GREENVILLE, N.C., INC. (THE "COMPANY"), THE DISCUSSION HEREIN
SUPERSEDES THE DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE
INFORMATION CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE
IN THE REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN
THE REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY
AND THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT
BE ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL
CAPITALIZED TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE
MEANINGS SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 18
SELECTED HISTORICAL FINANCIAL INFORMATION................... 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 20
General................................................... 20
Results of Operations..................................... 20
Comparison of Nine Months Ended November 1, 1997 and
November 2, 1996........................................ 20
Comparison of Fiscal Years Ended February 1, 1997 and
February 3, 1996........................................ 21
Comparison of Fiscal Years Ended February 3, 1996 and
January 31, 1995........................................ 21
Seasonality and Quarterly Fluctuations.................... 22
Liquidity and Capital Resources........................... 22
Impact of Inflation....................................... 23
BUSINESS OF THE COMPANY..................................... 23
SECURITY OWNERSHIP OF THE COMPANY........................... 24
INDEX TO HISTORICAL FINANCIAL STATEMENTS.................... F-1
Report of KPMG Peat Marwick LLP, Independent Auditors..... F-2
Balance Sheets............................................ F-3
Statements of Operations.................................. F-4
Statements of Shareholders' Equity........................ F-5
Statements of Cash Flows.................................. F-6
Notes to Financial Statements............................. F-7
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 2089
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1938. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 9:20 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 157.6685 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 8,375 shares of Common Stock
outstanding held of record by 58 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 68.1% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 2090
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws"). This summary does not purport to be a complete statement of
all of the differences between the rights of the Shareholders and the New Belk
Stockholders. This summary is qualified in its entirety by reference to the full
text of the New Belk Certificate, the New Belk Bylaws, the DGCL, the Company
Articles, the Company Bylaws and the NCBCA.
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 10,000 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one
3
<PAGE> 2091
vote per share. Shares of New Belk Class A Common Stock may be owned only by
Class A Permitted Holders. If a share of New Belk Class A Common Stock is
transferred to any person other than a Class A Permitted Holder, whether by
sale, assignment, gift, bequest, appointment or otherwise, such share will be
converted automatically into a share of New Belk Class B Common Stock. Shares of
New Belk Class A Common Stock are convertible into New Belk Class B Common
Stock, in whole or in part, at any time and from time to time at the option of
the holder, on the basis of one share of New Belk Class B Common Stock for each
share of New Belk Class A Common Stock converted. Shares of New Belk Class A
Common Stock held by a New Belk Stockholder who is a Class A Permitted Holder
will also automatically convert into New Belk Class B Common Stock in the event
that such New Belk Stockholder no longer meets the requirements of a Class A
Permitted Holder. New Belk Class B Common Stock has no conversion rights. The
Company Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
4
<PAGE> 2092
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the
5
<PAGE> 2093
shares of the series so affected by the amendment will be considered a separate
class for purposes of voting by classes. The New Belk Certificate is consistent
with the foregoing provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the shareholders and approved (i) by a majority
(unless the articles of incorporation, a bylaw adopted by the shareholders or
the board of directors require a greater vote or a vote by voting groups) of the
votes entitled to be cast on the amendment by any voting group with respect to
which the amendment would create dissenters' rights and (ii) when a quorum is
present, by all other voting groups entitled to vote on the amendment through
casting more affirmative than opposing votes. As under the DGCL, the holders of
the outstanding shares of a class or one or more series are entitled to vote as
a separate voting group (if shareholder voting is otherwise required by the
NCBCA) on a proposed amendment if the amendment would change certain fundamental
rights and preferences of that class or series. The Company Articles do not
specify a greater voting requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power, nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has power, by
vote of a majority of all the directors, and without the assent or vote of the
shareholders, to make, alter, amend and rescind the bylaws of the Company.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without prior notice, if all
holders of outstanding shares entitled to vote on such action sign the written
consent(s) describing such action. The Company Bylaws and Company Articles do
not provide otherwise.
6
<PAGE> 2094
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more than 30% during any 12-month period. The
articles of incorporation or bylaws may establish a variable range for the size
of the board of directors by fixing a minimum and maximum number of directors.
If a variable
7
<PAGE> 2095
range is established, the number of directors may be fixed or changed from time
to time, within the minimum and maximum, by the shareholders or (unless the
articles of incorporation or a shareholders' agreement shall otherwise provide)
the board of directors. After shares are issued, only the shareholders may
change the range for the size of the board or change from a fixed to a
variable-range size board or vice versa. The Company Bylaws require the Company
Board to consist of at least three, but no more than 15, members.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares
8
<PAGE> 2096
entitled to vote thereon consents; or (iii) the transaction is fair to the
corporation at the time it is authorized by the board of directors, a committee
of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the disinterested directors or committee authorized, approved or
ratified the transaction; (ii) the material facts of the transaction and the
director's interest were disclosed or known to the shareholders entitled to vote
and the disinterested shares authorized, approved or ratified the transaction;
or (iii) the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
9
<PAGE> 2097
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any transaction from which the director derived an improper
personal benefit or (iv) acts or omissions occurring prior to the date the
provisions became effective.
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder,
except in certain circumstances; (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested stockholder, except
in certain
10
<PAGE> 2098
circumstances; or (v) any receipt by the interested stockholder of the benefit
of any loans, advances, guarantees, pledges or other financial benefits (other
than those expressly permitted in (i) through (iv) above) provided by or through
the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) an
affiliate or associate of the corporation who within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
11
<PAGE> 2099
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any final action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholder's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholder's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization
12
<PAGE> 2100
Agreement as described above. The Dissenters' Notice will (i) supply a form for
demanding payment (a "Payment Demand"), (ii) state where the Payment Demand must
be sent and where and when certificates must be deposited, (iii) inform holders
of uncertificated shares to what extent transfer of the shares will be
restricted after the Payment Demand is received, (iv) set a date by which the
Surviving Corporation must receive the Payment Demand, which date may not be
fewer than 30 nor more than 60 days after the date the Dissenters' Notice is
mailed and (v) be accompanied by a copy of Article 13. A Shareholder who is sent
a Dissenters' Notice and who wishes to assert dissenters' rights must demand
payment and deposits his certificates in accordance with the terms of the
Dissenters' Notice. A Shareholder who demands payment and deposit his
certificates in accordance with the terms of the Dissenters' Notice retains all
other rights of a Shareholder until these rights are canceled or modified by the
consummation and effectiveness of the Merger. A Shareholder who does not demand
payments or deposit his certificates in accordance with the terms of the
Dissenters' Notice will not be entitled to payment for his shares under the
NCBCA. If any such holder of Common Stock fails to perfect or shall have
effectively withdrawn or lost such right, each share of such holder's Common
Stock will thereupon be deemed to have been converted into and to have become,
as of the Effective Time, the right to receive, without any interest thereon,
the number of shares of New Belk Class A Common Stock such Shareholder is
otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine
13
<PAGE> 2101
the fair value of the shares and accrued interest. A dissenting Shareholder who
takes no action within such 60-day period is deemed to have withdrawn his
dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such Shareholder dissents and such
Shareholder's other shares were registered in the names of different
shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
14
<PAGE> 2102
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ----------- ----------- -------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $41,198,142 $41,198,142 0.6 $11,099,151 $13,619,734
EBITDA............... 2,680,540 2,575,838 7 11,099,151 6,931,715
EBIT................. 1,609,761 1,505,059 10 11,099,151 3,951,439
Net Income........... 378,565 312,029 15 -- 4,680,435
Book Equity.......... 20,283,036 12,156,589 1 -- 12,156,589
</TABLE>
15
<PAGE> 2103
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk of Asheboro,
N.C., Inc. 18.3590% X $10,609,421 = $ 1,947,784
Belk's Department
Store of Asheville,
North Carolina,
Incorporated 11.9502 X 8,096,519 = 967,550
Belk's Department
Store of Dunn,
North Carolina,
Incorporated 13.3712 X 14,191,195 = 1,897,533
Belk Department Store
of Elkin, N.C.,
Inc. 4.8684 X 1,368,240 = 66,611
Belk's Department
Store of Florence,
S.C., Incorporated 10.1627 X 24,968,409 = 2,537,465
Belk's Department
Store of Morehead
City, N.C., Inc. 4.0541 X 10,315,936 = 418,218
Belk's Department
Store of New Bern,
N.C., Incorporated 10.6728 X 7,893,728 = 842,482
Hudson-Belk Co. of
Fuquay-Varina,
N.C., Inc. 23.8868 X 5,660,048 = 1,352,004
Belk's Department
Store of
Jacksonville, N.C.,
Inc. 6.0189 X 29,859,959 = 1,797,241
-----------
Total $11,826,888
===========
Relative Operating Value of Company $13,619,734
Relative Operating Value of Other Companies Owned by Company + 11,826,888
-----------
Total Relative Value of Company = $25,446,622
===========
</TABLE>
16
<PAGE> 2104
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk's Department
Store of Asheville,
North Carolina,
Incorporated 1.2179% X $25,446,622 = $ 309,914
Belk Brothers Company 8.5493 X 25,446,622 = 2,175,508
Belk Enterprises,
Inc. 20.7164 X 25,446,622 = 5,271,624
Belk Department Store
of Clinton, N.C.
Inc. .2866 X 25,446,622 = 72,930
-----------
Total $ 7,829,977
===========
Total Relative Value of Company $25,446,622
Total Relative Value of Company Owned by Other Belk Companies - 7,829,977
-----------
Net Relative Value of Company = $17,616,646
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$17,616,646 / $1,156,226,577 = 1.5236%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(1.5236% X 59,998,834) / 5,798 = 157.6685
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
17
<PAGE> 2105
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share, and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the notes thereto, contained elsewhere in this Prospectus Supplement and
unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS
ENDED FEBRUARY 1, ENDED NOVEMBER 1,
1997 1997
----------------- -----------------
<S> <C> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 45.20 $ (11.87)
Dividends(2).............................................. 15.00 10.00
Book value per share(3)................................... 2,421.85 2,399.99
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96 0.29
Dividends(2).............................................. 0.26 0.22
Book value per share(5)................................... 12.52 12.65
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 151.36 44.98
Dividends(2).............................................. 40.99 34.99
Book value per share...................................... 1,974.01 1,994.06
</TABLE>
- ---------------
(1) Based on 8,375 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997 and the
nine-month period ended November 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 8,375 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the periods presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying the New Belk pro forma combined book value per share and New
Belk pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
18
<PAGE> 2106
SELECTED HISTORICAL FINANCIAL INFORMATION
The following selected historical financial information of the Company
presented below under the captions "Selected Statement of Income Data" and
"Selected Balance Sheet Data" for, and as of the end of, each of the years in
the five-year period ended February 1, 1997 are derived from the financial
statements of the Company. The financial statements as of February 1, 1997 and
for the year then ended have been audited by KPMG Peat Marwick LLP, independent
certified public accountants. Such financial statements, and the report thereon,
are included elsewhere in this Prospectus Supplement. The selected data
presented below for, and as of the end of, each of the years in the four-year
period ended February 3, 1996 and for the nine-month periods ended November 2,
1996 and November 1, 1997, and as of November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited data reflects, in the
judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
The information presented below under the caption "Selected Operating Data" is
unaudited.
Selected historical combined and pro forma financial data for the Belk
Companies is included in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
------------------------------------------------------------------- -------------------------
FEBRUARY 2, FEBRUARY 1, JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1993 1994 1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED STATEMENT OF
INCOME
Revenues:................ 37,425,526 37,486,054 38,498,133 39,823,181 41,243,896 28,063,310 28,312,733
Cost of goods sold....... 24,818,048 25,287,569 25,927,047 28,033,052 28,963,777 19,787,034 19,976,382
Depreciation and
amortization........... 776,291 869,165 847,517 764,145 1,070,780 754,437 784,227
Income from continuing
operations............. 1,593,796 1,347,143 1,547,267 796,437 378,565 (136,134) (99,400)
Net income (loss)........ 1,593,796 1,502,576 1,547,267 796,437 378,565 (136,134) (99,400)
Net income (loss) per
share(1)............... 190.30 179.41 184.75 95.10 45.20 (16.25) (11.87)
Dividends per share...... -- 10.00 15.00 15.00 15.00 15.00 10.00
Weighted average number
of shares
outstanding............ 8,375 8,375 8,375 8,375 8,375 8,375 8,375
SELECTED BALANCE SHEET
DATA:
Accounts
receivable -- net...... 5,736,510 5,388,337 5,548,080 5,751,013 6,724,679 6,279,325 6,624,297
Merchandise
inventories............ 8,820,725 8,690,156 8,775,761 8,853,131 10,704,953 12,741,347 12,107,487
Working capital.......... 8,784,481 10,613,789 12,618,582 12,749,393 3,524,353 2,822,712 10,702,406
Total assets............. 24,659,072 23,325,313 23,504,513 24,354,609 38,133,797 38,367,693 38,032,210
Short-term debt.......... -- -- -- -- -- -- --
Long-term debt........... -- -- -- -- -- -- 7,810,714
Capitalized lease
obligations............ -- -- -- -- -- -- --
Shareholders' equity..... 16,518,816 17,937,642 19,359,285 20,030,096 20,283,036 19,768,337 20,099,886
Book value per
share(2)............... 1,972.40 2,141.81 2,311.56 2,391.65 2,421.85 2,360.40 2,399.99
SELECTED OPERATING DATA:
Number of stores at end
of period.............. 9 8 8 7 7 7 7
Comparable store net
revenue increases
(decreases)............ 2.4% 1.9% 2.7% 2.3% (4.4)% (4.0)% (2.1)%
</TABLE>
- ---------------
(1) Based on the weighted average number of shares of Common Stock outstanding
for each period presented.
(2) Based on the number of shares of Common Stock outstanding at the end of each
period presented.
19
<PAGE> 2107
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is a discussion of the historical financial condition and
results of operations of the Belk Department Store of Greenville, N.C., Inc. for
each of the fiscal years ended January 31, 1995, February 3, 1996, and February
1, 1997 and for each of the nine-month periods ended November 2, 1996 and
November 1, 1997 which should be read in conjunction with the historical
financial statements, including the notes thereto, included elsewhere in this
Proxy Statement/Prospectus.
GENERAL
Certain Components of Net Income. Revenues include sales from retail
operations and leased departments. Cost of goods sold include cost of
merchandise, buying, and occupancy expense. Selling, general, and administrative
expense ("SG&A") includes payroll, advertising, credit, and depreciation
expense.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship to revenues of certain items in the Company's statements of income
and other pertinent financial data.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
--------------------------------------- -------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995(A) 1996(A) 1997(A) 1996 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold....................... 67.3 70.4 70.2 70.5 70.6
Selling, general and administrative
expenses............................... 25.7 25.9 26.3 28.1 27.5
Income from operations................... 7.0 3.7 3.5 1.4 1.9
Interest expense, net.................... 0.3 0.5 2.5 2.4 2.9
Income tax expense (benefit)............. 2.3 1.1 0.4 (0.3) (0.3)
Net income (loss)........................ 4.0 2.0 0.9 (0.5) (0.4)
Comparable stores revenues increase
(decrease)............................. 2.7 2.3 (4.4) (4.0) (2.1)
Number of stores
Opened................................. 0 0 0 0 0
Closed................................. 0 1 0 0 0
Total -- end of period................... 8 7 7 7 7
</TABLE>
- ---------------
(a) The fiscal years ended February 1, 1997 and January 31, 1995 consisted of 52
weeks. The fiscal year ended February 3, 1996 consisted of 368 days.
COMPARISON OF NINE MONTHS ENDED NOVEMBER 1, 1997 AND NOVEMBER 2, 1996
Revenues. The Company's revenues for the nine months ended November 1,
1997 increased 0.9%, or $0.2 million, over the same period in 1996 from $28.1
million to $28.3 million. The increase was attributable to a revenue increase at
the Greenville, North Carolina store at Plaza Mall, which was remodeled in
fiscal year 1997, of $0.5 million. Comparable store revenues for the nine months
ended November 1, 1997 decreased 2.1% with the largest decrease in the
Greenville, North Carolina store at Carolina East Mall which is in the same
market as the Plaza Mall store.
Cost of Goods Sold. As a percentage of revenues, cost of goods sold
increased from 70.5% for the nine months ended November 2, 1996 to 70.6% for the
nine months ended November 1, 1997. Cost of goods sold increased 1.0%, or $0.2
million, from $19.8 million for the nine months ended November 2, 1996 to $20.0
million for the nine months ended November 1, 1997 primarily as a result of the
increase in revenues.
Selling, General, and Administrative Expenses. As a percentage of
revenues, SG&A decreased from 28.1% for the nine months ended November 2, 1996
to 27.5% for the nine months ended November 1, 1997. SG&A decreased 1.0%, or
$0.1 million, from $7.9 million for the nine months ended November 2, 1996 to
20
<PAGE> 2108
$7.8 million for the nine months ended November 1, 1997. This decrease was
primarily due to a decrease in payroll as a percentage of revenues of 0.8%,
offset partially by increases in advertising and bad debts, net.
Interest Expense, Net. Interest expense, net was $0.7 million for the nine
months ended November 2, 1996 and $0.8 million for the nine months ended
November 1, 1997.
Net Loss. Net loss decreased $36.7 thousand to 0.4% of revenues for the
nine months ended November 1, 1997 compared to 0.5% of revenues for the same
period in 1996.
COMPARISON OF FISCAL YEARS ENDED FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
Revenues. The Company's revenues in fiscal year 1997 increased 3.6%, or
$1.4 million, over fiscal year 1996 from $39.8 million to $41.2 million. The
increase was attributable to increased revenues at the Greenville, North
Carolina store at Greenville Plaza Mall, which amounted to $4.1 million. This
increase was partially offset by a decrease in revenues at the Greenville, North
Carolina store at Carolina East Mall in the same market of $1.2 million and the
Farmville, North Carolina store of $1.0 million. On a comparable store revenues
basis, revenues decreased 4.4% compared to the first 52 weeks of fiscal year
1996. These decreases were primarily a result of the decrease in revenues at the
Greenville Carolina East Mall store.
Cost of Goods Sold. As a percentage of revenues, cost of goods sold
decreased from 70.4% in fiscal year 1996 to 70.2% in fiscal year 1997. Cost of
goods sold increased 3.3%, or $0.9 million, from $28.0 million in fiscal year
1996 to $28.9 million in fiscal year 1997 primarily due to an increase in
revenues and increases in buying and occupancy expense.
Selling, General, and Administrative Expenses. As a percentage of
revenues, SG&A increased from 25.9% in fiscal year 1996 to 26.3% in fiscal year
1997. SG&A increased 5.2%, or $0.5 million, primarily due to increases in
selling payroll expense, advertising, and depreciation expense.
Interest Expense, Net. Interest expense, net was $0.2 million in fiscal
year 1996 and $1.0 million in fiscal year 1997. In fiscal year 1997, interest
expense, net increased $0.8 million as a result of increased borrowings from
affiliates to fund capital expenditures and purchases of investments.
Net Income. Net income decreased $0.4 million to 0.9% of revenues in
fiscal year 1997 compared to 2.0% of revenues in fiscal year 1996. This decrease
was primarily a result of the increase in interest expense, net discussed above.
COMPARISON OF FISCAL YEARS ENDED FEBRUARY 3, 1996 AND JANUARY 31, 1995
Revenues. The Company's revenues in fiscal year 1996 increased by 3.4% or
$1.3 million from $38.5 million in fiscal year 1995 to $39.8 million in fiscal
year 1996. Adjusting for the impact of the additional days in fiscal year 1996,
comparable store revenues increased 2.3%. This increase was primarily due to an
increase in the Greenville Carolina East Mall store.
Cost of Goods Sold. As a percentage of revenues, cost of goods sold
increased from 67.3% in fiscal year 1995 to 70.4% in fiscal year 1996. Cost of
goods sold increased 8.1%, or $2.1 million, from $25.9 million in fiscal year
1995 to $28.0 million in fiscal year 1996 primarily due to a increase in
revenues. Cost of merchandise increased significantly at both the Greenville
Carolina East Mall and Greenville Plaza Mall stores as a result of higher
markdowns. In fiscal year 1996, higher markdowns were experienced due to the
liquidation of aged inventory at all stores.
Selling, General, and Administrative Expenses. As a percentage of
revenues, SG&A increased from 25.7% in fiscal year 1995 to 25.9% in fiscal year
1996. SG&A increased 4.2%, or $0.4 million, in fiscal year 1996 as compared to
fiscal year 1995. The increase was primarily attributable to an increase in
advertising and administrative expense.
Interest Expense, Net. Interest expense, net increased $66.7 thousand,
from $129.4 thousand for fiscal year 1995 to $196.1 thousand for fiscal year
1996.
21
<PAGE> 2109
Net Income. Net income decreased 48.5%, or $0.8 million, from 4.0% of
revenues in fiscal year 1995 to 2.0% of revenues in fiscal year 1996. The
decrease was primarily attributable to an increase of 3.1% in cost of goods
sold, as a percentage of revenues, related to the liquidation of aged inventory.
SEASONALITY AND QUARTERLY FLUCTUATIONS
The Company has historically experienced and expects to continue to
experience seasonal fluctuations in its revenues, operating income, and net
income. The highest revenue period for the Company is the fourth quarter which
includes the Christmas selling season. A disproportionate amount of the
Company's revenues and a substantial amount of the Company's operating and net
income are realized during the fourth quarter. If for any reason the Company's
revenues were below seasonal norms during the fourth quarter, the Company's
annual results of operations could be adversely affected. The Company's
inventory levels generally reach their highest in anticipation of increased
revenues during these months.
The following table illustrates the seasonality of revenues by quarter as a
percentage of the full-year for the fiscal years indicated.
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
First quarter............................................... 21.4% 20.8% 22.2%
Second quarter.............................................. 21.1 21.3 21.4
Third quarter............................................... 24.3 24.1 24.4
Fourth quarter.............................................. 33.2 33.8 32.0
</TABLE>
The Company's quarterly results of operations could also fluctuate
significantly as a result of a variety of factors, including the timing of new
store openings and remodelings.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash on hand, cash flow from
operations, and borrowings under credit facilities. During the nine months ended
November 1, 1997, net cash used by operations was $8.2 million, compared to net
cash provided by operations of $10.5 million during the same period in 1996. The
decrease in cash provided by operations was primarily a result of the change in
payables to affiliates. An investment in additional inventory was made to
support the revenues growth in the Greenville Plaza Mall store in the amount of
$3.9 million and $1.4 million during the nine months ended November 2, 1996 and
November 1, 1997, respectively. In addition, during the nine months ended
November 2, 1996 accounts receivable from customers increased resulting in a use
of cash of $0.5 million.
In fiscal year 1997, the Company had sufficient cash flows from operations
and credit facilities to fund its working capital needs, capital expenditures,
and equity purchases. Net cash provided by operations was $0.6 million, $1.7
million and $10.5 million for the 1995, 1996 and 1997 fiscal years,
respectively. The increase in cash flow in fiscal year 1997 was primarily
attributable to an increase in payables to affiliates, offset by increased
customer accounts receivable and an additional investment in merchandise
inventory.
Investing activities included capital expenditures, primarily for remodeled
or expanded stores and the purchases and sales of property and equipment related
to store openings and closings. Capital expenditures, primarily for new and
remodeled stores, amounted to $43.8 thousand in the first nine months of fiscal
year 1998 and $2.3 million in the comparable period in fiscal year 1997. Capital
expenditures amounted to $0.2 million, $1.6 million and $2.4 million for the
1995, 1996 and 1997 fiscal years, respectively. In fiscal year 1996, the Company
opened a new Men's, Kids and Home unit in the Greenville Plaza Mall. In
addition, the Plaza Mall Women's store was remodeled. The Farmville, North
Carolina store was closed in fiscal year 1996. The Company operated 8, 7 and 7
department stores, respectively for the 1995, 1996 and 1997 fiscal years. The
Mount Olive and Plymouth Landing stores will close January 31, 1998.
Financing activities included purchase of common stock and payments to or
additional borrowings from affiliates or credit facilities. The Company's total
indebtedness at November 1, 1997 was $7.8 million, comprised of $1.1 million of
current installments on long-term borrowings and $6.7 million of long-term
22
<PAGE> 2110
borrowings. The $7.8 million of total indebtedness is variable rate debt based
on LIBOR. The Company has entered into interest rate swap agreements with
various financial institutions to manage the exposure to changes in interest
rates on its LIBOR based indebtedness.
During fiscal year 1997, the Company purchased common stock in affiliates
from several major shareholders for $8.1 million. The Company has accounted for
the investment using the equity method.
The Company has exhausted its available financing capabilities during its
recent expansion.
IMPACT OF INFLATION
While it is difficult to determine the precise effects of inflation,
management does not believe inflation had a material impact on the financial
statements for the periods presented.
BUSINESS OF THE COMPANY
General. The Company operates four retail department stores in the
following locations in North Carolina: Carolina East Mall and Plaza Mall in
Greenville, Roanoke Landing in Williamston, and Parkwood Mall in Wilson. The
Company's stores operate in a manner consistent with the business of the Belk
Companies described in the Proxy Statement/Prospectus. The stores are managed
out of the Howard group office in Fayetteville, North Carolina. The Company
operates its retail store out of two locations at Plaza Mall in Greenville. In
February 1998, the Company sold the leases and fixed assets of its stores in Mt.
Olive and Plymouth, North Carolina to Peebles, Inc. In addition, the Company
closed its location in downtown Wilson in January 1998.
Facilities. The Company operates four stores, of which one is leased under
a long-term lease and three are owned by the Company; however, at Plaza Mall in
Greenville, the Company owns the 50,000 square foot "main" store, but also
leases the 54,000 square foot "men's" store. The leases have termination dates
of 2004 and 2009. The floor space of the leased buildings ranges from 54,000 to
93,000 square feet. The other owned buildings range from 46,000 to 120,000
square feet. The Company believes the facilities are generally adequate to meet
its current needs, although the Company's Board has approved a renovation of the
Wilson Store, which is scheduled for 1998.
Competition. Specific competitors in the Company's market include Brody's,
Sears, Penney, and Wal-Mart.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
23
<PAGE> 2111
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)(f)(g)(h).................................. 5,212 62.2%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(d)(g)(h).............................................. 3,948 47.1%
H. W. McKay Belk (Director and Executive Officer)
(b)(d)(g)(h).............................................. 3,948 47.1%
John R. Belk (Director and Executive Officer)
(b)(d)(g)(h).............................................. 3,932 46.9%
Sarah Belk Gambrell (e)(f).................................. 1,689 20.2%
Katherine McKay Belk (b)(d)................................. 1,206 14.4%
Katherine Belk Morris (b)(d)................................ 1,375 16.4%
Leroy Robinson (b)(d)....................................... 1,203 14.4%
Troy M. Howard (Director and Executive Officer)............. 0 *
William R. Young (Executive Officer)........................ 0 *
Belk Enterprises, Inc....................................... 1,735 20.7%
J.V. Properties............................................. 716 8.5%
Montgomery Investment Company............................... 476 5.7%
Milburn Investment Company.................................. 760 9.1%
Brothers Investment Company................................. 443 5.3%
All Directors and Executive Officers as a group (5
persons).................................................. 5,700 68.1%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Leroy Robinson, Katherine McKay Belk and Katherine Belk Morris -- 2801 West
Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk Gambrell -- 300 Cherokee
Road, Charlotte, N.C. 28207; Troy M. Howard and William R. Young -- 4525 Camp
Ground Road, Fayetteville, N.C. 28314; Belk Enterprises, Inc., J. V. Properties,
Montgomery Investment Company, Milburn Investment Company and Brothers
Investment Company -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 476 shares held by Montgomery Investment Company, of which John M.
Belk is the majority shareholder.
(b) Includes 443 shares held by Brothers Investment Company, which Corporation
is equally owned by John M. Belk and the Estate of Thomas M. Belk. Voting
and investment power is shared by John M. Belk, Katherine McKay Belk,
Katherine Belk Morris, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk
and Leroy Robinson.
(c) Includes 11 shares held by Mary Claudia Belk Irrevocable Trust dated
1/4/94. Claudia W. Belk, Trustee, is John M. Belk's wife.
24
<PAGE> 2112
(d) Includes 760 shares held by Milburn Investment Company, of which the Estate
of Thomas M. Belk is the sole shareholder. Voting and investment power is
shared by the Executors of the Estate of Thomas M. Belk, who are Katherine
McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., W. H. McKay Belk,
John R. Belk, John M. Belk and Leroy Robinson.
(e) Includes 400 shares held in several Trusts established by the Will of W. H.
Belk for the benefit of his children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(f) Includes 9 shares held in several Trusts established by the Will of Mary I.
Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(g) Includes 102 shares held by Belk's Department Store of Asheville, North
Carolina, Incorporated, 1,735 shares held by Belk Enterprises, Inc. and 24
shares held by Belk Department Store of Clinton, N.C., Inc., which shares
are voted by the members of the Executive Committee of the Board of
Directors of each such Corporation, under authority given by the directors
of each such Corporation at the annual meeting of directors held in March,
1997. The Executive Committee of each such Corporation consists of John M.
Belk, Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(h) Includes 716 shares held by J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, has voting and investment power with respect to such
shares.
25
<PAGE> 2113
INDEX TO HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of KPMG Peat Marwick LLP, Independent Auditors....... F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statements of Shareholders' Equity.......................... F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 2114
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
Belk Department Store of Greenville, N.C., Inc.
We have audited the accompanying balance sheet of Belk Department Store of
Greenville, N.C., Inc. as of February 1, 1997, and the related statements of
operations, shareholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Belk Department Store of
Greenville, N.C., Inc. at February 1, 1997, and the results of its operations
and its cash flows for the year then ended, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Charlotte, North Carolina
November 14, 1997
F-2
<PAGE> 2115
BELK DEPARTMENT STORE OF GREENVILLE, N.C., INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 827,821 $ 767,596 $ 272,828
Accounts receivable, net.............................. 5,751,013 6,724,679 6,624,297
Merchandise inventory................................. 8,853,131 10,704,953 12,107,487
Receivables from affiliates........................... 358,885 1,964,802 1,718,468
Deferred income taxes................................. 62,643 51,289 65,554
Prepaid expenses and other current assets............. 564,103 439,086 405,941
----------- ----------- -----------
Total current assets.................................... 16,417,596 20,652,405 21,194,575
Investments............................................. 18,990 7,257,423 7,257,423
Investment in unconsolidated entity..................... -- 871,774 899,929
Property and equipment, net............................. 7,555,428 8,873,263 8,132,883
Deferred income taxes................................... 134,207 179,226 179,226
Other assets............................................ 228,388 299,706 368,174
----------- ----------- -----------
Total assets............................................ $24,354,609 $38,133,797 $38,032,210
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................... $ 2,784,607 $ 2,719,636 $ 2,698,611
Accrued expenses...................................... 694,271 558,416 857,014
Payables to affiliates................................ 180,681 13,850,000 5,750,000
Current installments of long-term debt................ -- -- 1,157,144
Accrued income taxes.................................. 8,644 -- 29,400
----------- ----------- -----------
Total current liabilities............................... 3,668,203 17,128,052 10,492,169
Long-term debt, excluding current installments.......... -- -- 6,653,570
Deferred compensation................................... 540,657 577,841 641,828
Other noncurrent liabilities............................ 115,653 144,868 144,757
----------- ----------- -----------
Total liabilities....................................... 4,324,513 17,850,761 17,932,324
----------- ----------- -----------
Shareholders' equity:
Common stock, $100 par value; authorized 23,000
shares; issued and outstanding 8,375 shares........ 837,500 837,500 837,500
Retained earnings..................................... 19,192,596 19,445,536 19,262,386
----------- ----------- -----------
Total shareholders' equity.............................. 20,030,096 20,283,036 20,099,886
----------- ----------- -----------
Total liabilities and shareholders' equity.............. $24,354,609 $38,133,797 $38,032,210
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 2116
BELK DEPARTMENT STORE OF GREENVILLE, N.C., INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
--------------------------------------- -------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues........................ $38,498,133 $39,823,181 $41,243,896 $28,063,310 $28,312,733
Cost of goods sold (including
occupancy and buying
expenses)..................... 25,927,047 28,033,052 28,963,777 19,787,034 19,976,382
Selling, general and
administrative expenses....... 9,894,934 10,305,876 10,841,948 7,879,626 7,798,302
----------- ----------- ----------- ----------- -----------
Income from operations.......... 2,676,152 1,484,253 1,438,171 396,650 538,049
Interest expense, net........... (129,433) (196,150) (1,014,047) (682,988) (832,154)
Gain (loss) on sale of property
and equipment................. 6 (12,322) 16,111 16,012 200
Other income (expense), net..... (100,452) (25,009) 67,074 10,041 74,604
----------- ----------- ----------- ----------- -----------
Income (loss) before income
taxes, and equity in earnings
of unconsolidated entities.... 2,446,273 1,250,772 507,309 (260,285) (219,301)
Income taxes.................... 899,006 454,335 184,924 (95,000) (80,000)
----------- ----------- ----------- ----------- -----------
Income (loss) before equity in
earnings of unconsolidated
entities...................... 1,547,267 796,437 322,385 (165,285) (139,301)
Equity in earnings of
unconsolidated entities, net
of income taxes............... -- -- 56,180 29,151 39,901
----------- ----------- ----------- ----------- -----------
Net income (loss)............... $ 1,547,267 $ 796,437 $ 378,565 $ (136,134) $ (99,400)
=========== =========== =========== =========== ===========
Earnings (loss) per share....... $ 184.75 $ 95.10 $ 45.20 $ (16.25) $ (11.87)
=========== =========== =========== =========== ===========
Weighted average shares......... 8,375 8,375 8,375 8,375 8,375
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 2117
BELK DEPARTMENT STORE OF GREENVILLE, N.C., INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
-------- ----------- -----------
<S> <C> <C> <C>
Balance at February 1, 1994 (unaudited)................... $837,500 $17,100,142 $17,937,642
Cash dividends (unaudited)................................ -- (125,625) (125,625)
Net income (unaudited).................................... -- 1,547,267 1,547,267
-------- ----------- -----------
Balance at January 31, 1995 (unaudited)................... 837,500 18,521,784 19,359,284
Cash dividends (unaudited)................................ -- (125,625) (125,625)
Net income (unaudited).................................... -- 796,437 796,437
-------- ----------- -----------
Balance at February 3, 1996............................... 837,500 19,192,596 20,030,096
Cash dividends............................................ -- (125,625) (125,625)
Net income................................................ -- 378,565 378,565
-------- ----------- -----------
Balance at February 1, 1997............................... 837,500 19,445,536 20,283,036
Cash dividends (unaudited)................................ -- (83,750) (83,750)
Net loss (unaudited)...................................... -- (99,400) (99,400)
-------- ----------- -----------
Balance at November 1, 1997 (unaudited)................... $837,500 $19,262,386 $20,099,886
======== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 2118
BELK DEPARTMENT STORE OF GREENVILLE, N.C., INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
--------------------------------------- -------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)....................... $ 1,547,267 $ 796,437 $ 378,565 $ (136,134) $ (99,400)
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating
activities:
Deferred income taxes................... (201,467) 1,429 (33,665) (12,963) (14,265)
Depreciation and amortization........... 847,517 764,145 1,070,780 754,437 784,227
Loss (gain) on sale of property and
equipment............................. (6) 12,322 (16,111) (16,012) (200)
Equity in earnings of unconsolidated
entities.............................. -- -- (56,180) (29,151) (39,901)
(Increase) decrease in:
Accounts receivable, net.............. (159,743) (202,933) (973,666) (528,312) 100,382
Merchandise inventory................. (85,606) (77,370) (1,851,822) (3,888,216) (1,402,534)
Receivables from affiliates........... (309,329) 264,548 (1,605,917) 331,931 246,334
Other assets.......................... 155,183 (57,277) 53,699 (289,829) (35,323)
Increase (decrease) in:
Accounts payable and accrued
expenses............................ 403,979 1,183,626 (200,826) (161,944) 277,573
Payables to affiliates................ (1,702,022) (856,002) 13,669,319 14,410,361 (8,100,000)
Accrued income taxes.................. 16,681 (276,145) (8,644) (8,644) 29,400
Deferred compensation and other
noncurrent liabilities.............. 68,396 127,806 66,399 35,071 63,876
----------- ----------- ----------- ----------- -----------
Net cash provided (used) by operating
activities.............................. 580,850 1,680,586 10,491,931 10,460,595 (8,189,831)
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchases of property and equipment..... (207,961) (1,557,758) (2,391,313) (2,296,774) (43,847)
Proceeds from sale of property and
equipment............................. 18,448 28,861 18,809 18,946 200
Purchase of investments................. -- -- (8,054,027) (8,054,027) --
Other changes in investments............ -- -- -- -- 11,746
----------- ----------- ----------- ----------- -----------
Net cash used by investing activities..... (189,513) (1,528,897) (10,426,531) (10,331,855) (31,901)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of long-term
debt................................ -- -- -- -- 8,100,000
Principal payments on long-term
debt................................ -- -- -- -- (289,286)
Dividends paid........................ (125,625) (125,625) (125,625) (125,625) (83,750)
----------- ----------- ----------- ----------- -----------
Net cash provided (used) by financing
activities.............................. (125,625) (125,625) (125,625) (125,625) 7,726,964
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents............................. 265,712 26,064 (60,225) 3,115 (494,768)
Cash and cash equivalents at beginning of
period.................................. 536,045 801,757 827,821 827,821 767,596
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of
period.................................. $ 801,757 $ 827,821 $ 767,596 $ 830,936 $ 272,828
=========== =========== =========== =========== ===========
Supplemental disclosures of cash flow
information:
Interest paid......................... $ 593,245 $ 854,643 $ 1,433,242 $ 968,917 $ 1,224,072
Income taxes paid..................... 1,081,924 911,800 314,100 314,100 68,000
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 2119
BELK DEPARTMENT STORE OF GREENVILLE, N.C., INC.
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
COMPANY OPERATIONS
Belk Department Store of Greenville, N.C., Inc. (the Company) operates
retail department stores in North Carolina.
FISCAL YEAR
Starting in fiscal year 1996, the Company's fiscal year ends on the
Saturday closest to each January 31. Fiscal years 1996 and 1997 ended on
February 3, 1996 and February 1, 1997 and included 368 and 365 days,
respectively. Fiscal year 1995 ended on Tuesday, January 31, 1995 and included
364 days.
UNAUDITED FINANCIAL STATEMENTS
The financial statements as of February 3, 1996 and for the years ended
January 31, 1995 and February 3, 1996, and as of and for the periods ended
November 2, 1996 and November 1, 1997 are unaudited. In the opinion of
management, the accompanying financial statements reflect all adjustments
necessary to present fairly the Company's financial position and results of
operations and cash flows. The combined financial statements for the interim
periods ended November 2, 1996 and November 1, 1997 are not necessarily
indicative of the results of operations for a full fiscal year.
REVENUES
Revenues include sales from retail operations and leased departments, net
of returns.
COST OF GOODS SOLD
Cost of goods sold includes occupancy and buying expenses. Occupancy
expenses include rent, utilities and real estate taxes. Buying expenses include
the payroll and travel expenses associated with the buying function.
MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market as
determined by the retail inventory method.
FINANCE CHARGES
Selling, general and administrative expenses in the combined statements of
operations are reduced by finance charge revenue arising from customer accounts
receivable. Finance charge revenue amounted to approximately $769,000, $748,000
and $867,000 in fiscal years 1995, 1996 and 1997, respectively.
PROPERTY AND EQUIPMENT, NET
Property and equipment owned by the Company are stated at cost less
accumulated depreciation. Depreciation is provided utilizing straight-line and
various accelerated methods over the estimated asset lives.
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred income tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement bases
and the respective tax bases of the assets and liabilities and operating loss
and tax credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to
F-7
<PAGE> 2120
BELK DEPARTMENT STORE OF GREENVILLE, N.C., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized.
PRE-OPENING COSTS
Store pre-opening costs are expensed as incurred.
CASH EQUIVALENTS
Cash equivalents include liquid investments with an original maturity of 90
days or less.
ADVERTISING
Advertising costs are expensed as incurred and amounted to $730,168,
$937,289 and $1,065,140 in fiscal years 1995, 1996 and 1997, respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(2) ACCOUNTS RECEIVABLE, NET
Customer receivables arise primarily under open-end revolving credit
accounts used to finance purchases of merchandise from the Company. These
accounts have various billing and payment structures, including varying minimum
payment levels and finance charge rates. Installments of deferred payment
accounts receivable maturing after one year are included in current assets in
accordance with industry practice.
The Company provides an allowance for doubtful accounts which is determined
based on a number of factors, including the risk characteristics of the
portfolio, historical charge-off patterns and management judgment.
Accounts receivable, net consists of:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Customer receivables............................... $5,799,230 $6,811,184 $6,764,105
Other.............................................. 34,674 30,537 19,132
Less allowance for doubtful accounts............... (82,891) (117,042) (158,940)
---------- ---------- ----------
Accounts receivable, net........................... $5,751,013 $6,724,679 $6,624,297
========== ========== ==========
</TABLE>
F-8
<PAGE> 2121
BELK DEPARTMENT STORE OF GREENVILLE, N.C., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Changes in allowance for doubtful accounts are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
--------------------------------------- -------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance, beginning of
period...................... $ 63,818 $ 67,636 $ 82,891 $ 82,891 $ 117,042
Charged to expense............ 93,223 105,002 193,993 106,412 206,852
Net uncollectible balances
written off................. (89,405) (89,747) (159,842) (106,412) (164,954)
-------- -------- --------- --------- ---------
Balance, end of period........ $ 67,636 $ 82,891 $ 117,042 $ 82,891 $ 158,940
======== ======== ========= ========= =========
</TABLE>
(3) INVESTMENT IN UNCONSOLIDATED ENTITY
The Company's investment in the following unconsolidated entity includes
the unamortized excess of the Company's investment over its equity in the
investments' net assets. The excess was $234,359 at February 1, 1997, and is
being amortized on a straight-line basis over a period of 15 years. The
investment in unconsolidated entities and percentage owned is:
<TABLE>
<S> <C>
Hudson-Belk Co. of Fuquay-Varina, N.C., Inc................. 23.9%
</TABLE>
Condensed financial information of the unconsolidated entity is as follows:
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Current assets..................................... $1,860,092 $2,009,774 $2,350,848
Noncurrent assets.................................. 733,977 671,304 645,037
Current liabilities................................ 249,611 193,482 263,472
Noncurrent liabilities............................. 61,591 54,307 47,699
Shareholders' equity............................... 2,282,867 2,433,289 2,684,714
Revenues........................................... 4,293,565 4,153,975 4,326,878
Net income......................................... 220,903 199,591 300,595
</TABLE>
(4) INVESTMENTS
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values are recorded at original cost
when ownership is less than 20%. Any such investments owned 20% or more but not
greater than 50% are accounted for on the equity method. Investments that were
previously accounted for on the cost method may become qualified for use of the
equity method. The carrying amount of those investments are adjusted to reflect
the investor's share of the income, losses and dividends received from the
investees.
F-9
<PAGE> 2122
BELK DEPARTMENT STORE OF GREENVILLE, N.C., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(5) PROPERTY AND EQUIPMENT, NET
Details of property and equipment, net are as follows:
<TABLE>
<CAPTION>
ESTIMATED FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
LIVES 1996 1997 1997
--------- ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Land................................ N/A $ 274,457 $ 274,457 $ 274,457
Buildings........................... 30-50 9,211,738 9,212,466 10,641,906
Furniture, fixtures and equipment... 5-7 7,570,531 8,100,047 9,554,806
Construction in progress............ N/A 1,107,642 2,845,419 2,010
------------ ------------ ------------
18,164,368 20,432,389 20,473,179
Less accumulated depreciation....... (10,608,940) (11,559,126) (12,340,296)
------------ ------------ ------------
Property and equipment, net......... $ 7,555,428 $ 8,873,263 $ 8,132,883
============ ============ ============
</TABLE>
(6) ACCRUED EXPENSES
Accrued expenses are comprised of the following:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Salaries, wages and employee benefits.............. $397,899 $256,735 $142,954
Interest........................................... 6,376 81,629 114,273
Taxes, other than income........................... 93,659 68,034 196,457
Rent............................................... 17,730 16,341 9,236
Other.............................................. 178,607 135,677 394,094
-------- -------- --------
$694,271 $558,416 $857,014
======== ======== ========
</TABLE>
(7) BORROWINGS
Long term debt consists of the following:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Unsecured term loan agreement payable in
installments through July 2004; interest at
LIBOR (5.65% at November 1, 1997) plus from 80
to 100 basis points............................. $-- $-- $ 7,810,714
Less current installments......................... -- -- (1,157,144)
--- --- -----------
Long-term debt excluding current installments..... $-- $-- $ 6,653,570
=== === ===========
</TABLE>
The Company's term loan agreement contains, among other provisions and
covenants, restrictions relating to the creation of additional funded debt,
except as permitted, and the disposal, expansion or purchase of fixed assets,
except as permitted. Under the most restrictive of these provisions, the Company
must maintain, at the end of any fiscal year, a consolidated tangible net worth
in excess of a base amount increasing annually, as defined in the credit
agreement. In addition, at the end of the second quarter and the fiscal year,
the Company must maintain a leverage ratio of less than or equal to .50 to 1.00
and, commencing with the fiscal year ending in 1998, a minimum fixed charge
coverage ratio of 1.10 to 1.00. The Company was in compliance with the loan
covenants as of November 1, 1997.
F-10
<PAGE> 2123
BELK DEPARTMENT STORE OF GREENVILLE, N.C., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The covenants also include a restriction on dividend payments. The Company
can only declare dividends from operating profits from the preceding fiscal
year. At February 1, 1997, the Company had $19,066,971 of retained earnings
unavailable for dividend payments.
The Company has unsecured line of credit agreements totaling $4,500,000
with banks at interest rates quoted by the banks (which historically have been
approximately 80 points above LIBOR.) There were no amounts outstanding at
February 3, 1996, February 1, 1997 and November 1, 1997.
(8) LEASE COMMITMENTS
The Company leases certain stores, warehouse facilities and equipment under
operating leases. The majority of those leases will expire over the next 10
years. The leases usually contain renewal options and provide for payment by the
leasee of real estate taxes and other expenses, and in certain instances,
increased rentals based on percentages of sales.
<TABLE>
<CAPTION>
FISCAL YEAR OPERATING
- ----------- ----------
<S> <C>
1998........................................................ $ 625,235
1999........................................................ 621,035
2000........................................................ 591,635
2001........................................................ 591,635
2002........................................................ 591,635
After 2002.................................................. 2,482,353
----------
Total....................................................... $5,503,528
==========
</TABLE>
Rental expense for all operating leases consists of the following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Buildings:
Minimum rentals.................................. $454,595 $534,309 $668,147
Contingent rentals............................... 14,110 16,730 (3,941)
Equipment.......................................... 3,574 5,764 7,134
-------- -------- --------
Total rental expense............................. $472,279 $556,803 $671,340
======== ======== ========
</TABLE>
Contingent rentals are determined on the basis of a percentage of sales in
excess of stipulated minimums for certain store facilities.
F-11
<PAGE> 2124
BELK DEPARTMENT STORE OF GREENVILLE, N.C., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(9) INCOME TAXES
Federal and state income tax expense (benefit) is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
--------------------------------------- -------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
Federal...................... $ 880,507 $364,227 $173,211 $(64,755) $(51,905)
State........................ 219,966 88,679 45,378 (17,282) (13,830)
---------- -------- -------- -------- --------
1,100,473 452,906 218,589 (82,037) (65,735)
Deferred:
Federal...................... (161,188) 795 (26,995) (10,073) (11,648)
State........................ (40,279) 634 (6,670) (2,890) (2,617)
---------- -------- -------- -------- --------
(201,467) 1,429 (33,665) (12,963) (14,265)
---------- -------- -------- -------- --------
Income taxes................... $ 899,006 $454,335 $184,924 $(95,000) $(80,000)
========== ======== ======== ======== ========
</TABLE>
A reconciliation between income taxes computed using the effective income
tax rate and the federal statutory income tax rate of 34% is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Income tax at the statutory federal rate............ $831,733 $425,262 $172,485
State income taxes, net of federal income tax
benefit........................................... 118,593 58,947 25,547
Other............................................... (51,320) (29,874) (13,108)
-------- -------- --------
Income taxes........................................ $899,006 $454,335 $184,924
======== ======== ========
</TABLE>
Deferred taxes based upon differences between the financial statement and
tax bases of assets and liabilities and available tax carryforwards consist of:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
(UNAUDITED)
<S> <C> <C>
Deferred tax assets:
Benefit plan costs........................................ $243,719 $271,995
Allowance for doubtful accounts........................... 32,423 45,781
Inventory capitalization.................................. 30,219 36,733
Other..................................................... 6,258 --
-------- --------
Gross deferred tax assets................................... 312,619 354,509
Deferred tax liabilities:
Prepaid pension costs..................................... 62,018 52,441
Property and equipment.................................... 53,751 40,330
Other..................................................... -- 31,223
-------- --------
Gross deferred tax liabilities.............................. 115,769 123,994
-------- --------
Net deferred tax assets..................................... $196,850 $230,515
======== ========
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred
F-12
<PAGE> 2125
BELK DEPARTMENT STORE OF GREENVILLE, N.C., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
tax assets is dependent upon the temporary differences becoming deductible.
Management considers the scheduled reversals of deferred tax liabilities,
projected future income, and tax planning strategies in making this assessment.
(10) BENEFIT PLANS
The Company participates in the Belk Pension Plan, a defined benefit
multi-employer plan that covers substantially all of the employees of the Belk
companies. Pension expense allocated to the Company was $23,198, $43,373 and
$24,488 for fiscal years 1995, 1996 and 1997, respectively. Because the Belk
Pension Plan is a multi-employer plan, allocation of plan assets to the Company
is not practical.
The Company also participates in the Belk Employee's Group Medical Plan
that provides medical benefits to substantially all employees of the Belk
companies. This Plan is "self-funded" for medical benefits through a 501(c) (9)
Trust. The Company participates in the Group Life Insurance Plan that provides
life insurance to its employees, and is fully insured through a contract issued
by an insurance company. Contributions by the Company under the Belk Employees'
Group Medical Plan and the Group Life Insurance Plan amounted to approximately
$275,000, $250,000 and $282,000 in fiscal years 1995, 1996 and 1997,
respectively.
The Company participates in the Belk Profit Sharing Plan, a contributory,
defined contribution multi-employer plan, that provides benefits for
substantially all employees of the Belk companies. The cost of the plan
generally represents 10% of profits, as defined, and amounted to $294,843,
$147,759 and $61,668 in fiscal years 1995, 1996 and 1997, respectively.
The Company participates in the Supplemental Executive Retirement Plan
(SERP), a non-qualified defined benefit retirement plan that provides retirement
and death benefits to certain qualified executives of the Company. Total SERP
costs charged to operations were $12,740, $26,153 and $6,308 in fiscal years
1995, 1996 and 1997, respectively. The effective discount rate used in
determining the net periodic SERP cost is 8.5% for fiscal years 1995 and 1996
and 7.25% for fiscal year 1997. Actuarial gains and losses are amortized over
the average remaining service lives of the participants.
Certain eligible employees also participate in a non-qualified Deferred
Compensation Plan (DCP). Participants in the plan have elected to defer a
portion of their regular compensation subject to certain limitations prescribed
by the DCP. The Company is required to pay interest on the employees' deferred
compensation at various rates between 9% and 15%. Total interest expense related
to this plan and charged to operations was $38,314, $41,640 and $47,532 in
fiscal years 1995, 1996 and 1997, respectively.
The Company provides postretirement benefits to certain retired employees
in the form of medical and life insurance premiums. The Company recorded
approximately $29,000, $29,000 and $35,000 as selling, general and
administrative expense in fiscal years 1995, 1996 and 1997, respectively.
(11) RELATED PARTY TRANSACTIONS
The Belk Center, Inc. services the Company's customer accounts receivable.
The Company paid The Belk Center, Inc. approximately $372,000, $430,000 and
$487,000 during fiscal years 1995, 1996 and 1997, respectively, for these
services.
Various other selling, general, administrative and transaction processing
services are provided by Belk Store Services, Inc. (BSS). The Company paid BSS
approximately $767,000, $762,000 and $750,000 during fiscal years 1995, 1996 and
1997, respectively, for these services, not including the transaction processing
services. The Company paid approximately $446,000, $543,000 and $614,000 during
fiscal years 1995, 1996 and 1997, respectively for transaction processing fees.
F-13
<PAGE> 2126
BELK DEPARTMENT STORE OF GREENVILLE, N.C., INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Company has line of credit agreements with an affiliated company. At
February 1, 1997, the Company had outstanding borrowings of $8,100,000 under
these agreements, which are included in payables to affiliates in the
accompanying balance sheets. The interest rate at February 1, 1997 was 6.28%.
The Company may participate in operational, investing and financing
activities with other Belk companies.
(12) FAIR VALUE OF FINANCIAL INSTRUMENTS
For financial instruments which are short-term in nature, such as cash and
cash equivalents, accounts receivable, receivables from affiliates, accounts
payable, payables to affiliates and accrued expenses, carrying value
approximates fair value. The carrying values of the Company's variable rate
long-term debt are reasonable estimates of fair value.
F-14
<PAGE> 2127
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
A-1
<PAGE> 2128
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares; (ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (iv) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes; (v)
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional shares so created is to be acquired by cash under
G.S. 55-6-04; (vi) changes the corporation into a nonprofit corporation or
cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 2129
SEC.SEC. 55-13-04 TO 55-13-19. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 2130
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 2131
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 2132
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 2133
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................. $41,243,896 $378,565 $1,609,761 $2,680,540 $20,283,036
Adjustments to eliminate less than
wholly-owned subsidiaries................. -- -- -- -- --
Less: Leased sales.......................... 45,754 -- -- -- --
----------- -------- ---------- ---------- -----------
Adjusted Shareholders' Statement............ $41,198,142 378,565 1,609,761 2,680,540 20,283,036
=========== -------- ---------- ---------- -----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............. (10,238) (16,111) (16,111)
Gain/loss on sale of securities........... -- -- --
Impairment loss........................... -- -- --
Equity in earnings of unconsolidated
subsidiaries............................ (56,180) (88,406) (88,406)
Gain/loss on discontinued operations...... -- -- --
Adjustment to tax expense................. -- -- --
-------- ---------- ----------
Total non-operating items................... (66,418) (104,517) (104,517)
-------- ---------- ----------
Other Adjustments:
Adjustment for dividends received from
other Belk entities..................... (118) (185) (185) --
Adjustment for ownership in other Belk
entities................................ -- -- -- (8,126,447)
-------- ---------- ---------- -----------
Per Model................................... $312,029 $1,505,059 $2,575,838 $12,156,589
======== ========== ========== ===========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................. $ (767,596)
Negative cash balances reclassified to
accounts payable...................... --
Receivables from affiliates, net........ --
Loans receivable from affiliates, net... --
Liabilities
Notes payable........................... --
Current installments of long-term
debt.................................. --
Current portion of obligations under
capital leases........................ --
Payables to affiliates, net............. 6,135,198
Long-term debt, excluding current
installments.......................... --
Obligations under capital leases,
excluding current portion............. --
Loans payable to affiliates, net........ 5,731,549
-----------
Net debt (cash)............................. 11,099,151
Adjustments to eliminate less than
wholly-owned subsidiaries................. --
-----------
Per Model................................... $11,099,151
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 2134
SUPPLEMENT NO. 50
<PAGE> 2135
BELK DEPARTMENT STORE OF GREENVILLE, N.C., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 9:20 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 50
<PAGE> 2136
BELK-SIMPSON COMPANY OF HENDERSONVILLE, N.C., INCORPORATED
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk-Simpson Company of Hendersonville, N.C.,
Incorporated (the "Company"), to be held on April 16, 1998, at 3:30 p.m., local
time, at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road,
Charlotte, North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 190.2252 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 400,234 shares of New Belk Class A Common Stock which
will represent approximately 0.6671% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(51)
<PAGE> 2137
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 2138
BELK-SIMPSON COMPANY OF HENDERSONVILLE, N.C., INCORPORATED
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK-SIMPSON COMPANY OF HENDERSONVILLE, N.C.,
INCORPORATED:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk-Simpson Company of Hendersonville, N.C., Incorporated (the
"Company") will be held on April 16, 1998, at 3:30 p.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 190.2252 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 2139
BELK-SIMPSON COMPANY OF HENDERSONVILLE, N.C., INCORPORATED
SUPPLEMENT NO. 51
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 51 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK-SIMPSON COMPANY
OF HENDERSONVILLE, N.C., INCORPORATED (THE "COMPANY"), THE DISCUSSION HEREIN
SUPERSEDES THE DISCUSSION IN THE PROXY STATEMENT/ PROSPECTUS. ALL OF THE
INFORMATION CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE
IN THE REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN
THE REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY
AND THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT
BE ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL
CAPITALIZED TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE
MEANINGS SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION.................................. B-1
</TABLE>
<PAGE> 2140
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1939. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 3:30 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization dated as of November 25, 1997 (the "Reorganization Agreement"),
by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk Acquisition
Co., a South Carolina corporation, and the 112 Belk companies named therein (the
"Belk Companies"), including the Company, pursuant to which the Company will be
merged with and into New Belk (the "Merger") and (ii) the Merger. A copy of the
Reorganization Agreement is attached as Annex A to the Proxy Statement/
Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 190.2252 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 2,560 shares of Common Stock
outstanding held of record by 45 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 64.8% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 2141
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. In addition, the Reorganization is expected to have
certain other benefits for the Company and the Shareholders, including the
ability to share the risk associated with the uncertain prospects for the
Company's store in its current location. The store is located in a market that
is close to a substantially larger market with larger Belk stores and other
competitors. The prospects for growth of the Company's store may be limited
because of the size of its market and its close proximity to such competition.
The Merger would allow the Company to share with New Belk the risk associated
with the Company's current market and participate in the growth of other Belk
stores located in markets with better growth prospects.
There can be no assurance, however, that any of these benefits will be
achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 3,000 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common
3
<PAGE> 2142
Stock are entitled to 10 votes per share. The holders of New Belk Class B Common
Stock are entitled to one vote per share. Shares of New Belk Class A Common
Stock may be owned only by Class A Permitted Holders. If a share of New Belk
Class A Common Stock is transferred to any person other than a Class A Permitted
Holders, whether by sale, assignment, gift, bequest, appointment or otherwise,
such share will be converted automatically into a share of New Belk Class B
Common Stock. Shares of New Belk Class A Common Stock are convertible into New
Belk Class B Common Stock, in whole or in part, at any time and from time to
time at the option of the holder, on the basis of one share of New Belk Class B
Common Stock for each share of New Belk Class A Common Stock converted. Shares
of New Belk Class A Common Stock held by a New Belk Stockholder who is a Class A
Permitted Holder will also automatically convert into New Belk Class B Common
Stock in the event that such New Belk Stockholder no longer meets the
requirements of a Class A Permitted Holder. New Belk Class B Common Stock has no
conversion rights. The Company Articles provide for only one class of common
stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same
4
<PAGE> 2143
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them
5
<PAGE> 2144
adversely. If any proposed amendment would alter or change the powers,
preferences or special rights of one or more series of any class so as to affect
them adversely, but would not so affect the entire class, then only the shares
of the series so affected by the amendment will be considered a separate class
for purposes of voting by classes. The New Belk Certificate is consistent with
the foregoing provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the shareholders and approved (i) by a majority
(unless the articles of incorporation, a bylaw adopted by the shareholders or
the board of directors require a greater vote or a vote by voting groups) of the
votes entitled to be cast on the amendment by any voting group with respect to
which the amendment would create dissenters' rights and (ii) when a quorum is
present, by all other voting groups entitled to vote on the amendment through
casting more affirmative than opposing votes. As under the DGCL, the holders of
the outstanding shares of a class or series are entitled to vote as a separate
voting group (if shareholder voting is otherwise required by the NCBCA) on a
proposed amendment if the amendment would change certain fundamental rights and
preferences of that class or series. The Company Articles do not specify a
greater voting requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power, nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has power, by
vote of a majority of all the directors, and without the assent or vote of the
shareholders, to make, alter, amend and rescind the bylaws of the Company.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without
6
<PAGE> 2145
prior notice, if all holders of outstanding shares entitled to vote on such
action sign the written consent(s) describing such action. The Company Bylaws
and Company Articles do not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more
7
<PAGE> 2146
than 30% during any 12-month period. The articles of incorporation or bylaws may
establish a variable range for the size of the board of directors by fixing a
minimum and maximum number of directors. If a variable range is established, the
number of directors may be fixed or changed from time to time, within the
minimum and maximum, by the shareholders or (unless the articles of
incorporation or a shareholders' agreement shall otherwise provide) the board of
directors. After shares are issued, only the shareholders may change the range
for the size of the board or change from a fixed to a variable-range size board
or vice versa. The Company Bylaws require the Company Board to consist of at
least three, but no more than 15, members.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a
8
<PAGE> 2147
majority of disinterested directors consents; (ii) the material facts are
disclosed and a majority of shares entitled to vote thereon consents; or (iii)
the transaction is fair to the corporation at the time it is authorized by the
board of directors, a committee of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the disinterested directors or committee authorized, approved or
ratified the transaction; (ii) the material facts of the transaction and the
director's interest were disclosed or known to the shareholders entitled to vote
and the disinterested shares authorized, approved or ratified the transaction;
or (iii) the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or
9
<PAGE> 2148
otherwise, in the defense of any proceeding to which he was a party because he
was a director or officer of the corporation against reasonable expenses
incurred by the director or officer in connection with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any transaction from which the director derived an improper
personal benefit or (iv) acts or omissions occurring prior to the date the
provisions became effective.
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested stockholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested
10
<PAGE> 2149
stockholder, except in certain circumstances; (iv) any transaction involving the
corporation which has the effect of increasing the proportionate share of the
stock of any class or series, or securities convertible into the stock of any
class or series, of the corporation which is owned by the interested
stockholder, except in certain circumstances; or (v) any receipt by the
interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits (other than those expressly permitted in (i)
through (iv) above) provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) an
affiliate or associate of the corporation who within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any
11
<PAGE> 2150
security convertible into or exchangeable for, or any warrant, option or right
to purchase, subscribe for or otherwise acquire, stock of any class or series of
New Belk, whether now or hereafter authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any final action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholder's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
12
<PAGE> 2151
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates must be deposited,
(iii) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the Payment Demand is received, (iv) set a date
by which the Surviving Corporation must receive the Payment Demand, which date
may not be fewer than 30 nor more than 60 days after the date the Dissenters'
Notice is mailed and (v) be accompanied by a copy of Article 13. A Shareholder
who is sent a Dissenters' Notice and who wishes to assert dissenters' rights
must demand payment and deposit his certificates in accordance with the terms of
the Dissenters' Notice. A Shareholder who demands payment and deposit his
certificates in accordance with the terms of the Dissenters' Notice retains all
other rights of a Shareholder until these rights are canceled or modified by the
consummation and effectiveness of the Merger. A Shareholder who does not demand
payments or deposit his certificates in accordance with the terms of the
Dissenters' Notice will not be entitled to payment for his shares under the
NCBCA. If any such holder of Common Stock fails to perfect or shall have
effectively withdrawn or lost such right, each share of such holder's Common
Stock will thereupon be deemed to have been converted into and to have become,
as of the Effective Time, the right to receive, without any interest thereon,
the number of shares of New Belk Class A Common Stock such Shareholder is
otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
13
<PAGE> 2152
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such Shareholder dissents and such
Shareholder's other shares were registered in the names of different
shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
14
<PAGE> 2153
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales................... $8,919,781 $8,919,781 0.6 $(1,327,184) $6,679,052
EBITDA...................... 1,065,937 1,065,936 7 (1,327,184) 8,788,736
EBIT........................ 805,725 805,725 10 (1,327,184) 9,384,434
Net Income.................. 510,986 510,986 15 -- 7,664,790
Book Equity................. 4,656,017 4,655,710 1 -- 4,655,710
</TABLE>
15
<PAGE> 2154
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
N/A N/A% X $ N/A = $ N/A
----------
Total $ N/A
==========
Relative Operating Value of Company $9,384,434
Relative Operating Value of Other Companies Owned by Company + --
----------
Total Relative Value of Company = $9,384,434
==========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Brothers Company 17.2656% X $9,384,434 = $1,620,279
Belk Enterprises,
Inc. .3125 X 9,384,434 = 29,326
Belk Brothers of
Monroe, North
Carolina,
Incorporated .2344 X 9,384,434 = 21,997
----------
Total $1,671,602
==========
Total Relative Value of Company $9,384,434
Total Relative Value of Company Owned by Other Belk Companies - 1,671,602
----------
Net Relative Value of Company = $7,712,831
==========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 7,712,831 / $1,156,226,577 = .6671%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.6671% X 59,998,834) / 2,104 = 190.2252
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 2155
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share dividends per
share and book value per share data of the Company, unaudited pro forma combined
per share data of New Belk and unaudited pro forma equivalent per share data of
New Belk giving effect to the Reorganization. The data set forth below should be
read in conjunction with the historical financial statements of the Company,
including the condensed notes thereto, contained elsewhere in this Prospectus
Supplement and unaudited pro forma combined financial statements of New Belk,
including the notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 199.60
Dividends(2).............................................. 40.00
Book value per share(3)................................... 1,818.76
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 182.62
Dividends(2).............................................. 49.46
Book value per share...................................... 2,381.62
</TABLE>
- ---------------
(1) Based on 2,560 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share numbers above
are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 2,560 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share, New Belk pro
forma combined earnings per share and New Belk pro forma combined earnings
per share from continuing operations by the Exchange Ratio for the Merger.
17
<PAGE> 2156
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales............................................... $ 9,219 $ 8,909 $ 8,920
Net income.............................................. 428 327 511
Per common share
Net income (loss)(1).................................. 167.03 127.68 199.60
Dividends............................................. 25.00 40.00 40.00
Book value(2)......................................... 1,533.01 1,632.40 1,818.76
Total assets............................................ 4,907 4,837 5,593
Shareholders' equity.................................... 3,925 4,179 4,656
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $6,192 $6,113
Income from operations...................................... 521 592
</TABLE>
- ---------------
(1) Based on 2,560 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 2,560 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 2157
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Blue Ridge Mall
in Hendersonville, North Carolina. The Company's store operates in a manner
consistent with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is managed out of the Kuhne/Greiner group office
in Greenville, South Carolina.
The Company also owns approximately $400,000 in marketable securities.
Facilities. The Company owns the store property and building, which
contains approximately 76,000 square feet of floor area, together with an
adjacent parking area. The Company believes the facility is adequate for its
current needs.
Competition. Specific competitors in the Company's market include
Wal-Mart, K-Mart, and Penney.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 2158
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)(f)........................................ 813 31.8%
Thomas M. Belk, Jr. (Executive Officer) (b)(e)(f)(g)........ 528 20.6%
H. W. McKay Belk (Executive Officer) (b)(e)(f)(h)........... 513 20.0%
John R. Belk (Director and Executive Officer)
(b)(e)(f)(i).............................................. 537 21.0%
Sarah Belk Gambrell (Director) (c)(d)....................... 774 30.2%
John A. Kuhne (Director and Executive Officer).............. 0 *
R. E. Greiner (Director and Executive Officer).............. 0 *
Kate Simpson (j)............................................ 800 31.3%
Lucy S. Kuhne (j)........................................... 800 31.3%
Claire E Russo (j).......................................... 800 31.3%
Welch Bostick, Jr. (Executive Officer)...................... 0 *
Kate McArver Simpson, Lucy Caroline Bowden Simpson Kuhne and
Hazel Claire M. Efird as Personal Representatives of the
Estate of William Henry Belk Simpson, Deceased............ 800 31.3%
J.V. Properties............................................. 442 17.3%
All Directors and Executive Officers as a group (8
persons).................................................. 1,658 64.8%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson, Katherine McKay Belk and Katherine Belk
Morris -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk
Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207; John A. Kuhne, Lucy S.
Kuhne, Claire E. Russo, Kate Simpson, R. E. Greiner and Welch Bostick, Jr. -- 14
S. Main Street, Greenville, S.C. 29601; Kate McArver Simpson, Lucy Caroline
Bowden Simpson Kuhne and Hazel Claire M. Efird as Personal Representatives of
the Estate of William Henry Belk Simpson, Deceased -- P.O. Box 17433,
Greenville, S.C. 29606; J.V. Properties -- 2801 West Tyvola Road, Charlotte,
N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 16 shares held by Montgomery Investment Company, of which John M.
Belk is the majority shareholder.
(b) Includes 11 shares held by Milburn Investment Company, of which the Estate
of Thomas M. Belk is the sole shareholder. Voting and investment power is
shared by the Executors of the Estate of Thomas M. Belk, who are Katherine
McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W. McKay Belk,
John R. Belk and Leroy Robinson.
(c) Includes 80 shares held in several Trusts established by the Will of W. H.
Belk for the benefit of his children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power
20
<PAGE> 2159
of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson Belk
is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H. Belk,
Jr. and Irwin Belk.
(d) Includes 26 shares held in several Trusts established by the will of Mary
I. Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(e) Includes 6 shares held by Belk Brothers of Monroe, North Carolina,
Incorporated and 8 shares held by Belk Enterprises, Inc., which shares are
voted by the members of the Executive Committee of the Board of Directors
of each such Corporation, under authority given by the directors of each
such Corporation at the annual meeting of directors held in March, 1997.
The Executive Committee of each such Corporation consists of John M. Belk,
Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(f) Includes 442 shares of J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
(g) Includes 53 shares held by Thomas M. Belk, Jr. as custodian for his minor
children and 8 shares held as custodian for the minor children of his
brother, H. W. McKay Belk.
(h) Includes 46 shares held by H. W. McKay Belk as custodian for his minor
children.
(i) Includes 70 shares held by John R. Belk as custodian for his minor
children.
(j) Includes 800 shares held by the Estate of William Henry Belk Simpson.
Voting and investment power is shared by the Personal Representatives, who
are Kate Simpson, Lucy Kuhne and Claire Russo.
21
<PAGE> 2160
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 2161
BELK-SIMPSON COMPANY OF HENDERSONVILLE, N.C., INCORPORATED
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 112,444 $ 129,391
Accounts receivable, net.................................. 1,170,739 1,334,573
Merchandise inventory..................................... 1,645,068 1,709,460
Receivable from affiliates, net........................... 535,824 1,197,793
Deferred income taxes..................................... 24,434 21,479
Other..................................................... 69,455 66,394
---------- ----------
Total current assets........................................ 3,557,964 4,459,090
Investments................................................. 299,695 412,178
Property, plant and equipment, net.......................... 935,282 683,040
Other noncurrent assets..................................... 44,005 38,965
---------- ----------
$4,836,946 $5,593,273
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 445,064 $ 578,923
Accrued income taxes...................................... 11,416 131,401
---------- ----------
Total current liabilities................................... 456,480 710,324
Deferred income taxes....................................... 160,177 180,167
Other noncurrent liabilities................................ 41,344 46,765
---------- ----------
Total liabilities........................................... 658,001 937,256
Shareholders' equity:
Common stock.............................................. 256,000 256,000
Net unrealized gain (loss) on investments, net of income
taxes.................................................. 171,289 239,775
Retained earnings......................................... 3,751,656 4,160,242
---------- ----------
Total shareholders' equity.................................. 4,178,945 4,656,017
---------- ----------
$4,836,946 $5,593,273
========== ==========
</TABLE>
F-2
<PAGE> 2162
BELK-SIMPSON COMPANY OF HENDERSONVILLE, N.C., INCORPORATED
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Total store sales.......................................... $9,388,106 $9,220,612 $9,286,976
Less: Leased Sales......................................... 169,308 311,687 367,195
---------- ---------- ----------
Net sales.................................................. 9,218,798 8,908,925 8,919,781
Operating costs and expenses............................... 8,465,797 8,313,521 8,119,101
---------- ---------- ----------
Income from operations..................................... 753,001 595,404 800,680
---------- ---------- ----------
Other income (expense):
Interest, net............................................ (23,248) 7,169 28,337
Dividend income.......................................... 4,042 4,599 5,157
Gain (loss) on disposal of property, plant and
equipment............................................. 1,500 -- --
Miscellaneous, net....................................... (34,682) (69,954) (112)
---------- ---------- ----------
Total other expense, net................................... (52,388) (58,186) 33,382
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 700,613 537,218 834,062
Income tax expense (benefit)............................... 273,007 210,361 323,076
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 427,606 326,857 510,986
---------- ---------- ----------
Net earnings............................................... 427,606 326,857 510,986
Retained earnings at beginning of period................... 3,163,593 3,527,199 3,751,656
Dividends paid............................................. (64,000) (102,400) (102,400)
---------- ---------- ----------
Retained earnings at end of period......................... $3,527,199 $3,751,656 $4,160,242
========== ========== ==========
</TABLE>
F-3
<PAGE> 2163
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 2164
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 2165
ANNEX A
DISSENTERS' RIGHTS OF APPRAISER
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13.
DISSENTERS' RIGHTS.
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares;
A-1
<PAGE> 2166
(ii) creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares; (iii) alters or abolishes a preemptive right of
the holder of the shares to acquire shares or other securities; (iv)
excludes or limits the right of the shares to vote on any matter, or to
cumulate votes; (v) reduces the number of shares owned by the shareholder
to a fraction of a share if the fractional shares so created is to be
acquired by cash under G.S. 55-6-04; (vi) changes the corporation into a
nonprofit corporation or cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 2167
SEC.SEC. 55-13-04 TO 55-13-19. Reserved for future codification purposes.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 2168
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 2169
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 2170
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 2171
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................... $ 8,919,781 $510,986 $805,725 $1,065,937 $4,656,017
Adjustments to eliminate less than
wholly-owned subsidiaries................... -- -- -- -- --
----------- -------- -------- ---------- ----------
Adjusted Shareholders' Statement.............. $ 8,919,781 510,986 805,725 1,065,937 4,656,017
=========== -------- -------- ---------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............... -- -- --
Gain/loss on sale of securities............. -- -- --
Impairment loss............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries.............................. -- -- --
Gain/loss on discontinued operations........ -- -- --
Adjustment to tax expense................... -- -- -- --
-------- -------- ----------
Total non-operating items..................... -- -- --
-------- -------- ----------
Other Adjustments:
Adjustment for dividends received from other
Belk entities............................. -- -- --
Adjustment for ownership in other Belk
entities.................................. (307)
-------- -------- ---------- ----------
Per Model..................................... $510,986 $805,725 $1,065,937 $4,655,710
======== ======== ========== ==========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................... $ (129,391)
Negative cash balances reclassified to
accounts payable........................ --
Receivables from affiliates, net.......... (1,197,793)
Loans receivable from affiliates, net..... --
Liabilities
Notes payable............................. --
Current installments of long-term debt.... --
Current portion of obligations under
capital leases.......................... --
Payables to affiliates, net............... --
Long-term debt, excluding current
installments............................ --
Obligations under capital leases,
excluding current portion............... --
Loans payable to affiliates, net.......... --
-----------
Net debt (cash)............................... (1,327,184)
Adjustments to eliminate less than
wholly-owned subsidiaries................... --
-----------
Per Model..................................... $(1,327,184)
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 2172
SUPPLEMENT NO. 51
<PAGE> 2173
BELK-SIMPSON COMPANY OF HENDERSONVILLE, N.C., INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 3:30 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 51
<PAGE> 2174
BELK DEPARTMENT STORE OF HICKORY, N.C., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk Department Store of Hickory, N.C., Inc.
(the "Company"), to be held on April 16, 1998, at 2:10 p.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 177.2478 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 965,591 shares of New Belk Class A Common Stock which
will represent approximately 1.6093% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(52)
<PAGE> 2175
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 2176
BELK DEPARTMENT STORE OF HICKORY, N.C., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK DEPARTMENT STORE OF HICKORY, N.C., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk Department Store of Hickory, N.C., Inc. (the "Company") will
be held on April 16, 1998, at 2:10 p.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-
4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 177.2478 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 2177
BELK DEPARTMENT STORE OF HICKORY, N.C., INC.
SUPPLEMENT NO. 52
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 52 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK DEPARTMENT
STORE OF HICKORY, N.C., INC.(THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES
THE DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION
CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE IN THE
REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN THE
REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND
THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE
ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED
TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS
SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 2178
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1927. The
Company changed its name from Belk-Broome Company to Belk Department Store of
Hickory, N.C., Inc. in 1992. The mailing address of the Company's principal
executive offices is 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, and its telephone number at that address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 2:10 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 177.2478 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 7,678 shares of Common Stock
outstanding held of record by 87 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 67.3% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 2179
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
New Belk has entered into an agreement dated February 27, 1998 (the
"Hanahan Agreement") with Mary E.S. Hanahan ("Mrs. Hanahan"), who is the owner
of 14 shares of Common Stock of the Company (the "Hanahan Shares"). In the
Hanahan Agreement, Mrs. Hanahan granted to certain employees of BSS her
irrevocable proxy to vote the Hanahan Shares in favor of the Merger, agreed to
withdraw her appeal in certain litigation instituted by Belk of Spartanburg,
S.C., Inc. against Mrs. Hanahan and another party and released New Belk and the
Belk Companies from any and all claims which Mrs. Hanahan has or may have
against New Belk and the Belk Companies. New Belk agreed, among other things, to
purchase from Mrs. Hanahan, at her election at any time prior to December 31,
1999, all of the shares of New Belk Common Stock received by Mrs. Hanahan in
exchange for the Hanahan Shares and shares in other Belk Companies in the
Reorganization for an aggregate purchase price of $3.85 million.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 9,160 shares of
Common Stock.
3
<PAGE> 2180
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock held by a New Belk Stockholder who is a Class A Permitted
Holder will also automatically convert into New Belk Class B Common Stock in the
event that such New Belk Stockholder no longer meets the requirements of a Class
A Permitted Holder. New Belk Class B Common Stock has no conversion rights. The
Company Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the
4
<PAGE> 2181
holders of New Belk Class B Common Stock upon the same terms and conditions
applicable to the conversion of New Belk Class A Common Stock into New Belk
Class B Common Stock and must have the same restrictions on transfer and
ownership applicable to the transfer and ownership of the New Belk Class A
Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. DGCL requires that
an amendment of the certificate of incorporation of a corporation be adopted by
the board of directors and the holders of a majority of the outstanding shares
of stock entitled to vote thereon. The holders of the outstanding shares of a
class are entitled to vote as a separate class on a proposed amendment that
would increase or decrease the aggregate
5
<PAGE> 2182
number of authorized shares of such class, increase or decrease the par value of
the shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the shareholders and approved (i) by a majority
(unless the articles of incorporation, a bylaw adopted by the shareholders or
the board of directors require a greater vote or a vote by voting groups) of the
votes entitled to be cast on the amendment by any voting group with respect to
which the amendment would create dissenters' rights and (ii) when a quorum is
present, by all other voting groups entitled to vote on the amendment through
casting more affirmative than opposing votes. As under the DGCL, the holders of
the outstanding shares of a class or series are entitled to vote as a separate
voting group (if shareholder voting is otherwise required by the NCBCA) on a
proposed amendment if the amendment would change certain fundamental rights and
preferences of that class or series. The Company Articles do not specify a
greater voting requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power, nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has power, by
vote of a majority of all the directors, and without the assent or vote of the
shareholders, to make, alter, amend and rescind the bylaws of the Company.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
6
<PAGE> 2183
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without prior notice, if all
holders of outstanding shares entitled to vote on such action sign the written
consent(s) describing such action. The Company Bylaws and Company Articles do
not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of
7
<PAGE> 2184
incorporation or bylaws to fix or change the number of directors and if the
shareholders do not have the right to cumulate their votes for directors, the
board may increase or decrease the number of directors by not more than 30%
during any 12-month period. The articles of incorporation or bylaws may
establish a variable range for the size of the board of directors by fixing a
minimum and maximum number of directors. If a variable range is established, the
number of directors may be fixed or changed from time to time, within the
minimum and maximum, by the shareholders or (unless the articles of
incorporation or a shareholders' agreement shall otherwise provide) the board of
directors. After shares are issued, only the shareholders may change the range
for the size of the board or change from a fixed to a variable-range size board
or vice versa. The Company Bylaws require the Company Board to consist of at
least three, but no more than 15, members.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
8
<PAGE> 2185
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the disinterested directors or committee authorized, approved or
ratified the transaction; (ii) the material facts of the transaction and the
director's interest were disclosed or known to the shareholders entitled to vote
and the disinterested shares authorized, approved or ratified the transaction;
or (iii) the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
Corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
9
<PAGE> 2186
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any transaction from which the director derived an improper
personal benefit or (iv) acts or omissions occurring prior to the date the
provisions became effective.
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested stockholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which
10
<PAGE> 2187
results in the issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder, except in certain circumstances; (iv)
any transaction involving the corporation which has the effect of increasing the
proportionate share of the stock of any class or series, or securities
convertible into the stock of any class or series, of the corporation which is
owned by the interested stockholder, except in certain circumstances; or (v) any
receipt by the interested stockholder of the benefit of any loans, advances,
guarantees, pledges or other financial benefits (other than those expressly
permitted in (i) through (iv) above) provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) an
affiliate or associate of the corporation who within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a
11
<PAGE> 2188
preemptive right to purchase, subscribe for or otherwise acquire stock of any
class or series of New Belk or any security convertible into or exchangeable
for, or any warrant, option or right to purchase, subscribe for or otherwise
acquire, stock of any class or series of New Belk, whether now or hereafter
authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and the shareholder
gives the corporation written notice of the demand at least five business days
before the date (iv) on which the shareholder wishes to inspect and copy such
records. Such documents include: (i) records of any final action taken by the
board of directors, records of any final action of a committee of the board of
directors while acting in place of the board of directors on behalf of the
corporation, minutes of any meeting of the shareholders and records of action
taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
12
<PAGE> 2189
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates must be deposited,
(iii) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the Payment Demand is received, (iv) set a date
by which the Surviving Corporation must receive the Payment Demand, which date
may not be fewer than 30 nor more than 60 days after the date the Dissenters'
Notice is mailed and (v) be accompanied by a copy of Article 13. A Shareholder
who is sent a Dissenters' Notice and who wishes to assert dissenters' rights
must demand payment and deposit his certificates in accordance with the terms of
the Dissenters' Notice. A Shareholder who demands payment and deposit his
certificates in accordance with the terms of the Dissenters' Notice retains all
other rights of a Shareholder until these rights are canceled or modified by the
consummation and effectiveness of the Merger. A Shareholder who does not demand
payments or deposit his certificates in accordance with the terms of the
Dissenters' Notice will not be entitled to payment for his shares under the
NCBCA. If any such holder of Common Stock fails to perfect or shall have
effectively withdrawn or lost such right, each share of such holder's Common
Stock will thereupon be deemed to have been converted into and to have become,
as of the Effective Time, the right to receive, without any interest thereon,
the number of shares of New Belk Class A Common Stock such Shareholder is
otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
13
<PAGE> 2190
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such Shareholder dissents and such
Shareholder's other shares were registered in the names of different
shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period")multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
14
<PAGE> 2191
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ----------- ----------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales................... $26,613,169 $26,613,169 0.6 $377,832 $15,590,069
EBITDA...................... 3,066,411 3,068,994 7 377,832 21,105,126
EBIT........................ 2,506,398 2,508,981 10 377,832 24,711,978
Net Income.................. 1,450,564 1,452,157 15 -- 21,782,355
Book Equity................. 13,595,197 11,943,569 1 -- 11,943,569
</TABLE>
15
<PAGE> 2192
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Tags Stores, LLC 10.0130% X $15,118,749 = $ 1,513,840
-----------
Total $ 1,513,840
===========
Relative Operating Value of Company $24,711,978
Relative Operating Value of Other Companies Owned by Company + 1,513,840
-----------
Total Relative Value of Company = $26,225,818
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk's Department
Store of Asheville,
North Carolina,
Incorporated 1.5499% X $26,225,818 = $ 406,474
Belk Brothers Company 22.8608% X 26,225,818 = 5,995,432
Belk Enterprises,
Inc. 3.7510% X 26,225,818 = 983,730
Matthews-Belk Company .8864 X 26,225,818 = 232,466
-----------
Total $ 7,618,102
===========
Total Relative Value of Company $26,225,818
Total Relative Value of Company Owned by Other Belk Companies - 7,618,102
-----------
Net Relative Value of Company = $18,607,717
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$18,607,717 / $1,156,226,577 = 1.6093%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(1.6093% X 59,998,834) / 5,447.6875 = 177.2478
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 2193
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $188.92
Dividends(2).............................................. 22.00
Book value per share(3)................................... 1,770.67
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 170.16
Dividends(2).............................................. 46.08
Book value per share...................................... 2,219.14
</TABLE>
- ---------------
(1) Based on 7,678 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 7,678 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
17
<PAGE> 2194
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 25,896 $ 28,226 $ 26,613
Net income.................................................. 1,317 1,152 1,451
Per common share
Net income (loss)(1)...................................... 171.51 150.03 188.92
Dividends................................................. 12.00 17.00 22.00
Book value(2)............................................. 1,470.71 1,603.74 1,770.67
Total assets................................................ 15,766 15,707 16,823
Shareholders' Equity........................................ 11,292 12,314 13,595
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $16,840 $17,457
Income from operations...................................... 1,321 1,547
</TABLE>
- ---------------
(1) Based on 7,678 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 7,678 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 2195
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
To the extent a discussion of the financial condition and results of
operations of the Company for any of the fiscal years ended January 31, 1995,
February 3, 1996 or February 1, 1997 or for either of the nine-month periods
ended November 2, 1996 or November 1, 1997 is necessary to identify certain
trends or conditions that differ from the combined Belk Companies and that are
material to Shareholders' understanding of the financial condition or results of
operations of the Company, such discussion is included below. The discussion
which follows is based upon and should be read in conjunction with the
historical financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus Supplement.
The Company opened the Hickory Outlet Center in October of fiscal year
1995. The outlet was then contributed to TAGS Stores, LLC in exchange for a
partnership interest in June of fiscal year 1997, resulting in a decrease of
revenues for that year. Fiscal year 1997 comparable store sales decreased due to
poor sales performance at the Morganton store.
BUSINESS OF THE COMPANY
General. The Company operates two retail department stores in Valley Hills
Mall in Hickory, North Carolina and in downtown Morganton, North Carolina. The
Company's stores operate in a manner consistent with the business of the Belk
Companies described in the Proxy Statement/Prospectus. The stores are managed
out of the Matthews group office in Gastonia, North Carolina.
Facilities. The Company owns both the store property and building at
Hickory, which contains approximately 160,000 square feet of floor area,
together with an adjacent parking area. The Company also owns its downtown store
in Morganton, which contains approximately 27,000 square feet of floor area. The
Company believes the Hickory facilities are adequate for its current needs but
the Morganton facilities are not; consequently, the Board of Directors has
approved a relocation of the downtown Morganton store to a new shopping center
site, which is scheduled for the first quarter of 1999.
Competition. Specific competitors in the Company's market include Sears,
Penney, Goody's, K-Mart and Wal-Mart.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 2196
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)(f)........................................ 3,229.375 42.1%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(e)(f)(g).............................................. 2,409.375 31.4%
H. W. McKay Belk (Director and Executive Officer)
(b)(e)(f)(h).............................................. 2,407.375 31.4%
John R. Belk (Director and Executive Officer)
(b)(e)(f)(i).............................................. 2,403.375 31.3%
Sarah Belk Gambrell (Director) (d).......................... 1,065.0000 13.9%
David Belk Cannon (Director) (k)............................ 425.0000 5.5%
James K. Glenn, Jr. (Director) (j).......................... 312.0000 4.1%
B. Frank Matthews, II (Director) (n)........................ 60.0625 *
Eugene Robinson Matthews (Executive Officer)................ 8 *
J.V. Properties............................................. 1,755.25 22.9%
NationsBank, N.A. (l)(m).................................... 499 6.5%
All Directors and Executive Officers as a group (9
persons).................................................. 5,165.625 67.3%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk and John R.
Belk -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk
Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207; David Belk Cannon -- 1607
W. Floyd Baker Blvd., Gaffney, S.C. 29341; James K. Glenn, Jr. -- P. O. Box
2736, Winston-Salem, N.C. 27102; B. Frank Matthews, II and Eugene Robinson
Matthews -- 2240 Remount Road, Gastonia, N.C. 28054; J.V. Properties -- 2801
West Tyvola Road, Charlotte, N.C. 28217-4500; and NationsBank, N.A. -- Sara
McDonnell (NCI-002-07-13), NationsBank, N.A., Charlotte, N.C. 28255.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 277 shares held by Montgomery Investment Company, of which John M.
Belk is the majority shareholder.
(b) Includes 45 shares held by Brothers Investment Company, which corporation
is equally owned by John M. Belk and the Estate of Thomas M. Belk. Voting
and investment power is shared by John M. Belk, Katherine McKay Belk,
Katherine Belk Morris, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk
and Leroy Robinson.
(c) Includes 18.0625 shares Mary Claudia Belk Irrevocable Trust dated 1/4/94.
Claudia W. Belk, the Trustee, is John M. Belk's wife.
(d) Includes 328 shares held in several Trusts established by the Will of Mary
I. Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
20
<PAGE> 2197
(e) Includes 119 shares held by Belk's Department Store of Asheville, North
Carolina, Incorporated, 288 shared held by Belk Enterprises, Inc. and
68.0625 shares held by Matthews-Belk Company, which shares are voted by the
members of the Executive Committee of the Board of Directors of each such
Corporation, under authority given by the directors of each such
Corporation at the annual meeting of directors held in March, 1997. The
Executive Committee of each such Corporation consists of John M. Belk,
Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(f) Includes 1755.25 shares held by J.V. Properties, a partnership. The Board
of Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay
Belk and John R. Belk, have voting and investment power with respect to
such shares.
(g) Includes 20 shares held by Thomas M. Belk, Jr. as custodian for his minor
children.
(h) Includes 20 shares held by H. W. McKay Belk as custodian for his minor
children.
(i) Includes 15 shares held by John R. Belk as custodian for his minor
children.
(j) Includes 307 shares held by James K. Glenn, Jr., Trustee under Will of
Daisy Belk Mattox and 5 shares held by John Belk Stevens Trust U/W ITEM
III, Section C f/b/o James Kirk Glenn, Jr., et al. Voting and investment
power is vested in James K. Glenn, Jr., the Trustee of each Trust.
(k) Includes 139 shares held by Residuary Trust U/W Mrs. Henry Belk Cannon. The
Trustees, David Belk Cannon and John C. Daughtridge, have voting and
investment power with respect to such shares.
(l) Includes 45 shares held by NationsBank as Trustee for the Daisy Belk
Doughton Lange Revocable Trust dtd 3/25/97, 3 shares held by NationsBank as
Trustee for the Robert L. Doughton II Revocable Trust dtd 3/25/97, 163
shares held by Sara Dew Misner and North Carolina National Bank, Co-
trustees for Daisy Doughton Lange U/A dated November 5, 1965, and 106
shares held by N.C. Nat'l Bank, Trustees U/A 7/9/65 -- Sadie Belk Cummings,
Grantor. NationsBank has sole voting and investing power with respect to
such shares.
(m) Includes 182 shares held by Daisy Doughton Lange and North Carolina
National Bank, Trustees for Robert L. Doughton, II under Agreement dated
July 21, 1965. The named Trustees have voting and investment power with
respect to such shares.
(n) Includes 19.0625 shares held by B. Frank Matthews, II's wife, Betty Choate
Matthews.
21
<PAGE> 2198
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 2199
BELK DEPARTMENT STORE OF HICKORY, N.C., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 202,236 $ 235,933
Accounts receivable, net.................................. 4,392,413 4,663,512
Merchandise inventory..................................... 5,306,423 4,965,324
Receivable from affiliates, net........................... -- 385,234
Deferred income taxes..................................... 46,388 --
Other..................................................... 227,408 206,847
----------- -----------
Total current assets........................................ 10,174,868 10,456,850
Investments................................................. 1,588 1,651,628
Property, plant and equipment, net.......................... 5,401,782 4,599,709
Other noncurrent assets..................................... 128,735 114,697
----------- -----------
$15,706,973 $16,822,884
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 1,452,770 $ 1,554,757
Payables to affiliates, net............................... 125,099 --
Deferred income taxes..................................... -- 60,024
Accrued income taxes...................................... 101,270 208,714
----------- -----------
Total current liabilities................................... 1,679,139 1,823,495
Deferred income taxes....................................... 291,428 148,020
Loans payable to affiliates, net............................ 1,199,000 999,000
Other noncurrent liabilities................................ 223,857 257,172
----------- -----------
Total liabilities........................................... 3,393,424 3,227,687
Shareholders' equity:
Common stock.............................................. 767,800 767,800
Retained earnings......................................... 11,545,749 12,827,397
----------- -----------
Total shareholders' equity.................................. 12,313,549 13,595,197
----------- -----------
$15,706,973 $16,822,884
=========== ===========
</TABLE>
F-2
<PAGE> 2200
BELK DEPARTMENT STORE OF HICKORY, N.C., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Total store sales....................................... $26,385,972 $28,839,367 $27,249,479
Less: Leased Sales...................................... 490,135 613,431 636,310
----------- ----------- -----------
Net sales............................................... 25,895,837 28,225,936 26,613,169
Operating costs and expenses............................ 23,484,631 26,067,612 24,056,533
----------- ----------- -----------
Income from operations.................................. 2,411,206 2,158,324 2,556,636
----------- ----------- -----------
Other income (expense):
Interest, net......................................... (223,961) (199,232) (153,800)
Gain (loss) on disposal of property, plant and
equipment.......................................... 242 (8,311) (2,584)
Miscellaneous, net.................................... (44,725) (64,566) (47,654)
----------- ----------- -----------
Total other expense, net................................ (268,444) (272,109) (204,038)
----------- ----------- -----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities..... 2,142,762 1,886,215 2,352,598
Income tax expense (benefit)............................ 825,893 734,284 902,034
----------- ----------- -----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities................... 1,316,869 1,151,931 1,450,564
----------- ----------- -----------
Net earnings............................................ 1,316,869 1,151,931 1,450,564
Retained earnings at beginning of period................ 9,299,611 10,524,344 11,545,749
Dividends paid.......................................... (92,136) (130,526) (168,916)
----------- ----------- -----------
Retained earnings at end of period...................... $10,524,344 $11,545,749 $12,827,397
=========== =========== ===========
</TABLE>
F-3
<PAGE> 2201
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 2202
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 2203
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13.
DISSENTERS' RIGHTS.
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when
and in the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action
to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action unless exclusion
would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable
under all the circumstances, giving due consideration to the rate
currently paid by the corporation on its principal bank loans, if any,
but not less than the rate provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on
file with a corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
A-1
<PAGE> 2204
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it (i)
alters or abolishes a preferential right of the shares; (ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (iv) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes; (v)
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional shares so created is to be acquired by cash under
G.S. 55-6-04; (vi) changes the corporation into a nonprofit corporation or
cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 2205
SEC.SEC. 55-13-04 TO 55-13-19. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 2206
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 2207
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 2208
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 2209
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................. $26,613,169 $1,450,564 $2,506,398 $3,066,411 $13,595,197
Adjustments to eliminate less than
wholly-owned subsidiaries................. -- -- -- -- --
----------- ---------- ---------- ---------- -----------
Adjusted Shareholders' Statement............ $26,613,169 1,450,564 2,506,398 3,066,411 13,595,197
=========== ---------- ---------- ---------- -----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............. 1,593 2,584 2,584
Gain/loss on sale of securities........... -- -- --
Impairment loss........................... -- -- --
Equity in earnings of unconsolidated
subsidiaries............................ -- -- --
Gain/loss on discontinued operations...... -- -- --
Adjustment to tax expense................. -- -- -- --
---------- ---------- ----------
Total non-operating items................... 1,593 2,584 2,584
---------- ---------- ----------
Other Adjustments:
Adjustment for dividends received from
other Belk entities..................... -- -- --
Adjustment for ownership in other Belk
entities................................ (1,651,628)
---------- ---------- ---------- -----------
Per Model................................... $1,452,157 $2,508,982 $3,068,995 $11,943,569
========== ========== ========== ===========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................. $ (235,934)
Negative cash balances reclassified to
accounts payable...................... --
Receivables from affiliates, net........ (385,234)
Loans receivable from affiliates, net... --
Liabilities
Notes payable........................... --
Current installments of long-term
debt.................................. --
Current portion of obligations under
capital leases........................ --
Payables to affiliates, net............. --
Long-term debt, excluding current
installments.......................... --
Obligations under capital leases,
excluding current portion............. --
Loans payable to affiliates, net........ 999,000
-----------
Net debt (cash)............................. 377,832
Adjustments to eliminate less than
wholly-owned subsidiaries................. --
-----------
Per Model................................... $ 377,832
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 2210
SUPPLEMENT NO. 52
<PAGE> 2211
BELK DEPARTMENT STORE OF HICKORY, N.C., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 2:10 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 52
<PAGE> 2212
BELK-BECK CO. OF HIGH POINT, N.C., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk-Beck Co. of High Point, N.C., Inc. (the
"Company"), to be held on April 16, 1998, at 2:30 p.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 36.7519 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 219,997 shares of New Belk Class A Common Stock which
will represent approximately 0.3667% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(53)
<PAGE> 2213
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 2214
BELK-BECK CO. OF HIGH POINT, N.C., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK-BECK CO. OF HIGH POINT, N.C., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk-Beck Co. of High Point, N.C., Inc. (the "Company") will be
held on April 16, 1998, at 2:30 p.m., local time, at the offices of Belk Stores
Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, for
the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 36.7519 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 2215
BELK-BECK CO. OF HIGH POINT, N.C., INC.
SUPPLEMENT NO. 53
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 53 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK-BECK CO. OF
HIGH POINT, N.C., INC. (THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE
DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED
HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION.
IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE
INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE
REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE
"RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED
HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE
PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 16
SELECTED HISTORICAL FINANCIAL INFORMATION................... 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 18
BUSINESS OF THE COMPANY..................................... 18
SECURITY OWNERSHIP OF THE COMPANY........................... 19
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 2216
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1930. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 2:30 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 36.7519 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 8,854 shares of Common Stock
outstanding held of record by 52 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 69.8% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 2217
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 20,568 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock
3
<PAGE> 2218
held by a New Belk Stockholder who is a Class A Permitted Holder will also
automatically convert into New Belk Class B Common Stock in the event that such
New Belk Stockholder no longer meets the requirements of a Class A Permitted
Holder. New Belk Class B Common Stock has no conversion rights. The Company
Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving
4
<PAGE> 2219
the distribution. The Company Bylaws provide that the Board of Directors of the
Company (the "Company Board") may from time to time declare dividends on the
Company's outstanding shares in the manner and upon the terms and conditions
provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. DGCL requires that
an amendment of the certificate of incorporation of a corporation be adopted by
the board of directors and the holders of a majority of the outstanding shares
of stock entitled to vote thereon. The holders of the outstanding shares of a
class are entitled to vote as a separate class on a proposed amendment that
would increase or decrease the aggregate number of authorized shares of such
class, increase or decrease the par value of the shares of such class or alter
or change the powers, preferences or special rights of the shares of such class
so as to affect them adversely. If any proposed amendment would alter or change
the powers, preferences or special rights of one or more series of any class so
as to affect them adversely, but would not so affect the entire class, then only
the shares of the series so affected by the amendment will be considered a
separate class for purposes of voting by classes. The New Belk Certificate is
consistent with the foregoing provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the
5
<PAGE> 2220
shareholders and approved (i) by a majority (unless the articles of
incorporation, a bylaw adopted by the shareholders or the board of directors
require a greater vote or a vote by voting groups) of the votes entitled to be
cast on the amendment by any voting group with respect to which the amendment
would create dissenters' rights and (ii) when a quorum is present, by all other
voting groups entitled to vote on the amendment through casting more affirmative
than opposing votes. As under the DGCL, the holders of the outstanding shares of
a class or series are entitled to vote as a separate voting group (if
shareholder voting is otherwise required by the NCBCA) on a proposed amendment
if the amendment would change certain fundamental rights and preferences of that
class or series. The Company Articles do not specify a greater voting
requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power, nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has power, by
vote of a majority of all the directors and without the assent or vote of the
shareholders, to make, alter, amend and rescind the bylaws of the Company.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without prior notice, if all
holders of outstanding shares entitled to vote on such action sign the written
consent(s) describing such action. The Company Bylaws and Company Articles do
not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding
6
<PAGE> 2221
having the right to vote for such directors, order an election to be held to
fill any such vacancies or newly created directorships or to replace the
directors chosen by the directors then in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more than 30% during any 12-month period. The
articles of incorporation or bylaws may establish a variable range for the size
of the board of directors by fixing a minimum and maximum number of directors.
If a variable range is established, the number of directors may be fixed or
changed from time to time, within the minimum and maximum, by the shareholders
or (unless the articles of incorporation or a shareholders' agreement shall
otherwise provide) the board of directors. After shares are issued, only the
shareholders may change the range for the size of the board or change from a
fixed to a variable-range size board or vice versa. The Company Bylaws require
the Company Board to consist of at least three, but no more than 15, members.
7
<PAGE> 2222
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the
8
<PAGE> 2223
disinterested directors or committee authorized, approved or ratified the
transaction; (ii) the material facts of the transaction and the director's
interest were disclosed or known to the shareholders entitled to vote and the
disinterested shares authorized, approved or ratified the transaction; or (iii)
the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any transaction from which the director derived an improper
personal benefit or (iv) acts or omissions occurring prior to the date the
provisions became effective.
9
<PAGE> 2224
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder,
except in certain circumstances; (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested stockholder, except
in certain circumstances; or (v) any receipt by the interested stockholder of
the benefit of any loans, advances, guarantees, pledges or other financial
benefits (other than those expressly permitted in (i) through (iv) above)
provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation
10
<PAGE> 2225
or (ii) an affiliate or associate of the corporation who within three years of
the date in question was the direct or indirect owner of at least 15% of the
voting power of any class or series of the then outstanding stock of the
corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other
11
<PAGE> 2226
books and records and to make copies or extracts therefrom. A proper purpose
means a purpose reasonably related to such person's interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any final action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates must be deposited,
(iii) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the Payment Demand is received, (iv) set a date
by which the Surviving Corporation must receive the Payment Demand, which date
may not be fewer than 30 nor more than 60 days after the date the
12
<PAGE> 2227
Dissenters' Notice is mailed and (v) be accompanied by a copy of Article 13. A
Shareholder who is sent a Dissenters' Notice and who wishes to assert
dissenters' rights must demand payment and deposits his certificates in
accordance with the terms of the Dissenters' Notice. A Shareholder who demands
payment and deposit his certificates in accordance with the terms of the
Dissenters' Notice retains all other rights of a Shareholder until these rights
are canceled or modified by the consummation and effectiveness of the Merger. A
Shareholder who does not demand payments or deposit his certificates in
accordance with the terms of the Dissenters' Notice will not be entitled to
payment for his shares under the NCBCA. If any such holder of Common Stock fails
to perfect or shall have effectively withdrawn or lost such right, each share of
such holder's Common Stock will thereupon be deemed to have been converted into
and to have become, as of the Effective Time, the right to receive, without any
interest thereon, the number of shares of New Belk Class A Common Stock such
Shareholder is otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such
13
<PAGE> 2228
Shareholder dissents and such Shareholder's other shares were registered in the
names of different shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ----------- ----------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $14,109,719 $14,109,719 0.6 $2,810,328 $ 5,655,503
EBITDA............... 968,502 966,834 7 2,810,328 3,957,510
EBIT................. 160,018 158,350 10 2,810,328 (1,226,828)
Net Income (loss).... (72,810) (74,170) 15 -- (1,112,550)
Book Equity.......... 6,271,528 6,270,761 1 -- 6,270,761
</TABLE>
14
<PAGE> 2229
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
N/A N/A% X $ N/A = $ N/A
----------
Total $ N/A
==========
Relative Operating Value of Company $6,270,761
Relative Operating Value of Other Companies Owned by Company + --
----------
Total Relative Value of Company = $6,270,761
==========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Brothers Company 24.8023% X $ 6,270,761 = $1,555,293
Belk Enterprises,
Inc. .4970 X 6,270,761 = 31,166
Belk-Beck Company of
Burlington, North
Carolina, Inc. 7.0025% X 6,270,761 = 439,110
Belk Department Store
of Reidsville,
N.C., Inc. .0904 X 6,270,761 = 5,669
----------
Total $2,031,237
==========
Total Relative Value of Company $6,270,761
Total Relative Value of Company Owned by Other Belk Companies - 2,031,237
----------
Net Relative Value of Company = $4,239,524
==========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$4,239,524 / $1,156,226,577 = .3667%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.3667% X 59,998,834) / 5,986 = 36.7519
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
15
<PAGE> 2230
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ (8.22)
Dividends(2).............................................. 10.00
Book value per share(3)................................... 708.33
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 35.28
Dividends(2).............................................. 9.56
Book value per share...................................... 460.13
</TABLE>
- ---------------
(1) Based on 8,854 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 8,854 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
16
<PAGE> 2231
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $11,564 $13,717 $14,110
Net income (loss)........................................... 838 129 (73)
Per common share
Net income (loss)(1)...................................... 94.64 14.59 (8.22)
Dividends................................................. 20.00 10.00 0.00
Book value(2)............................................. 731.96 726.55 708.33
Total assets................................................ 7,343 11,014 10,268
Shareholders' equity........................................ 6,481 6,433 6,272
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $9,672 $9,965
Income (loss) from operations............................... (418) (178)
</TABLE>
- ---------------
(1) Based on 8,854 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 8,854 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
17
<PAGE> 2232
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
To the extent a discussion of the financial condition and results of
operations of the Company for any of the fiscal years ended January 31, 1995,
February 3, 1996 or February 1, 1997 or for either of the nine-month periods
ended November 2, 1996 or November 1, 1997 is necessary to identify certain
trends or conditions that differ from the combined Belk Companies and that are
material to Shareholders' understanding of the financial condition or results of
operations of the Company, such discussion is included below. The discussion
which follows is based upon and should be read in conjunction with the
historical financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus Supplement.
During fiscal year 1996, the Company's only store was relocated to a new
mall location increasing selling square feet by 110%. As a result, income from
operations decreased due to one-time relocation expenses incurred in closing the
original store and opening the new store. Other income (expense), net decreased
in fiscal year 1996 as a result of a $28,000 loss on abandonment of fixed assets
and an increase in interest expense due to additional debt incurred to fund the
relocation of the store.
Income from operations decreased from $579,063 in fiscal year 1996 to
$27,000 in fiscal year 1997 due to increased depreciation and rent expense
related to the relocation of the store. The impact of the increased rent was
partially offset by the one-time relocation expenses incurred in fiscal year
1996.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Oak Hollow Mall
in High Point, North Carolina. The Company's store operates in a manner
consistent with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is managed out of the Huffstetler group office
in Greensboro, North Carolina.
Facilities. The Company leases its store building, which contains
approximately 132,000 square feet of floor area. The current term of the lease
expires in 2015. The Company believes the building is adequate to meet its
current needs.
Competition. Specific competitors in the Company's market include Dillard,
Sears and Penney.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
18
<PAGE> 2233
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d).............................................. 4,242 47.9%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(c)(d)(e).............................................. 3,414 38.6%
H. W. McKay Belk (Director and Executive Officer)
(b)(c)(d)(f).............................................. 3,414 38.6%
John R. Belk (Director and Executive Officer)
(b)(c)(d)(g).............................................. 3,403 38.4%
Henderson Belk (Director)................................... 0 *
Sarah Belk Gambrell......................................... 586 6.6%
David Belk Cannon (Director)(j)............................. 364 4.1%
James K. Glenn, Jr. (Director) (i).......................... 1,140 12.9%
Leroy Robinson (Director) (b)............................... 398 4.5%
Katherine McKay Belk (b).................................... 503 5.7%
Pete Huffstetler (Executive Officer)........................ 0 *
Gordon J. Tendler (Executive Officer)....................... 0 *
Darrell Murphy (Executive Officer).......................... 0 *
James K. Glenn, Jr., Trustee under Will of Daisy Belk
Mattox.................................................... 500 5.6%
J.V. Properties............................................. 2,196 24.8%
Montgomery Investment Company............................... 644 7.3%
Belk-Beck Company of Burlington, North Carolina, Inc. ...... 620 7.0%
SunTrust Bank, Augusta, N.A.(k)(l).......................... 542 6.1%
Joan C. Whelchel(k)......................................... 532 6.0%
All Directors and Executive Officers as a group (9
persons).................................................. 6,179 69.8%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson and Katherine McKay Belk -- 2801 West Tyvola
Road, Charlotte, N.C. 28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road,
Charlotte, N.C. 28207; David Belk Cannon -- 1607 W. Floyd Baker Blvd., Gaffney,
S.C. 29341; James K. Glenn, Jr. -- P.O. Box 2736, Winston-Salem, N.C. 27102;
Pete Huffstetler, Darrell Murphy and Gordon J. Tendler -- 1-104 Carolina Circle
Mall, Greensboro, N.C. 27405; James K. Glenn, Jr., Trustee under Will of Daisy
Belk Mattox -- P.O. Box 2736, Winston Salem, N.C. 27102; J.V. Properties,
Montgomery Investment Company and Belk-Beck Company of Burlington, North
Carolina, Inc. -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; SunTrust
Bank, Augusta, N.A. -- Carlton S. Faulk, V.P., SunTrust Bank, Augusta, N.A.,
P.O. Box 927, Augusta, GA 30903-0927; Joan C. Whelchel -- 1536 North Wheeland
Avenue, Chicago, Illinois 60610.
19
<PAGE> 2234
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 644 shares held by Montgomery Investment Company, of which John M.
Belk is the majority shareholder.
(b) Includes 398 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(c) Includes 44 shares held by Belk Enterprises, Inc., 620 shares held by
Belk-Beck Company of Burlington, North Carolina, Inc. and 8 shares held by
Belk Department Store of Reidsville, N.C., Inc., which shares are voted by
the members of the Executive Committee of the Board of Directors of each
such Corporation, under authority given by the directors of each such
Corporation at the annual meeting of directors held in March, 1997. The
Executive Committee of each such Corporation consists of John M. Belk,
Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(d) Includes 2,196 shares held by J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
(e) Includes 44 shares held by Thomas M. Belk, Jr. as custodian for his minor
children.
(f) Includes 44 shares held by H. W. McKay Belk as custodian for his minor
children.
(g) Includes 33 shares held by John R. Belk as custodian for his minor
children.
(h) Includes 105 shares held by Katherine Belk as custodian for her minor
grandchildren.
(i) Includes 500 shares held by James K. Glenn, Jr., Trustee under will of
Daisy Belk Mattox and 118 shares held by John Belk Stevens Trust U/W ITEM
III, Section C f/b/o James Kirk Glenn, Jr., et al. 234 shares held by John
Belk Stevens Trust U/W ITEM III, Section A f/b/o Sara S. Glenn and 234
shares held by John Belk Stevens Trust U/W ITEM III, Section B, f/b/o Mary
S. Whelchel. Voting and investment power is vested in James K. Glenn, Jr.,
the Trustee of each Trust.
(j) Includes 128 shares held by Residuary Trust U/W of Mrs. Henry Belk Cannon.
The Trustees, David Belk Cannon and John C. Daughtridge, have voting and
investment power with respect to such shares.
(k) Includes 320 shares held by SunTrust Bank, August, N.A. and Joan C.
Whelchel as Successor Co-Trustees under Agreement with Mary Stevens
Whelchel dated September 15, 1950, 182 shares held by SunTrust Bank,
Augusta, N.A. and Joan C. Whelchel, Successor Co-Trustees under Will of
Nealie Belk Stevens for Mary Stevens Whelchel, 10 shares held by SunTrust
Bank, Augusta, N.A. and Joan C. Whelchel, as Successor Co-Trustees under
Agreement with Merritt Cofer Whelchel, 10 shares held by SunTrust Bank,
Augusta, N.A. and Joan C. Whelchel, as Successor Co-Trustees under
Agreement with Mary Ruth Whelchel and 10 shares held by SunTrust Bank,
Augusta, N.A. and Joan C. Whelchel, as Successor Co-Trustees under
Agreement with Sadie Elizabeth Whelchel. SunTrust Bank and Joan C. Whelchel
have voting and investment power with respect to such shares.
(l) Includes 10 shares held by SunTrust Bank, August, N.A. as Guardian for
Frankie Stevens Whelchel. SunTrust Bank has voting power with respect to
such shares.
20
<PAGE> 2235
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
</TABLE>
F-1
<PAGE> 2236
BELK-BECK CO. OF HIGH POINT, N.C., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 115,524 $ 201,648
Accounts receivable, net.................................. 2,737,671 3,056,518
Merchandise inventory..................................... 2,971,027 2,810,768
Receivable from affiliates, net........................... 99,996 175,524
Refundable income taxes................................... 120,100 28,685
Deferred income taxes..................................... 133,741 224,364
Other..................................................... 189,571 163,177
----------- -----------
Total current assets........................................ 6,367,630 6,660,684
Investments................................................. 767 767
Property, plant and equipment, net.......................... 4,564,252 3,492,820
Deferred income taxes....................................... 10,909 50,216
Other noncurrent assets..................................... 70,096 63,046
----------- -----------
$11,013,654 $10,267,533
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current installments of long-term debt.................... $ 212,500 $ 425,000
Accounts payable and accrued expenses..................... 1,020,622 632,847
----------- -----------
Total current liabilities................................... 1,233,122 1,057,847
Long-term debt, excluding current installments.............. 3,187,500 2,762,500
Other noncurrent liabilities................................ 160,154 175,658
----------- -----------
Total liabilities........................................... 4,580,776 3,996,005
Shareholders' equity:
Common stock.............................................. 885,400 885,400
Retained earnings......................................... 5,547,478 5,386,128
----------- -----------
Total shareholders' equity.................................. 6,432,878 6,271,528
----------- -----------
$11,013,654 $10,267,533
=========== ===========
</TABLE>
F-2
<PAGE> 2237
BELK-BECK CO. OF HIGH POINT, N.C., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Total store sales....................................... $11,565,282 $13,938,776 $14,452,388
Less: Leased Sales...................................... 813 222,047 342,669
----------- ----------- -----------
Net sales............................................... 11,564,469 13,716,729 14,109,719
Operating costs and expenses............................ 10,250,725 13,137,667 14,082,720
----------- ----------- -----------
Income from operations.................................. 1,313,744 579,062 26,999
----------- ----------- -----------
Other income (expense):
Interest, net......................................... 68,860 (79,954) (249,332)
Gain (loss) on disposal of property, plant and
equipment.......................................... 100 (262,875) 1,669
Miscellaneous, net.................................... (13,811) (33,565) 131,350
----------- ----------- -----------
Total other expense, net................................ 55,149 (376,394) (116,313)
----------- ----------- -----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities..... 1,368,893 202,668 (89,314)
Income tax expense (benefit)............................ 530,954 73,446 (16,504)
----------- ----------- -----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities................... 837,939 129,222 (72,810)
----------- ----------- -----------
Net earnings............................................ 837,939 129,222 (72,810)
Retained earnings at beginning of period................ 4,934,477 5,595,336 5,547,478
Dividends paid.......................................... (177,080) (177,080) (88,540)
----------- ----------- -----------
Retained earnings at end of period...................... $ 5,595,336 $ 5,547,478 $ 5,386,128
=========== =========== ===========
</TABLE>
F-3
<PAGE> 2238
BELK-BECK COMPANY OF HIGH-POINT, NC, INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31. Fiscal years 1997 and 1996 ended on February 1, 1997 and February 3,
1996, respectively.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
F-4
<PAGE> 2239
BELK-BECK COMPANY OF HIGH-POINT, NC, INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) The Company's term loan agreement contains, among other provisions and
covenants, restrictions relating to the creation of additional funded debt,
except as permitted, and the disposal, expansion or purchase of fixed assets,
except as permitted. Under the most restrictive of these provisions, the Company
must maintain net working capital, as defined, of not less than $5,400,000;
tangible net worth, as defined, of not less than $5,800,000; and a minimum cash
flow coverage, as defined, of $750,000. The Company was not in compliance with
the cash flow coverage restriction as of February 1, 1997. The Company was in
compliance with the covenants regarding net working capital and tangible net
worth. The Company has obtained waivers for the out of compliance condition.
(9) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(10) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
F-5
<PAGE> 2240
BELK-BECK COMPANY OF HIGH-POINT, NC, INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(11) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(12) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-6
<PAGE> 2241
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
A-1
<PAGE> 2242
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares; (ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (iv) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes; (v)
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional shares so created is to be acquired by cash under
G.S. 55-6-04; (vi) changes the corporation into a nonprofit corporation or
cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 2243
SEC.SEC. 55-13-04 TO 55-13-19. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 2244
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 2245
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 2246
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 2247
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................... $14,109,719 $(72,810) $160,018 $968,502 $6,271,528
Adjustments to eliminate less than
wholly-owned subsidiaries................... -- -- -- -- --
----------- -------- -------- -------- ----------
Adjusted Shareholders' Statement.............. $14,109,719 (72,810) 160,018 968,502 6,271,528
=========== -------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............... (1,361) (1,668) (1,668)
Gain/loss on sale of securities............. -- -- --
Impairment loss............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries.............................. -- -- --
Gain/loss on discontinued operations........ -- -- --
Adjustment to tax expense................... -- -- -- --
-------- -------- --------
Total non-operating items..................... (1,361) (1,668) (1,668)
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities............................. -- -- --
Adjustment for ownership in other Belk
entities.................................. (767)
-------- -------- -------- ----------
Per Model..................................... $(74,171) $158,350 $966,833 $6,270,761
======== ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................... $ (201,648)
Negative cash balances reclassified to
accounts payable........................ --
Receivables from affiliates, net.......... (175,524)
Loans receivable from affiliates, net..... --
Liabilities
Notes payable............................. --
Current installments of long-term debt.... 425,000
Current portion of obligations under
capital leases.......................... --
Payables to affiliates, net............... --
Long-term debt, excluding current
installments............................ 2,762,500
Obligations under capital leases,
excluding current portion............... --
Loans payable to affiliates, net.......... --
-----------
Net debt (cash)............................... 2,810,328
Adjustments to eliminate less than
wholly-owned subsidiaries................... --
-----------
Per Model..................................... $ 2,810,328
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 2248
SUPPLEMENT NO. 53
<PAGE> 2249
BELK-BECK CO. OF HIGH POINT, N.C., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 2:30 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 53
<PAGE> 2250
BELK'S DEPARTMENT STORE OF JACKSONVILLE, N.C., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk's Department Store of Jacksonville, N.C.,
Inc. (the "Company"), to be held on April 16, 1998, at 9:50 a.m., local time, at
the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 114.5736 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 1,150,663 shares of New Belk Class A Common Stock which
will represent approximately 1.9178% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(54)
<PAGE> 2251
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 2252
BELK'S DEPARTMENT STORE OF JACKSONVILLE, N.C., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK'S DEPARTMENT STORE OF JACKSONVILLE, N.C., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk's Department Store of Jacksonville, N.C., Inc. (the "Company")
will be held on April 16, 1998, at 9:50 a.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 114.5736 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 2253
BELK'S DEPARTMENT STORE OF JACKSONVILLE, N.C., INC.
SUPPLEMENT NO. 54
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 54 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK'S DEPARTMENT
STORE OF JACKSONVILLE, N.C., INC. (THE "COMPANY"), THE DISCUSSION HEREIN
SUPERSEDES THE DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE
INFORMATION CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE
IN THE REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN
THE REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY
AND THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT
BE ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL
CAPITALIZED TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE
MEANINGS SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 18
SELECTED HISTORICAL FINANCIAL INFORMATION................... 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 20
BUSINESS OF THE COMPANY..................................... 20
SECURITY OWNERSHIP OF THE COMPANY........................... 21
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 2254
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1950. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 9:50 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 114.5736 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 13,524 shares of Common Stock
outstanding held of record by 49 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 75.9% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 2255
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 27,048 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock
3
<PAGE> 2256
held by a New Belk Stockholder who is a Class A Permitted Holder will also
automatically convert into New Belk Class B Common Stock in the event that such
New Belk Stockholder no longer meets the requirements of a Class A Permitted
Holder. New Belk Class B Common Stock has no conversion rights. The Company
Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving
4
<PAGE> 2257
the distribution. The Company Bylaws provide that the Board of Directors of the
Company (the "Company Board") may from time to time declare dividends on the
Company's outstanding shares in the manner and upon the terms and conditions
provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the
5
<PAGE> 2258
shareholders and approved (i) by a majority (unless the articles of
incorporation, a bylaw adopted by the shareholders or the board of directors
require a greater vote or a vote by voting groups) of the votes entitled to be
cast on the amendment by any voting group with respect to which the amendment
would create dissenters' rights and (ii) when a quorum is present, by all other
voting groups entitled to vote on the amendment through casting more affirmative
than opposing votes. As under the DGCL, the holders of the outstanding shares of
a class or series are entitled to vote as a separate voting group (if
shareholder voting is otherwise required by the NCBCA) on a proposed amendment
if the amendment would change certain fundamental rights and preferences of that
class or series. The Company Articles do not specify a greater voting
requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has power, by
vote of a majority of all the directors, to make, alter, amend and rescind the
bylaws of the Company. The bylaws enacted by the Shareholders may be affected by
action of the Company Board, and the bylaws enacted by the Company Board may be
affected by the Shareholders; but the Company Board may not re-enact,
substantially or otherwise, a bylaw which the Shareholders have repealed or
altered, nor may it repeal a bylaw enacted by the Shareholders which limits the
powers of the Company Board, or enhances or protects the rights of shareholders,
without the consent of the Shareholders.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without prior notice, if all
holders of outstanding shares entitled to vote on such action sign the written
consent(s) describing such action. The Company Bylaws and Company Articles do
not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be
6
<PAGE> 2259
filled by a majority of the directors then in office, although less than a
quorum, or by a sole remaining director. If at the time of filling any vacancy
or newly created directorship, the directors then in office constitute less than
a majority of the whole board as constituted immediately prior to such increase,
the Delaware Court of Chancery may, upon application of stockholders holding at
least 10% of the total number of shares outstanding having the right to vote for
such directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more than 30% during any 12-month period. The
articles of incorporation or bylaws may establish a variable range for the size
of the board of directors by fixing a minimum and maximum number of directors.
If a variable range is established, the number of directors may be fixed or
changed from time to time, within the minimum and maximum, by the shareholders
or (unless the articles of incorporation or a shareholders' agreement shall
7
<PAGE> 2260
otherwise provide) the board of directors. After shares are issued, only the
shareholders may change the range for the size of the board or change from a
fixed to a variable-range size board or vice versa. The Company Bylaws require
the Company Board to consist of at least three, but no more than 15, members.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
8
<PAGE> 2261
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the disinterested directors or committee authorized, approved or
ratified the transaction; (ii) the material facts of the transaction and the
director's interest were disclosed or known to the shareholders entitled to vote
and the disinterested shares authorized, approved or ratified the transaction;
or (iii) the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly
9
<PAGE> 2262
in conflict with the best interests of the corporation, (ii) any liability under
unlawful distributions, (iii) any transaction from which the director derived an
improper personal benefit or (iv) acts or omissions occurring prior to the date
the provisions became effective.
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested stockholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder,
except in certain circumstances; (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested stockholder, except
in certain circumstances; or (v) any receipt by the interested stockholder of
the benefit of any loans, advances,
10
<PAGE> 2263
guarantees, pledges or other financial benefits (other than those expressly
permitted in (i) through (iv) above) provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) an
affiliate or associate of the corporation who within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
11
<PAGE> 2264
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any final action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates
12
<PAGE> 2265
must be deposited, (iii) inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the Payment Demand is received,
(iv) set a date by which the Surviving Corporation must receive the Payment
Demand, which date may not be fewer than 30 nor more than 60 days after the date
the Dissenters' Notice is mailed and (v) be accompanied by a copy of Article 13.
A Shareholder who is sent a Dissenters' Notice and who wishes to assert
dissenters' rights must demand payment and deposit his certificates in
accordance with the terms of the Dissenters' Notice. A Shareholder who demands
payment and deposit his certificates in accordance with the terms of the
Dissenters' Notice retains all other rights of a Shareholder until these rights
are canceled or modified by the consummation and effectiveness of the Merger. A
Shareholder who does not demand payments or deposit his certificates in
accordance with the terms of the Dissenters' Notice will not be entitled to
payment for his shares under the NCBCA. If any such holder of Common Stock fails
to perfect or shall have effectively withdrawn or lost such right, each share of
such holder's Common Stock will thereupon be deemed to have been converted into
and to have become, as of the Effective Time, the right to receive, without any
interest thereon, the number of shares of New Belk Class A Common Stock such
Shareholder is otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
13
<PAGE> 2266
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such Shareholder dissents and such
Shareholder's other shares were registered in the names of different
shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
14
<PAGE> 2267
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ----------- ----------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $53,971,998 $53,971,998 0.6 $7,746,340 $24,636,859
EBITDA............... 4,659,157 4,654,514 7 7,746,340 24,835,258
EBIT................. 2,903,390 2,898,747 10 7,746,340 21,241,130
Net Income........... 1,579,610 1,576,642 15 -- 23,649,630
Book Equity.......... 24,469,277 20,411,407 1 -- 20,411,407
</TABLE>
15
<PAGE> 2268
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk Department Store
of Charleston, S.C.
Inc. 9.0013% X $31,169,909 = $ 2,805,697
Belk's Department
Store of Conway,
S.C., Incorporated 5.3125 X 2,033,804 = 108,046
Belk's Department
Store of Morehead
City, N.C., Inc. 1.6892 X 10,315,936 = 174,257
Belk's Department
Store of New Bern,
N.C., Incorporated .4806 X 7,893,728 = 37,937
Tags Stores, LLC 12.5590 X 15,118,749 = 1,898,764
-----------
Total $ 5,024,701
===========
Relative Operating Value of Company $24,835,258
Relative Operating Value of Other Companies Owned by Company + 5,024,701
-----------
Total Relative Value of Company = $29,859,959
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Department Store
of Ahoskie, N.C.,
Inc. .5453% X $29,859,959 = 162,826
Belk Brothers Company 5.1760 X 29,859,959 = 1,545,551
Belk Enterprises,
Inc. 8.5478 X 29,859,959 = 2,552,370
Belk Finance Company 3.8154 X 29,859,959 = 1,139,277
Belk's Department
Store of Clinton,
N.C., Inc. .5453 X 29,859,959 = 162,826
Belk's Department
Store of
Greenville, N.C.,
Inc. 6.0189 X 29,859,959 = 1,797,241
Belk's Department
Store of Morehead
City, N.C., Inc. .5453 X 29,859,959 = 162,826
Belk's Department
Store of New Bern,
N.C., Incorporated .5453 X 29,859,959 = 162,826
-----------
Total $ 7,685,744
===========
Total Relative Value of Company $29,859,959
Total Relative Value of Company Owned by Other Belk Companies - 7,685,744
-----------
Net Relative Value of Company = $22,174,215
===========
</TABLE>
16
<PAGE> 2269
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$22,174,215 / $1,156,226,577 = 1.9178%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(1.9178% X 59,998,834) / 10,043 = 114.5736
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
17
<PAGE> 2270
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 116.80
Dividends(2).............................................. 11.00
Book value per share(3)................................... 1,809.32
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 109.99
Dividends(2).............................................. 29.79
Book value per share...................................... 1,434.46
</TABLE>
- ---------------
(1) Based on 13,524 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 13,524 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
18
<PAGE> 2271
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 48,459 $ 56,534 $ 53,972
Net income.................................................. 2,227 1,405 1,580
Per common share
Net income (loss)(1)...................................... 164.70 103.87 116.80
Dividends................................................. 10.00 11.00 11.00
Book value(2)............................................. 1,610.65 1,703.52 1,809.32
Total assets................................................ 29,202 33,367 43,447
Shareholders' equity........................................ 21,782 23,038 24,469
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $38,214 $40,917
Income from operations...................................... 1,628 2,566
</TABLE>
- ---------------
(1) Based on 13,524 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding for the years ended January 31, 1995,
February 3, 1996 and February 1, 1997.
(2) Based on 13,524 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
19
<PAGE> 2272
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
To the extent a discussion of the financial condition and results of
operations of the Company for any of the fiscal years ended January 31, 1995,
February 3, 1996 or February 1, 1997 or for either of the nine-month periods
ended November 2, 1996 or November 1, 1997 is necessary to identify certain
trends or conditions that differ from the combined Belk Companies and that are
material to Shareholders' understanding of the financial condition or results of
operations of the Company, such discussion is included below. The discussion
which follows is based upon and should be read in conjunction with the
historical financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus Supplement.
The Company intends to consolidate its current debt under a $12,000,000
revolving credit facility with a bank.
BUSINESS OF THE COMPANY
General. The Company is qualified to do business in North Carolina and
South Carolina and operates three retail department stores in South Carolina at
Inlet Square Mall in Murrell's Inlet and Briarcliffe Mall and Myrtle Square Mall
in Myrtle Beach. The Company also operates a retail department store at
Jacksonville Mall in Jacksonville, North Carolina. The Company's stores operate
in a manner consistent with the business of the Belk Companies described in the
Proxy Statement/Prospectus, with the exception that the Company operates the
retail department store at Briarcliffe Mall from two locations. The stores are
managed out of the Nipper group office in Summerville, South Carolina.
The Company is also a partner in CK Belk-Charleston LLC. CK Belk-Charleston
LLC developed the Company's distribution center in Summerville, South Carolina.
The Company owns and operates the Nipper group office in Summerville, South
Carolina, which provides buying, advertising, accounting, personnel and other
services to stores in the Nipper group area; and the Company leases from CK
Belk -- Charleston LLC the distribution center in Summerville which provides
receiving, marking and distribution services to stores in the Nipper group area.
Facilities. The Company operates four stores, of which all are leased
under long-term leases. The store leases have termination dates ranging from
2001 through 2010. The floor space of the leased buildings ranges from 80,000 to
132,000 square feet. The Company believes the facilities are adequate to meet
its current needs.
Competition. Specific competitors in the Company's market include
Wal-Mart, Sears, Target and Penney.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
20
<PAGE> 2273
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)(f)........................................ 5,551 41.0%
Thomas M. Belk, Jr. (Director and Executive Officer)
(c)(e)(f)(g).............................................. 4,181 30.9%
H. W. McKay Belk (Director and Executive Officer)
(c)(e)(f)(h).............................................. 4,189 31.0%
John R. Belk (Director and Executive Officer)
(c)(e)(f)(i).............................................. 4,325 32.0%
Henderson Belk (d).......................................... 220 1.6%
Sarah Belk Gambrell (Director) (d).......................... 1,346 10.0%
Sarah Gambrell Knight....................................... 836 6.2%
W. B. Beery, III (Director) (k)............................. 2,105 15.6%
Katherine Belk Morris (c)................................... 716 5.3%
Thomas A. Nipper (Executive Officer)........................ 0 *
Lars Petersen (Executive Officer)........................... 0 *
Bob Webster (Executive Officer)............................. 0 *
Montgomery Investment Company............................... 1,088 8.0%
Belk Department Store of Greenville, N.C., Inc.............. 814 6.0%
Belk Enterprises, Inc....................................... 1,156 8.5%
J.V. Properties............................................. 700 5.2%
All Directors and Executive Officers as a group (7
persons).................................................. 10,266 75.9%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk and Katherine Belk Morris -- 2801 West Tyvola Road, Charlotte,
N.C. 28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road, Charlotte, N.C.
28207; Sarah Gambrell Knight -- 810 Colville Road, Charlotte, N.C. 28207; W. B.
Beery, III -- 1919 Brookhaven Road, Wilmington, N.C. 28403; Thomas A. Nipper,
Lars Petersen and Bob Webster -- 200 Marymeade Drive, Summerville, S.C. 29483;
Montgomery Investment Company, Belk Department Store of Greenville, N.C., Inc.,
Belk Enterprises, Inc. and J.V. Properties -- 2801 West Tyvola Road, Charlotte,
N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 1,088 shares held by Montgomery Investment Company, of which John
M. Belk is the majority shareholder.
(b) Includes 34 shares held by Claudia Belk Irrevocable Trust dated 1/4/94.
Claudia W. Belk, the Trustee, is John M. Belk's wife.
(c) Includes 256 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
21
<PAGE> 2274
(d) Includes 220 shares held in several Trusts established by the Will of Mary
I. Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(e) Includes 73.75 shares held by Belk's Department Store of New Bern, N.C.,
Incorporated, 73.75 shares held by Belk of Ahoskie, N.C., Inc., 814 shares
held by Belk Department Store of Greenville, N.C., Inc., 1,156 shares held
by Belk Enterprises, Inc., 73.75 shares held by Belk's Department Store of
Morehead City, N.C., Inc., 516 shares held by Belk Finance Company and
73.75 shares held by Belk Department Store of Clinton, N.C., Inc., which
shares are voted by the members of the Executive Committee of the Board of
Directors of each such Corporation, under authority given by the directors
of each such Corporation at the annual meeting of directors held in March,
1997. The Executive Committee of each such Corporation consists of John M.
Belk, Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(f) Includes 700 shares of J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
(g) Includes 16 shares held by Thomas M. Belk, Jr. as custodian for his minor
children and 8 shares held as custodian for the minor children of his
brother, H. W. McKay Belk.
(h) Includes 24 shares held by H. W. McKay Belk as custodian for his minor
children.
(i) Includes 8 shares held by John R. Belk as custodian for his minor children.
(j) Includes 24 shares held by Katherine Belk Morris as custodian for her minor
children.
(k) Includes 180 shares held by W. B. Beery, III's wife, Martha B. Beery.
22
<PAGE> 2275
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 2276
BELK'S DEPARTMENT STORE OF JACKSONVILLE, N.C., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 489,970 $ 4,897,979
Accounts receivable, net.................................. 6,794,058 7,867,723
Merchandise inventory..................................... 9,536,381 9,710,817
Receivable from affiliates, net........................... 2,779,289 --
Refundable income taxes................................... 297,720 136,999
Deferred income taxes..................................... 156,441 53,816
Other..................................................... 815,371 885,639
----------- -----------
Total current assets........................................ 20,869,230 23,552,973
Loans receivable from affiliates, net....................... 4,131 4,095
Investments................................................. 1,507,414 6,019,460
Property, plant and equipment, net.......................... 10,701,802 13,113,199
Deferred income taxes....................................... 196,041 489,266
Other noncurrent assets..................................... 88,535 268,383
----------- -----------
$33,367,153 $43,447,376
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current installments of long-term debt.................... $ 1,333,333 $ 1,428,068
Accounts payable and accrued expenses..................... 2,870,804 4,463,304
Payables to affiliates, net............................... -- 6,697,543
----------- -----------
Total current liabilities................................... 4,204,137 12,588,915
Long-term debt, excluding current installments.............. 5,666,667 4,522,803
Other noncurrent liabilities................................ 457,918 1,863,424
----------- -----------
Total liabilities........................................... 10,328,722 18,975,142
Deferred income............................................. -- 2,957
Shareholders' equity:
Common stock.............................................. 1,352,400 1,352,400
Retained earnings......................................... 21,686,031 23,116,877
----------- -----------
Total shareholders' equity.................................. 23,038,431 24,469,277
----------- -----------
$33,367,153 $43,447,376
=========== ===========
</TABLE>
F-2
<PAGE> 2277
BELK'S DEPARTMENT STORE OF JACKSONVILLE, N.C., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3 FEBRUARY 1
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Total store sales....................................... $48,589,770 $57,358,317 $54,917,975
Less: Leased Sales...................................... 131,064 824,701 945,977
----------- ----------- -----------
Net sales............................................... 48,458,706 56,533,616 53,971,998
Operating costs and expenses............................ 45,009,461 53,904,999 51,037,183
----------- ----------- -----------
Income from operations.................................. 3,449,245 2,628,617 2,934,815
----------- ----------- -----------
Other income (expense):
Interest, net......................................... 90 (438,753) (432,200)
Dividend income....................................... 144 744 --
Gain (loss) on disposal of property, plant and
equipment.......................................... -- 4,750 3,899
Miscellaneous, net.................................... (19,905) (35,947) (35,324)
----------- ----------- -----------
Total other expense, net................................ (19,671) (469,206) (463,625)
----------- ----------- -----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities..... 3,429,574 2,159,411 2,471,190
Income tax expense (benefit)............................ 1,202,183 754,620 891,580
----------- ----------- -----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities................... 2,227,391 1,404,791 1,579,610
----------- ----------- -----------
Net earnings............................................ 2,227,391 1,404,791 1,579,610
Retained earnings at beginning of period................ 18,337,853 20,430,004 21,686,031
Dividends paid.......................................... (135,240) (148,764) (148,764)
----------- ----------- -----------
Retained earnings at end of period...................... $20,430,004 $21,686,031 $23,116,877
=========== =========== ===========
</TABLE>
F-3
<PAGE> 2278
BELK'S DEPARTMENT STORE OF JACKSONVILLE, N.C., INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31. Fiscal years 1997 and 1996 ended on February 1, 1997 and February 3,
1996, respectively.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
F-4
<PAGE> 2279
BELK'S DEPARTMENT STORE OF JACKSONVILLE, N.C., INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) LONG-TERM DEBT
The Company's term loan agreement contains, among other provisions and
covenants, restrictions relating to the creation of additional funded debt,
except as permitted, and the disposal, expansion or purchase of fixed assets,
except as permitted. Under the most restrictive of these provisions, the Company
must maintain tangible net worth, as defined, of not less than $21,146,000; a
minimum current ratio, as defined, of 2.5 to 1.0, a maximum ratio of total
liabilities to net worth of .60 to 1; cash flow, as defined, greater than
$1,500,000; limit dividends to $250,000 per year provided that the Company is in
compliance with all debt covenants; limit capital expenditures during any fiscal
year to $750,000; loans to $100,000, and limit investments to $1,000,000, as
defined. The Company was in compliance with the tangible net worth, cash flow,
and loan restrictions as of February 1, 1997. The Company was not in compliance
with the current ratio, total liabilities to net worth, capital expenditures,
dividends, and investment restrictions as of February 1, 1997. The Company has
obtained waivers for all out of compliance conditions.
(9) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. (BSS) in obtaining
merchandising, architectural, legal, accounting, internal audit, accounts
payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
F-5
<PAGE> 2280
BELK'S DEPARTMENT STORE OF JACKSONVILLE, N.C., INC.
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(10) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(11) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(12) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-6
<PAGE> 2281
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13.
DISSENTERS' RIGHTS.
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES.
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
A-1
<PAGE> 2282
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares; (ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (iv) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes; (v)
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional shares so created is to be acquired by cash under
G.S. 55-6-04; (vi) changes the corporation into a nonprofit corporation or
cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 2283
SEC.SEC. 55-13-04 TO 55-13-19. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS.
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 2284
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 2285
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES.
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 2286
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 2287
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................. $53,971,999 $1,579,610 $2,903,390 $4,659,157 $24,469,277
Adjustments to eliminate less than
wholly-owned subsidiaries................. -- -- -- -- --
----------- ---------- ---------- ---------- -----------
Adjusted Shareholders' Statement............ $53,971,999 1,579,610 2,903,390 4,659,157 24,469,277
=========== ---------- ---------- ---------- -----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............. (2,492) (3,899) (3,899)
Gain/loss on sale of securities........... -- -- --
Impairment loss........................... -- -- --
Equity in earnings of unconsolidated
subsidiaries............................ -- -- --
Gain/loss on discontinued operations...... -- -- --
Adjustment to tax expense................. -- -- -- --
---------- ---------- ----------
Total non-operating items................... (2,492) (3,899) (3,899)
---------- ---------- ----------
Other Adjustments:
Adjustment for dividends received from
other Belk entities..................... (476) (744) (744)
Adjustment for ownership in other Belk
entities................................ (4,057,870)
---------- ---------- ---------- -----------
Per Model................................... $1,576,642 $2,898,747 $4,654,514 $20,411,407
========== ========== ========== ===========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................. $(4,897,979)
Negative cash balances reclassified to
accounts payable...................... --
Receivables from affiliates, net........ --
Loans receivable from affiliates, net... (4,095)
Liabilities
Notes payable........................... --
Current installments of long-term
debt.................................. 1,428,068
Current portion of obligations under
capital leases........................ --
Payables to affiliates, net............. 6,697,543
Long-term debt, excluding current
installments.......................... 4,522,803
Obligations under capital leases,
excluding current portion............. --
Loans payable to affiliates, net........ --
-----------
Net debt (cash)............................. 7,746,340
Adjustments to eliminate less than
wholly-owned subsidiaries................. --
-----------
Per Model................................... $ 7,746,340
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 2288
SUPPLEMENT NO. 54
<PAGE> 2289
BELK'S DEPARTMENT STORE OF JACKSONVILLE, N.C., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 9:50 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
-------------------
-------------------------------
Signature
-------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 54
<PAGE> 2290
BELK'S DEPARTMENT STORE OF LENOIR, NORTH CAROLINA, INCORPORATED
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk's Department Store of Lenoir, North
Carolina, Incorporated (the "Company"), to be held on April 16, 1998, at 8:20
a.m., local time, at the offices of Belk Stores Services, Inc., 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 38.0445 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 243,561 shares of New Belk Class A Common Stock which
will represent approximately 0.4059% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(55)
<PAGE> 2291
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 2292
BELK'S DEPARTMENT STORE OF LENOIR, NORTH CAROLINA, INCORPORATED
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK'S DEPARTMENT STORE OF LENOIR,
NORTH CAROLINA, INCORPORATED:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk's Department Store of Lenoir, North Carolina, Incorporated
(the "Company") will be held on April 16, 1998, at 8:20 a.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 38.0445 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 2293
BELK'S DEPARTMENT STORE OF LENOIR,
NORTH CAROLINA, INCORPORATED
SUPPLEMENT NO. 55
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 55 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK'S DEPARTMENT
STORE OF LENOIR, NORTH CAROLINA, INCORPORATED (THE "COMPANY"), THE DISCUSSION
HEREIN SUPERSEDES THE DISCUSSION IN THE PROXY STATEMENT/ PROSPECTUS. ALL OF THE
INFORMATION CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE
IN THE REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN
THE REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY
AND THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT
BE ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL
CAPITALIZED TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE
MEANINGS SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 18
SELECTED HISTORICAL FINANCIAL INFORMATION................... 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 20
BUSINESS OF THE COMPANY..................................... 20
SECURITY OWNERSHIP OF THE COMPANY........................... 21
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 2294
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1928. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 8:20 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 38.0445 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 9,400 shares of Common Stock
outstanding held of record by 38 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 74.1% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 2295
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. In addition, the Reorganization is expected to have
certain other benefits for the Company and the Shareholders, including the
ability to share the risks of the Company's uncertain prospects in its market.
The Company's store is located in a shopping center which is changing its focus
from a typical shopping center to an outlet furniture market. The Board of
Directors is considering whether to relocate the Company's store in connection
with reviewing its long term prospects in the market. The Merger would enable
the Company to rely on New Belk to provide the capital necessary to effect any
such relocation. If the Company does not participate in the Reorganization and
is required to finance the relocation of its store on its own, there can be no
assurance that the Company would be able to obtain the financing necessary to do
so.
There can be no assurance, however, that any of these benefits will be
achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 10,700 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer
3
<PAGE> 2296
restrictions in respect of New Belk Class A Common Stock. The holders of New
Belk Class A Common Stock are entitled to 10 votes per share. The holders of New
Belk Class B Common Stock are entitled to one vote per share. Shares of New Belk
Class A Common Stock may be owned only by Class A Permitted Holders. If a share
of New Belk Class A Common Stock is transferred to any person other than a Class
A Permitted Holder, whether by sale, assignment, gift, bequest, appointment or
otherwise, such share will be converted automatically into a share of New Belk
Class B Common Stock. Shares of New Belk Class A Common Stock are convertible
into New Belk Class B Common Stock, in whole or in part, at any time and from
time to time at the option of the holder, on the basis of one share of New Belk
Class B Common Stock for each share of New Belk Class A Common Stock converted.
Shares of New Belk Class A Common Stock held by a New Belk Stockholder who is a
Class A Permitted Holder will also automatically convert into New Belk Class B
Common Stock in the event that such New Belk Stockholder no longer meets the
requirements of a Class A Permitted Holder. New Belk Class B Common Stock has no
conversion rights. The Company Articles provide for only one class of common
stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same
4
<PAGE> 2297
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. DGCL requires that
an amendment of the certificate of incorporation of a corporation be adopted by
the board of directors and the holders of a majority of the outstanding shares
of stock entitled to vote thereon. The holders of the outstanding shares of a
class are entitled to vote as a separate class on a proposed amendment that
would increase or decrease the aggregate number of authorized shares of such
class, increase or decrease the par value of the shares of such class or alter
or change the powers, preferences or special rights of the shares of such class
so as to affect them
5
<PAGE> 2298
adversely. If any proposed amendment would alter or change the powers,
preferences or special rights of one or more series of any class so as to affect
them adversely, but would not so affect the entire class, then only the shares
of the series so affected by the amendment will be considered a separate class
for purposes of voting by classes. The New Belk Certificate is consistent with
the foregoing provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the shareholders and approved (i) by a majority
(unless the articles of incorporation, a bylaw adopted by the shareholders or
the board of directors require a greater vote or a vote by voting groups) of the
votes entitled to be cast on the amendment by any voting group with respect to
which the amendment would create dissenters' rights and (ii) when a quorum is
present, by all other voting groups entitled to vote on the amendment through
casting more affirmative than opposing votes. As under the DGCL, the holders of
the outstanding shares of a class or series are entitled to vote as a separate
voting group (if shareholder voting is otherwise required by the NCBCA) on a
proposed amendment if the amendment would change certain fundamental rights and
preferences of that class or series. The Company Articles do not specify a
greater voting requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power nor limit their power, to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has power, by
vote of a majority of all the directors and without the assent or vote of the
shareholders, to make, alter, amend and rescind the bylaws of the Company.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without
6
<PAGE> 2299
prior notice, if all holders of outstanding shares entitled to vote on such
action sign the written consent(s) describing such action. The Company Bylaws
and Company Articles do not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more
7
<PAGE> 2300
than 30% during any 12-month period. The articles of incorporation or bylaws may
establish a variable range for the size of the board of directors by fixing a
minimum and maximum number of directors. If a variable range is established, the
number of directors may be fixed or changed from time to time, within the
minimum and maximum, by the shareholders or (unless the articles of
incorporation or a shareholders' agreement shall otherwise provide) the board of
directors. After shares are issued, only the shareholders may change the range
for the size of the board or change from a fixed to a variable-range size board
or vice versa. The Company Bylaws require the Company Board to consist of at
least three, but no more than 15, members.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
8
<PAGE> 2301
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the disinterested directors or committee authorized, approved or
ratified the transaction; (ii) the material facts of the transaction and the
director's interest were disclosed or known to the shareholders entitled to vote
and the disinterested shares authorized, approved or ratified the transaction;
or (iii) the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
9
<PAGE> 2302
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any transaction from which the director derived an improper
personal benefit or (iv) acts or omissions occurring prior to the date the
provisions became effective.
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested stockholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which
10
<PAGE> 2303
results in the issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder, except in certain circumstances; (iv)
any transaction involving the corporation which has the effect of increasing the
proportionate share of the stock of any class or series, or securities
convertible into the stock of any class or series, of the corporation which is
owned by the interested stockholder, except in certain circumstances; or (v) any
receipt by the interested stockholder of the benefit of any loans, advances,
guarantees, pledges or other financial benefits (other than those expressly
permitted in (i) through (iv) above) provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) an
affiliate or associate of the corporation who within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a
11
<PAGE> 2304
preemptive right to purchase, subscribe for or otherwise acquire stock of any
class or series of New Belk or any security convertible into or exchangeable
for, or any warrant, option or right to purchase, subscribe for or otherwise
acquire, stock of any class or series of New Belk, whether now or hereafter
authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any final action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
12
<PAGE> 2305
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates must be deposited,
(iii) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the Payment Demand is received, (iv) set a date
by which the Surviving Corporation must receive the Payment Demand, which date
may not be fewer than 30 nor more than 60 days after the date the Dissenters'
Notice is mailed and (v) be accompanied by a copy of Article 13. A Shareholder
who is sent a Dissenters' Notice and who wishes to assert dissenters' rights
must demand payment and deposit his certificates in accordance with the terms of
the Dissenters' Notice. A Shareholder who demands payment and deposit his
certificates in accordance with the terms of the Dissenters' Notice retains all
other rights of a Shareholder until these rights are canceled or modified by the
consummation and effectiveness of the Merger. A Shareholder who does not demand
payments or deposit his certificates in accordance with the terms of the
Dissenters' Notice will not be entitled to payment for his shares under the
NCBCA. If any such holder of Common Stock fails to perfect or shall have
effectively withdrawn or lost such right, each share of such holder's Common
Stock will thereupon be deemed to have been converted into and to have become,
as of the Effective Time, the right to receive, without any interest thereon,
the number of shares of New Belk Class A Common Stock such Shareholder is
otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
13
<PAGE> 2306
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such Shareholder dissents and such
Shareholder's other shares were registered in the names of different
shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
14
<PAGE> 2307
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $6,614,964 $6,614,964 0.6 $ (813,634) $4,782,617
EBITDA............... 478,808 462,088 7 (813,634) 4,048,255
EBIT................. 440,689 423,969 10 (813,634) 5,053,329
Net Income........... 308,951 297,120 15 -- 4,456,800
Book Equity.......... 3,711,829 3,484,852 1 -- 3,484,852
</TABLE>
15
<PAGE> 2308
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk's Department
Store of Boone,
North Carolina,
Incorporated 12.7946% X $12,985,621 = $ 1,661,458
Belk Department Store
of Wilkesboro,
N.C., Inc. 5.1220% X 3,451,898 + 176,806
-----------
Total $ 1,838,265
===========
Relative Operating Value of Company $ 5,053,329
Relative Operating Value of Other Companies Owned by Company + 1,838,265
-----------
Total Relative Value of Company = $ 6,891,593
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Brothers Company 18.7872% X $ 6,891,593 = $ 1,294,737
Belk Enterprises,
Inc. 5.5319% X 6,891,593 = 381,236
Belk's Department
Store of Boone,
North Carolina,
Incorporated 5.2766% X 6,891,593 = 363,642
Matthews-Belk Company 1.4468% X 6,891,593 = 99,708
Belk's Department
Store of Mount
Airy, North
Carolina,
Incorporated .8511% X 6,891,593 = 58,654
-----------
Total $ 2,197,977
===========
Total Relative Value of Company $ 6,891,593
Total Relative Value of Company Owned by Other Belk Companies - 2,197,977
-----------
Net Relative Value of Company = $ 4,693,616
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 4,693,616 / $1,156,226,577 = .4059%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.4059% X 59,998,834) / 6,402 = 38.0445
</TABLE>
16
<PAGE> 2309
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
17
<PAGE> 2310
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 32.87
Dividends(2).............................................. 7.50
Book value per share(3)................................... 394.88
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 36.52
Dividends(2).............................................. 9.89
Book value per share...................................... 476.32
</TABLE>
- ---------------
(1) Based on 9,400 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 9,400 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
18
<PAGE> 2311
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
------------ ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $7,309 $6,684 $6,615
Net income.................................................. 203 29 309
Per common share
Net income (loss)(1)...................................... 21.62 3.06 32.87
Dividends................................................. 7.50 10.00 7.50
Book value(2)............................................. 376.45 369.51 394.88
Total assets................................................ 5,149 4,667 4,439
Shareholders' equity........................................ 3,539 3,473 3,712
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $4,430 $4,514
Income from operations...................................... 194 257
</TABLE>
- ---------------
(1) Based on 9,400 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 9,400 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
19
<PAGE> 2312
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Lenoir Mall in
Lenoir, North Carolina. The Company's store operates in a manner consistent with
the business of the Belk Companies described in the Proxy Statement/Prospectus.
The store is managed out of the Matthews group office in Gastonia, North
Carolina.
Facilities. The Company leases its store building, which contains
approximately 71,000 square feet of floor area. The current term of the lease
expires in 1999, but the Company has options to extend the lease through 2019.
The Company believes that Lenoir Mall is an inappropriate location from which
the Company can best conduct its retail operations; consequently the Company is
studying possible relocation opportunities in the Lenoir market.
Competition. Specific competitors in the Company's market include
Wal-Mart, K-Mart and the nearby Hickory, North Carolina, market.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
20
<PAGE> 2313
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)(f)........................................ 4,986 53.0%
Thomas M. Belk, Jr. (Director and Executive Officer)
(c)(e)(f)................................................. 3,542 37.7%
H. W. McKay Belk (Director and Executive Officer)
(c)(e)(f)................................................. 3,538 37.6%
John R. Belk (Director and Executive Officer) (c)(e)(f)..... 3,534 37.6%
Sarah Belk Gambrell (Director) (d).......................... 1,396 14.9%
David Belk Cannon (Director) (h)............................ 656 7.0%
James K. Glenn, Jr. (Director) (g).......................... 128 1.4%
B. Frank Matthews, II (Director and Executive Officer)...... 0 *
Eugene Robinson Matthews (Executive Officer)................ 0 *
Katherine McKay Belk (c).................................... 624 6.6%
Katherine Belk Morris (c)................................... 536 5.7%
Belk's Department Store of Boone North Carolina,
Incorporated.............................................. 496 5.3%
Belk Enterprises, Inc....................................... 520 5.5%
J.V. Properties............................................. 1,766 18.8%
All Directors and Executive Officers as a group (9
persons).................................................. 6,962 74.1%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Katherine McKay Belk and Katherine Belk Morris -- 2801 West Tyvola Road,
Charlotte, N.C. 28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road, Charlotte,
N.C. 28207; David Belk Cannon -- 1607 W. Floyd Baker Blvd., Gaffney, S.C. 29341;
James K. Glenn, Jr. -- P.O. Box 2736, Winston-Salem, N.C. 27102; B. Frank
Matthews, II and Eugene Robinson Matthews -- 2240 Remount Road, Gastonia, N.C.
28054; Belk's Department Store of Boone, North Carolina, Incorporated, Belk
Enterprises, Inc., and J.V. Properties -- 2801 West Tyvola Road, Charlotte, N.C.
28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 160 shares held by Montgomery Investment Company, of which John M.
Belk is the majority shareholder.
(b) Represented by 172 shares of Mary Claudia Belk Irrevocable Trust dated
1/4/94. Claudia W. Belk, the Trustee, is John M. Belk's wife.
(c) Includes 464 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(d) Includes 432 shares held in several Trusts established by the Will of Mary
I. Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power
21
<PAGE> 2314
of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson Belk
is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H. Belk,
Jr. and Irwin Belk.
(e) Includes 80 shares held by Belk's Department Store of Mount Airy, North
Carolina, Incorporated, 496 shares held by Belk's Department Store of
Boone, North Carolina, Incorporated, 520 shares held by Belk Enterprises,
Inc. and 136 shares held by Matthews-Belk Company, which shares are voted
by the members of the Executive Committee of the Board of Directors of each
such Corporation, under authority given by the directors of each such
Corporation at the annual meeting of directors held in March, 1997. The
Executive Committee of each such Corporation consists of John M. Belk,
Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(f) Includes 1,766 shares of J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, has voting and investment power with respect to such
shares.
(g) Includes 128 shares held by James K. Glenn, Jr., Trustee under Will of
Daisy Belk Mattox. Voting and investment power is vested in James K. Glenn,
Jr., the Trustee.
(h) Includes 180 shares held by Residuary Trust U/W Mrs. Henry Belk Cannon. The
Trustees, David Belk Cannon and John C. Daughtridge, have voting and
investment power with respect to such shares.
22
<PAGE> 2315
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 2316
BELK'S DEPT STORE OF LENOIR, NORTH CAROLINA, INCORPORATED
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 48,214 $ 51,006
Accounts receivable, net.................................. 1,249,981 1,385,057
Merchandise inventory..................................... 1,412,653 1,445,788
Receivable from affiliates, net........................... -- 30,247
Deferred income taxes..................................... 11,671 --
Other..................................................... 66,532 61,051
---------- ----------
Total current assets........................................ 2,789,051 2,973,149
Loans receivable from affiliates, net....................... 1,147,812 732,386
Investments................................................. 226,977 226,977
Property, plant and equipment, net.......................... 337,278 326,514
Deferred income taxes....................................... 109,067 126,054
Other noncurrent assets..................................... 56,774 53,457
---------- ----------
$4,666,959 $4,438,537
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current installments of long-term debt.................... $ 575,000 $ --
Accounts payable and accrued expenses..................... 315,487 437,815
Payables to affiliates, net............................... 112,058 --
Deferred income taxes..................................... -- 1,922
Accrued income taxes...................................... 30,347 125,008
---------- ----------
Total current liabilities................................... 1,032,892 564,745
Other noncurrent liabilities................................ 160,689 161,963
---------- ----------
Total liabilities........................................... 1,193,581 726,708
Shareholders' equity:
Common stock.............................................. 940,000 940,000
Retained earnings......................................... 2,533,378 2,771,829
---------- ----------
Total shareholders' equity.................................. 3,473,378 3,711,829
---------- ----------
$4,666,959 $4,438,537
========== ==========
</TABLE>
F-2
<PAGE> 2317
BELK'S DEPT STORE OF LENOIR, NORTH CAROLINA, INCORPORATED
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ------------ ------------
<S> <C> <C> <C>
Net sales.................................................. $7,308,860 $6,683,500 $6,614,964
Operating costs and expenses............................... 6,980,829 6,586,277 6,190,562
---------- ---------- ----------
Income from operations..................................... 328,031 97,223 424,402
---------- ---------- ----------
Other income (expense):
Interest, net............................................ (24,026) (16,895) (4,015)
Dividend income.......................................... 12,160 15,200 16,720
Gain (loss) on disposal of property, plant and
equipment............................................. -- 2,251 --
Miscellaneous, net....................................... 743 (11,527) (433)
---------- ---------- ----------
Total other expense, net................................... (11,123) (10,971) 12,272
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 316,908 86,252 436,674
Income tax expense (benefit)............................... 113,636 57,489 127,723
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 203,272 28,763 308,951
---------- ---------- ----------
Net earnings............................................... 203,272 28,763 308,951
Retained earnings at beginning of period................... 2,465,843 2,598,615 2,533,378
Dividends paid............................................. (70,500) (94,000) (70,500)
---------- ---------- ----------
Retained earnings at end of period......................... $2,598,615 $2,533,378 $2,771,829
========== ========== ==========
</TABLE>
F-3
<PAGE> 2318
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 2319
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 2320
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13.
DISSENTERS' RIGHTS.
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
A-1
<PAGE> 2321
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares; (ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (iv) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes; (v)
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional shares so created is to be acquired by cash under
G.S. 55-6-04; (vi) changes the corporation into a nonprofit corporation or
cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 2322
SEC.SEC. 55-13-04 TO 55-13-19. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 2323
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 2324
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 2325
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 2326
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
---------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement.................... $6,614,964 $308,951 $440,689 $478,808 $3,711,829
Adjustments to eliminate less than wholly-owned
subsidiaries................................. -- -- -- -- --
---------- -------- -------- -------- ----------
Adjusted Shareholders' Statement............... $6,614,964 308,951 440,689 478,808 3,711,829
========== -------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E................ -- -- --
Gain/loss on sale of securities.............. -- -- --
Impairment loss.............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries............................... -- -- --
Gain/loss on discontinued operations......... -- -- --
Adjustment to tax expense.................... -- -- -- --
-------- -------- --------
Total non-operating items...................... -- -- --
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities.............................. (11,831) (16,720) (16,720)
Adjustment for ownership in other Belk
entities................................... (226,977)
-------- -------- -------- ----------
Per Model...................................... $297,120 $423,969 $462,088 $3,484,852
======== ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER SHAREHOLDERS'
STATEMENT
Assets
Cash & cash equivalents.................... $ (51,006)
Negative cash balances reclassified to
accounts payable......................... --
Receivables from affiliates, net........... (30,247)
Loans receivable from affiliates, net...... (732,386)
Liabilities
Notes payable.............................. --
Current installments of long-term debt..... --
Current portion of obligations under
capital leases........................... --
Payables to affiliates, net................ --
Long-term debt, excluding current
installments............................. --
Obligations under capital leases, excluding
current portion.......................... --
Loans payable to affiliates, net........... --
----------
Net debt (cash)................................ (813,639)
Adjustments to eliminate less than wholly-owned
subsidiaries................................. --
----------
Per Model...................................... $ (813,639)
==========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 2327
SUPPLEMENT NO. 55
<PAGE> 2328
BELK'S DEPARTMENT STORE OF LENOIR, NORTH CAROLINA, INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 8:20 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed
exactly as shown to the left
hereof. Title should be added
if signing as executor,
administrator, trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 55
<PAGE> 2329
BELK DEPARTMENT STORE OF LINCOLNTON, N.C., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk Department Store of Lincolnton, N.C., Inc.
(the "Company"), to be held on April 15, 1998, at 12:10 p.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 228.1762 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 246,202 shares of New Belk Class A Common Stock which
will represent approximately 0.4103% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(56)
<PAGE> 2330
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 2331
BELK DEPARTMENT STORE OF LINCOLNTON, N.C., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK DEPARTMENT STORE OF LINCOLNTON, N.C., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk Department Store of Lincolnton, N.C., Inc. (the "Company")
will be held on April 16, 1998, at 12:10 p.m., local time, at the offices of
Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 228.1762 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 2332
BELK DEPARTMENT STORE OF LINCOLNTON, N.C., INC.
SUPPLEMENT NO. 56
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 56 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK DEPARTMENT
STORE OF LINCOLNTON, N.C., INC. (THE "COMPANY"), THE DISCUSSION HEREIN
SUPERSEDES THE DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE
INFORMATION CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE
IN THE REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN
THE REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY
AND THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT
BE ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL
CAPITALIZED TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE
MEANINGS SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 16
SELECTED HISTORICAL FINANCIAL INFORMATION................... 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 18
BUSINESS OF THE COMPANY..................................... 18
SECURITY OWNERSHIP OF THE COMPANY........................... 19
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 2333
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1924 as
Belk-Schrum Company. The Company changed its name to Belk Department Store of
Lincolnton, N.C., Inc. in 1992. The mailing address of the Company's principal
executive offices is 2801 West Tyvola Road, Charlotte, North Carolina 28217-
4500, and its telephone number at that address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 12:10 p.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 228.1762 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 1,800 shares of Common Stock
outstanding held of record by 40 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 69.4% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 2334
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 2,000 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock
3
<PAGE> 2335
held by a New Belk Stockholder who is a Class A Permitted Holder will also
automatically convert into New Belk Class B Common Stock in the event that such
New Belk Stockholder no longer meets the requirements of a Class A Permitted
Holder. New Belk Class B Common Stock has no conversion rights. The Company
Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving
4
<PAGE> 2336
the distribution. The Company Bylaws provide that the Board of Directors of the
Company (the "Company Board") may from time to time declare dividends on the
Company's outstanding shares in the manner and upon the terms and conditions
provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. DGCL requires that
an amendment of the certificate of incorporation of a corporation be adopted by
the board of directors and the holders of a majority of the outstanding shares
of stock entitled to vote thereon. The holders of the outstanding shares of a
class are entitled to vote as a separate class on a proposed amendment that
would increase or decrease the aggregate number of authorized shares of such
class, increase or decrease the par value of the shares of such class or alter
or change the powers, preferences or special rights of the shares of such class
so as to affect them adversely. If any proposed amendment would alter or change
the powers, preferences or special rights of one or more series of any class so
as to affect them adversely, but would not so affect the entire class, then only
the shares of the series so affected by the amendment will be considered a
separate class for purposes of voting by classes. The New Belk Certificate is
consistent with the foregoing provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the
5
<PAGE> 2337
shareholders and approved (i) by a majority (unless the articles of
incorporation, a bylaw adopted by the shareholders or the board of directors
require a greater vote or a vote by voting groups) of the votes entitled to be
cast on the amendment by any voting group with respect to which the amendment
would create dissenters' rights and (ii) when a quorum is present, by all other
voting groups entitled to vote on the amendment through casting more affirmative
than opposing votes. As under the DGCL, the holders of the outstanding shares of
a class or series are entitled to vote as a separate voting group (if
shareholder voting is otherwise required by the NCBCA) on a proposed amendment
if the amendment would change certain fundamental rights and preferences of that
class or series. The Company Articles do not specify a greater voting
requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power, nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has power, by
vote of a majority of all the directors and without the assent or vote of the
shareholders, to make, alter, amend and rescind the bylaws of the Company.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without prior notice, if all
holders of outstanding shares entitled to vote on such action sign the written
consent(s) describing such action. The Company Bylaws and Company Articles do
not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding
6
<PAGE> 2338
having the right to vote for such directors, order an election to be held to
fill any such vacancies or newly created directorships or to replace the
directors chosen by the directors then in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more than 30% during any 12-month period. The
articles of incorporation or bylaws may establish a variable range for the size
of the board of directors by fixing a minimum and maximum number of directors.
If a variable range is established, the number of directors may be fixed or
changed from time to time, within the minimum and maximum, by the shareholders
or (unless the articles of incorporation or a shareholders' agreement shall
otherwise provide) the board of directors. After shares are issued, only the
shareholders may change the range for the size of the board or change from a
fixed to a variable-range size board or vice versa. The Company Bylaws require
the Company Board to consist of at least three, but no more than 15, members.
7
<PAGE> 2339
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the
8
<PAGE> 2340
disinterested directors or committee authorized, approved or ratified the
transaction; (ii) the material facts of the transaction and the director's
interest were disclosed or known to the shareholders entitled to vote and the
disinterested shares authorized, approved or ratified the transaction; or (iii)
the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any transaction from which the director derived an improper
personal benefit or (iv) acts or omissions occurring prior to the date the
provisions became effective.
9
<PAGE> 2341
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested stockholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder,
except in certain circumstances; (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested stockholder, except
in certain circumstances; or (v) any receipt by the interested stockholder of
the benefit of any loans, advances, guarantees, pledges or other financial
benefits (other than those expressly permitted in (i) through (iv) above)
provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation
10
<PAGE> 2342
or (ii) an affiliate or associate of the corporation who within three years of
the date in question was the direct or indirect owner of at least 15% of the
voting power of any class or series of the then outstanding stock of the
corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other
11
<PAGE> 2343
books and records and to make copies or extracts therefrom. A proper purpose
means a purpose reasonably related to such person's interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any final action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates must be deposited,
(iii) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the Payment Demand is received, (iv) set a date
by which the Surviving Corporation must receive the Payment Demand, which date
may not be fewer than 30 nor more than 60 days after the date the
12
<PAGE> 2344
Dissenters' Notice is mailed and (v) be accompanied by a copy of Article 13. A
Shareholder who is sent a Dissenters' Notice and who wishes to assert
dissenters' rights must demand payment and deposit his certificates in
accordance with the terms of the Dissenters' Notice. A Shareholder who demands
payment and deposit his certificates in accordance with the terms of the
Dissenters' Notice retains all other rights of a Shareholder until these rights
are canceled or modified by the consummation and effectiveness of the Merger. A
Shareholder who does not demand payments or deposit his certificates in
accordance with the terms of the Dissenters' Notice will not be entitled to
payment for his shares under the NCBCA. If any such holder of Common Stock fails
to perfect or shall have effectively withdrawn or lost such right, each share of
such holder's Common Stock will thereupon be deemed to have been converted into
and to have become, as of the Effective Time, the right to receive, without any
interest thereon, the number of shares of New Belk Class A Common Stock such
Shareholder is otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such
13
<PAGE> 2345
Shareholder dissents and such Shareholder's other shares were registered in the
names of different shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $6,049,412 $6,049,412 0.6 $ (366,519) $3,996,166
EBITDA............... 709,663 709,663 7 (366,519) 5,334,160
EBIT................. 635,913 635,913 10 (366,519) 6,725,649
Net Income........... 391,875 391,875 15 -- 5,878,125
Book Equity.......... 3,390,253 2,382,720 1 -- 2,382,720
</TABLE>
14
<PAGE> 2346
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Matthews-Belk Company 3.3203% X $35,816,031 = $ 1,189,200
-----------
Total $ 1,189,200
===========
Relative Operating Value of Company $ 6,725,649
Relative Operating Value of Other Companies Owned by Company + 1,189,200
-----------
Total Relative Value of Company = $ 7,914,848
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Brothers Company 13.5833% X $ 7,914,848 = $ 1,075,098
Matthews-Belk Company
Gastonia, NC 26.4722% X 7,914,848 = 2,095,234
-----------
Total $ 3,170,332
===========
Total Relative Value of Company $ 7,914,848
Total Relative Value of Company Owned by Other Belk Companies - 3,170,332
-----------
Net Relative Value of Company = $ 4,744,516
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 4,744,516 / $1,156,226,577 = .4103%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.4103% X 59,998,834) / 1,079 = 228.1762
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
15
<PAGE> 2347
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 217.71
Dividends(2).............................................. 45.00
Book value per share(3)................................... 1,883.47
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 219.05
Dividends(2).............................................. 59.33
Book value per share...................................... 2,856.77
</TABLE>
- ---------------
(1) Based on 1,800 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 1,800 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
16
<PAGE> 2348
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 5,909 $ 6,001 $ 6,049
Net income.................................................. 456 283 392
Per common share
Net income (loss)(1)...................................... 253.26 157.19 217.71
Dividends................................................. 40.00 45.00 45.00
Book value(2)............................................. 1,598.57 1,710.77 1,883.47
Total assets................................................ 3,393 3,547 4,465
Shareholders' equity........................................ 2,877 3,079 3,390
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $4,147 $4,785
Income from operations...................................... 332 336
</TABLE>
- ---------------
(1) Based on 1,800 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 1,800 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
17
<PAGE> 2349
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Lincoln Center
in Lincolnton, North Carolina. The Company's store operates in a manner
consistent with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is managed out of the Matthews group office in
Gastonia, North Carolina.
Facilities. The Company leases its store building, which contains
approximately 64,000 square feet of floor area. The current term of the lease
expires in 2008. The store was expanded by approximately 20,000 square feet in
1997. The Company believes the building is adequate to meet its current needs.
Competition. Specific competitors in the Company's market include Wal-Mart
and the retail stores in nearby Gastonia, North Carolina.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
18
<PAGE> 2350
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d).............................................. 894 49.7%
Thomas M. Belk, Jr. (Director and Executive Officer)
(a)(c)(d)................................................. 810 45.0%
H. W. McKay Belk (Director and Executive Officer)
(a)(c)(d)................................................. 810 45.0%
John R. Belk (Director) (a)(c)(d)........................... 811 45.1%
Henderson Belk (Director) (b)............................... 2 *
Sarah Belk Gambrell (b)..................................... 79 4.4%
David Belk Cannon (Director) (f)............................ 110 6.1%
James K. Glenn, Jr. (Director) (e).......................... 41 2.3%
Leroy Robinson (Director) (a)............................... 73 4.1%
B. Frank Matthews, II (Director and Executive Officer)
(g)(h).................................................... 136 7.6%
Eugene Robinson Matthews (Director and Executive Officer)... 20 1.1%
Katherine Belk Morris (a)................................... 90 5.0%
Walter & Fon Cornwell....................................... 100 5.6%
Johnnie Schrum Waits........................................ 100 5.6%
J.V. Properties............................................. 244.5 13.6%
Matthews-Belk Company....................................... 476.5 26.5%
Betty Choate Matthews....................................... 92 5.1%
All Directors and Executive Officers as a group (10
persons).................................................. 1,250 69.4%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson and Katherine Belk Morris -- 2801 West Tyvola
Road, Charlotte, N.C. 28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road,
Charlotte, N.C. 28207; David Belk Cannon -- 1607 W. Floyd Baker Blvd., Gaffney,
S.C. 29341; James K. Glenn, Jr. -- P.O. Box 2736, Winston-Salem, N.C. 27102; B.
Frank Matthews, II, Betty Choate Matthews and Eugene Robinson Matthews -- 2240
Remount Road, Gastonia, N.C. 28054; Walter & Fon Cornwell -- 2585 23rd Avenue,
N.E., Hickory, N.C. 28601; Johnnie Schrum Waits -- 1394 Shipwatch Villas, Amelia
Island Plantation, Fernandina Beach, FL 32034; J.V. Properties and Matthews-Belk
Company -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 73 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(b) Includes 2 shares held in several Trusts established by the Will of Mary I.
Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power
19
<PAGE> 2351
of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson Belk
is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H. Belk,
Jr. and Irwin Belk.
(c) Includes 476.5 shares held by Matthews-Belk Company, which shares are voted
by the members of the Executive Committee of the Board of Directors of such
Corporation, under authority given by the directors of such Corporation at
the annual meeting of directors held in March, 1997. The Executive
Committee of such Corporation consists of John M. Belk, Thomas M. Belk,
Jr., H. W. McKay Belk and John R. Belk.
(d) Includes 244.5 shares held by J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
(e) Includes 27 shares held by James K. Glenn, Jr., Trustee U/W of Daisy Belk
Mattox and 14 shares held by John Belk Stevens Trust U/W ITEM III, Section
C f/b/o James Kirk Glenn, Jr., et al. Voting and investment power is vested
in James K. Glenn, Jr., the Trustee of each Trust.
(f) Includes 38 shares held by Residuary Trust U/W Mrs. Henry Belk Cannon. The
Trustees, David Belk Cannon and John C. Daughtridge, have voting and
investment power with respect to such shares.
(g) Includes 92 shares held by B. Frank Matthews, II's wife, Betty Choate
Matthews.
(h) Includes 20 shares held by First Union National Bank of N.C., B. Frank
Matthews, II and Annabelle Z. Royster, Co-Trustees under the will of J.H.
Matthews, Jr. The named Trustees have voting and investment power with
respect to such shares.
20
<PAGE> 2352
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
</TABLE>
F-1
<PAGE> 2353
BELK DEPARTMENT STORE OF LINCOLNTON, N.C., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 56,145 $ 44,840
Accounts receivable, net.................................. 850,280 978,074
Merchandise inventory..................................... 1,209,058 1,198,384
Receivable from affiliates, net........................... 569,881 525,355
Deferred income taxes..................................... 14,083 --
Other..................................................... 48,330 45,171
---------- ----------
Total current assets........................................ 2,747,777 2,791,824
Loans receivable from affiliates, net....................... 500,000 300,000
Investments................................................. 368 1,007,533
Property, plant and equipment, net.......................... 297,133 363,924
Other noncurrent assets..................................... 1,726 1,665
---------- ----------
$3,547,004 $4,464,946
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 360,136 $ 428,557
Deferred income taxes..................................... -- 689
Accrued income taxes...................................... 41,836 87,758
---------- ----------
Total current liabilities................................... 401,972 517,004
Deferred income taxes....................................... 36,666 16,130
Long-term debt, excluding current installments.............. -- 503,676
Other noncurrent liabilities................................ 28,988 37,883
---------- ----------
Total liabilities........................................... 467,626 1,074,693
Shareholders' equity:
Common stock.............................................. 180,000 180,000
Retained earnings......................................... 2,899,378 3,210,253
---------- ----------
Total shareholders' equity.................................. 3,079,378 3,390,253
---------- ----------
$3,547,004 $4,464,946
========== ==========
</TABLE>
F-2
<PAGE> 2354
BELK DEPARTMENT STORE OF LINCOLNTON, N.C., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $5,908,503 $6,001,216 $6,049,413
Operating costs and expenses............................... 5,366,014 5,571,424 5,413,111
---------- ---------- ----------
Income from operations..................................... 542,489 429,792 636,302
---------- ---------- ----------
Other income (expense):
Interest, net............................................ 16,467 44,632 6,337
Gain (loss) on disposal of property, plant and
equipment............................................. 196,784 -- --
Miscellaneous, net....................................... (7,839) (10,340) (388)
---------- ---------- ----------
Total other expense, net................................... 205,412 34,292 5,949
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 747,901 464,084 642,251
Income tax expense (benefit)............................... 292,026 181,133 250,376
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 455,875 282,951 391,875
---------- ---------- ----------
Net earnings............................................... 455,875 282,951 391,875
Retained earnings at beginning of period................... 2,313,552 2,697,427 2,899,378
Dividends paid............................................. (72,000) (81,000) (81,000)
---------- ---------- ----------
Retained earnings at end of period......................... $2,697,427 $2,899,378 $3,210,253
========== ========== ==========
</TABLE>
F-3
<PAGE> 2355
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 2356
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 2357
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13.
DISSENTERS' RIGHTS.
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
A-1
<PAGE> 2358
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares; (ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (iv) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes; (v)
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional shares so created is to be acquired by cash under
G.S. 55-6-04; (vi) changes the corporation into a nonprofit corporation or
cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 2359
SEC.SEC. 55-13-04 TO 55-13-19. Reserved for future codification purposes.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 2360
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 2361
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 2362
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 2363
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................... $ 6,049,412 $391,875 $635,913 $709,663 $3,390,253
Adjustments to eliminate less than
wholly-owned subsidiaries................... -- -- -- -- --
----------- -------- -------- -------- ----------
Adjusted Shareholders' Statement.............. $ 6,049,412 391,875 635,913 709,663 3,390,253
=========== -------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............... -- -- --
Gain/loss on sale of securities............. -- -- --
Impairment loss............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries.............................. -- -- --
Gain/loss on discontinued operations........ -- -- --
Adjustment to tax expense................... -- -- -- --
-------- -------- --------
Total non-operating items..................... -- -- --
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities............................. -- -- --
Adjustment for ownership in other Belk
entities.................................. (1,007,533)
-------- -------- -------- ----------
Per Model..................................... $391,875 $635,913 $709,663 $2,382,720
======== ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................... $ (44,840)
Negative cash balances reclassified to
accounts payable........................ --
Receivables from affiliates, net.......... (525,355)
Loans receivable from affiliates, net..... (300,000)
Liabilities
Notes payable............................. --
Current installments of long-term debt.... --
Current portion of obligations under
capital leases.......................... --
Payables to affiliates, net............... --
Long-term debt, excluding current
installments............................ 503,676
Obligations under capital leases,
excluding current portion............... --
Loans payable to affiliates, net.......... --
-----------
Net debt (cash)............................... (366,519)
Adjustments to eliminate less than
wholly-owned subsidiaries................... --
-----------
Per Model..................................... $ (366,519)
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 2364
SUPPLEMENT NO. 56
<PAGE> 2365
BELK DEPARTMENT STORE OF LINCOLNTON, N.C., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 12:10 p.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 56
<PAGE> 2366
BELK BROTHERS OF MONROE, NORTH CAROLINA, INCORPORATED
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk Brothers of Monroe, North Carolina,
Incorporated (the "Company"), to be held on April 15, 1998, at 8:10 a.m., local
time, at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road,
Charlotte, North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 146.3169 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 595,802 shares of New Belk Class A Common Stock which
will represent approximately 0.9930% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(57)
<PAGE> 2367
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 2368
BELK BROTHERS OF MONROE, NORTH CAROLINA, INCORPORATED
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK BROTHERS OF MONROE, NORTH CAROLINA,
INCORPORATED:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk Brothers of Monroe, North Carolina, Incorporated (the
"Company") will be held on April 15, 1998, at 8:10 a.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 146.3169 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 2369
BELK BROTHERS OF MONROE, NORTH CAROLINA, INCORPORATED
SUPPLEMENT NO. 57
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 57 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK BROTHERS OF
MONROE, NORTH CAROLINA, INCORPORATED (THE "COMPANY"), THE DISCUSSION HEREIN
SUPERSEDES THE DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE
INFORMATION CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE
IN THE REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN
THE REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY
AND THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT
BE ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL
CAPITALIZED TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE
MEANINGS SPECIFIED IN THE PROXY STATEMENT/ PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION.................................. B-1
</TABLE>
<PAGE> 2370
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1934. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 8:10 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 146.3169 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 6,028 shares of Common Stock
outstanding held of record by 46 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 79.6% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 2371
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 6,400 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock
3
<PAGE> 2372
held by a New Belk Stockholder who is a Class A Permitted Holder will also
automatically convert into New Belk Class B Common Stock in the event that such
New Belk Stockholder no longer meets the requirements of a Class A Permitted
Holder. New Belk Class B Common Stock has no conversion rights. The Company
Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving
4
<PAGE> 2373
the distribution. The Company Bylaws provide that the Board of Directors of the
Company (the "Company Board") may from time to time declare dividends on the
Company's outstanding shares in the manner and upon the terms and conditions
provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. DGCL requires that
an amendment of the certificate of incorporation of a corporation be adopted by
the board of directors and the holders of a majority of the outstanding shares
of stock entitled to vote thereon. The holders of the outstanding shares of a
class are entitled to vote as a separate class on a proposed amendment that
would increase or decrease the aggregate number of authorized shares of such
class, increase or decrease the par value of the shares of such class or alter
or change the powers, preferences or special rights of the shares of such class
so as to affect them adversely. If any proposed amendment would alter or change
the powers, preferences or special rights of one or more series of any class so
as to affect them adversely, but would not so affect the entire class, then only
the shares of the series so affected by the amendment will be considered a
separate class for purposes of voting by classes. The New Belk Certificate is
consistent with the foregoing provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the
5
<PAGE> 2374
shareholders and approved (i) by a majority (unless the articles of
incorporation, a bylaw adopted by the shareholders or the board of directors
require a greater vote or a vote by voting groups) of the votes entitled to be
cast on the amendment by any voting group with respect to which the amendment
would create dissenters' rights and (ii) when a quorum is present, by all other
voting groups entitled to vote on the amendment through casting more affirmative
than opposing votes. As under the DGCL, the holders of the outstanding shares of
a class or series are entitled to vote as a separate voting group (if
shareholder voting is otherwise required by the NCBCA) on a proposed amendment
if the amendment would change certain fundamental rights and preferences of that
class or series. The Company Articles do not specify a greater voting
requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power, nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has power, by
vote of a majority of all the directors and without the assent or vote of the
shareholders, to make, alter, amend and rescind the bylaws of the Company.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without prior notice, if all
holders of outstanding shares entitled to vote on such action sign the written
consent(s) describing such action. The Company Bylaws and Company Articles do
not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding
6
<PAGE> 2375
having the right to vote for such directors, order an election to be held to
fill any such vacancies or newly created directorships or to replace the
directors chosen by the directors then in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more than 30% during any 12-month period. The
articles of incorporation or bylaws may establish a variable range for the size
of the board of directors by fixing a minimum and maximum number of directors.
If a variable range is established, the number of directors may be fixed or
changed from time to time, within the minimum and maximum, by the shareholders
or (unless the articles of incorporation or a shareholders' agreement shall
otherwise provide) the board of directors. After shares are issued, only the
shareholders may change the range for the size of the board or change from a
fixed to a variable-range size board or vice versa. The Company Bylaws require
the Company Board to consist of at least three, but no more than 15, members.
7
<PAGE> 2376
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the
8
<PAGE> 2377
disinterested directors or committee authorized, approved or ratified the
transaction; (ii) the material facts of the transaction and the director's
interest were disclosed or known to the shareholders entitled to vote and the
disinterested shares authorized, approved or ratified the transaction; or (iii)
the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any transaction from which the director derived an improper
personal benefit or (iv) acts or omissions occurring prior to the date the
provisions became effective.
9
<PAGE> 2378
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested stockholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder,
except in certain circumstances; (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested stockholder, except
in certain circumstances; or (v) any receipt by the interested stockholder of
the benefit of any loans, advances, guarantees, pledges or other financial
benefits (other than those expressly permitted in (i) through (iv) above)
provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation
10
<PAGE> 2379
or (ii) an affiliate or associate of the corporation who within three years of
the date in question was the direct or indirect owner of at least 15% of the
voting power of any class or series of the then outstanding stock of the
corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other
11
<PAGE> 2380
books and records and to make copies or extracts therefrom. A proper purpose
means a purpose reasonably related to such person's interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any final action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates must be deposited,
(iii) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the Payment Demand is received, (iv) set a date
by which the Surviving Corporation must receive the Payment Demand, which date
may not be fewer than 30 nor more than 60 days after the date the
12
<PAGE> 2381
Dissenters' Notice is mailed and (v) be accompanied by a copy of Article 13. A
Shareholder who is sent a Dissenters' Notice and who wishes to assert
dissenters' rights must demand payment and deposit his certificates in
accordance with the terms of the Dissenters' Notice. A Shareholder who demands
payment and deposit his certificates in accordance with the terms of the
Dissenters' Notice retains all other rights of a Shareholder until these rights
are canceled or modified by the consummation and effectiveness of the Merger. A
Shareholder who does not demand payments or deposit his certificates in
accordance with the terms of the Dissenters' Notice will not be entitled to
payment for his shares under the NCBCA. If any such holder of Common Stock fails
to perfect or shall have effectively withdrawn or lost such right, each share of
such holder's Common Stock will thereupon be deemed to have been converted into
and to have become, as of the Effective Time, the right to receive, without any
interest thereon, the number of shares of New Belk Class A Common Stock such
Shareholder is otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such
13
<PAGE> 2382
Shareholder dissents and such Shareholder's other shares were registered in the
names of different shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ----------- ----------- -------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales................. $12,938,379 $12,938,379 0.6 $(1,840,229) $ 9,603,256
EBITDA.................... 1,498,834 1,489,426 7 (1,840,229) 12,266,211
EBIT...................... 1,285,799 1,276,392 10 (1,840,229) 14,604,149
Net Income................ 827,466 821,705 15 -- 12,325,575
Book Equity............... 7,070,400 6,043,501 1 -- 6,043,501
</TABLE>
14
<PAGE> 2383
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk Brothers Company .2044% X $262,130,313 = $ 535,794
Belk Enterprises,
Inc. .2714% X 358,369,404 = 972,615
Parks-Belk Company,
Incorporated --
Bristol, Va. 1.0418% X 12,516,874 = 130,401
Parks-Belk Company of
Clarksville,
Tennessee .2711% X 10,855,465 = 29,429
Belk of Covington,
Ga., Inc. 2.7381% X 4,579,688 = 125,396
Belk's Department
Store of Dunn,
North Carolina,
Incorporated 1.8181% X 14,191,195 = 258,010
Belk-Simpson Company
of Hendersonville,
N.C., Incorporated .2344% X 9,384,434 = 21,997
Belk's Department
Store of Laurens,
South Carolina,
Incorporated .2776% X 4,498,438 = 12,488
Beck-Matthews Company
of Macon, Georgia .8667% X 14,496,059 = 125,637
Belk of Spartanburg,
S.C., Inc. .2120% X 10,010,262 = 21,222
Belk of Toccoa, Ga.,
Inc. 3.6707% X 4,349,985 = 159,675
-----------
Total $ 2,392,664
===========
Relative Operating Value of Company $14,604,149
Relative Operating Value of Other Companies Owned by Company + 2,392,664
-----------
Total Relative Value of Company = $16,996,814
===========
</TABLE>
15
<PAGE> 2384
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Brothers Company 29.2634% X $16,996,814 = $ 4,973,846
Belk Enterprises,
Inc. 1.3271% X 16,996,814 = 225,565
Belk of Orangeburg,
S.C., Inc. 1.1944% X 16,996,814 = 203,010
Belk-Harry Company,
Salisbury, N.C. .6636 X 16,996,814 = 112,791
-----------
Total $ 5,515,211
===========
Total Relative Value of Company $16,996,814
Total Relative Value of Company Owned by Other Belk Companies - 5,515,211
-----------
Net Relative Value of Company = $11,481,603
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$11,481,603 / $1,156,226,577 = .9930%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.9930% X 59,998,834) / 4,072 = 146.3169
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 2385
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 137.27
Dividends(2).............................................. 35.00
Book value per share(3)................................... 1,172.93
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 140.46
Dividends(2).............................................. 38.04
Book value per share...................................... 1,831.89
</TABLE>
- ---------------
(1) Based on 6,028 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 6,028 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
17
<PAGE> 2386
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $12,545 $12,905 $12,938
Net income.................................................. 706 745 827
Per common share
Net income (loss)(1)...................................... 117.10 123.57 137.27
Dividends................................................. 25.00 35.00 35.00
Book value(2)............................................. 982.09 1,070.66 1,172.93
Total assets................................................ 7,111 7,552 8,451
Shareholders' equity........................................ 5,920 6,454 7,070
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $8,917 $8,863
Income from operations...................................... 727 946
</TABLE>
- ---------------
(1) Based on 6,028 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 6,028 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 2387
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Monroe Mall in
Monroe, North Carolina. The Company's store operates in a manner consistent with
the business of the Belk Companies described in the Proxy Statement/Prospectus.
The store is managed out of the Pennell group office in Charlotte, North
Carolina.
Facilities. The Company leases its store building, which contains
approximately 73,000 square feet of floor area. The current term of the lease
expires in 2004. The Company believes the building is adequate to meet its
current needs.
Competition. Specific competitors in the Company's market include
Wal-Mart, Penney and Peebles.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 2388
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)........................................... 2,661 44.1%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(d)(e)(f).............................................. 2,223 36.9%
H. W. McKay Belk (Director and Executive Officer)
(b)(d)(e)(g).............................................. 2,230 37.0%
John R. Belk (Director and Executive Officer)
(b)(d)(e)(h).............................................. 2,145 35.6%
Henderson Belk (Director) (c)............................... 4 *
Sarah Belk Gambrell (Director) (c).......................... 576 9.6%
David Belk Cannon (Director) (j)............................ 760 12.6%
James K. Glenn, Jr. (Director) (i).......................... 180 3.0%
Daisy D. Lange (Director) (l)............................... 366 6.1%
John H. Pennell (Executive Officer)......................... 0 *
Montgomery Investment Company............................... 452 7.5%
J.V. Properties............................................. 1,764 29.3%
NationsBank, N.A. (k)(l).................................... 864 14.3%
All Directors and Executive Officers as a group (10
persons).................................................. 4,798 79.6%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk
Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207; David Belk Cannon -- 1607
W. Floyd Baker Blvd., Gaffney, S.C. 29341; James K. Glenn, Jr. -- P.O. Box 2736,
Winston-Salem, N.C. 27102; Daisy D. Lange -- 7 Brickwall Lane, Ruislip,
Middlesex, England HA48JS; John H. Pennell -- 308 East Fifth Street, Charlotte,
N.C. 28202; NationsBank, N.A., Sara McDonnell (NCI-002-07-13) -- Charlotte, N.C.
28255; Montgomery Investment Company and J.V. Properties -- 2801 West Tyvola
Road, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 452 shares held by Montgomery Investment Company, of which John M.
Belk is the majority shareholder.
(b) Includes 157 shares held by Milburn Investment Company, of which the Estate
of Thomas M .Belk is the sole shareholder. Voting and investment power is
shared by the Executors of the Estate of Thomas M. Belk, who are Katherine
McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W. McKay Belk,
John R. Belk John M. Belk and Leroy Robinson.
(c) Includes 4 shares held in several Trusts established by the Will of Mary I.
Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
20
<PAGE> 2389
(d) Includes 40 shares held by Belk-Harry Company, 72 shares held by Belk of
Orangeburg, S.C., Inc. and 80 shares held by Belk Enterprises, Inc., which
shares are voted by the members of the Executive Committee of the Board of
Directors of each such Corporation, under the authority given by the
directors of each such Corporation at the annual meeting of directors held
in March, 1997. The Executive Committee of each such Corporation consists
of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(e) Includes 1,764 shares of J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
(f) Includes 8 shares held by Thomas M. Belk, Jr. as custodian for his minor
children, and 10 shares are held by his wife, Sarah F. Belk.
(g) Includes 3 shares held by H. W. McKay Belk as custodian for his minor
children, and 10 shares are held by his wife, Nina F. Belk.
(h) Includes 8 shares held by John R. Belk as custodian for his minor children,
and 10 shares are held by his wife, Kimberly D. Belk.
(i) Includes 32 shares held by John Belk Stevens Trust U/W ITEM III, Section C
f/b/o James Kirk Glenn, Jr., et al. and 64 shares held by John Belk Stevens
Trust U/W ITEM III, Section B f/b/o Mary S. Whelchel and 64 shares are held
by John Belk Stevens U/W ITEM III, Section A f/b/o Sara S. Glenn. Voting
and investment power is vested in James K. Glenn, Jr., the Trustee of each
Trust.
(j) Includes 264 shares held by Residuary Trust U/W Mrs. Henry Belk Cannon. The
Trustees, David Belk Cannon and John C. Daughtridge, have voting and
investment power with respect to such shares.
(k) Includes 498 shares held by NationsBank as Trustee for the Daisy Belk
Doughton Lange Revocable Trust dated 3/25/97. NationsBank has voting and
investment power with respect to such shares.
(l) Includes 366 shares held by Daisy Doughton Lange and North Carolina
National Bank. Trustees for Robert L. Doughton, II under Agreement dated
July 21, 1965. The named Trustees have voting and investment power with
respect to such shares.
21
<PAGE> 2390
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 2391
BELK BROTHERS OF MONROE, NORTH CAROLINA, INCORPORATED
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 97,820 $ 162,734
Accounts receivable, net.................................. 2,080,219 2,368,536
Merchandise inventory..................................... 2,266,751 2,169,822
Receivable from affiliates, net........................... 1,564,627 1,916,437
Deferred income taxes..................................... 68,254 48,636
Other..................................................... 103,578 98,262
---------- ----------
Total current assets........................................ 6,181,249 6,764,427
Loans receivable from affiliates, net....................... 8,800 8,800
Investments................................................. 528,230 1,026,900
Property, plant and equipment, net.......................... 807,664 626,730
Deferred income taxes....................................... -- 4,471
Other noncurrent assets..................................... 25,704 19,211
---------- ----------
$7,551,647 $8,450,539
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable............................................. $ -- $ 247,742
Accounts payable and accrued expenses..................... 919,545 1,015,837
Accrued income taxes...................................... 85,963 56,215
---------- ----------
Total current liabilities................................... 1,005,508 1,319,794
Deferred income taxes....................................... 40,575 --
Other noncurrent liabilities................................ 51,650 60,345
---------- ----------
Total liabilities........................................... 1,097,733 1,380,139
Shareholders' equity:
Common stock.............................................. 602,800 602,800
Retained earnings......................................... 5,851,114 6,467,600
---------- ----------
Total shareholders' equity.................................. 6,453,914 7,070,400
---------- ----------
$7,551,647 $8,450,539
========== ==========
</TABLE>
F-2
<PAGE> 2392
BELK BROTHERS OF MONROE, NORTH CAROLINA, INCORPORATED
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Total store sales....................................... $12,796,104 $13,166,780 $13,242,861
Less: Leased Sales...................................... 250,793 262,162 304,482
----------- ----------- -----------
Net sales............................................... 12,545,311 12,904,618 12,938,379
Operating costs and expenses............................ 11,382,937 11,720,234 11,641,710
----------- ----------- -----------
Income from operations.................................. 1,162,374 1,184,384 1,296,669
----------- ----------- -----------
Other income (expense):
Interest, net......................................... 9,464 30,731 64,894
Dividend income....................................... 10,750 10,618 9,408
Gain (loss) on disposal of property, plant and
equipment.......................................... 575 (278) --
Miscellaneous, net.................................... (30,586) (5,566) (20,278)
----------- ----------- -----------
Total other expense, net................................ (9,797) 35,505 54,024
----------- ----------- -----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities..... 1,152,577 1,219,889 1,350,693
Income tax expense (benefit)............................ 446,717 475,009 523,227
----------- ----------- -----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities................... 705,860 744,880 827,466
----------- ----------- -----------
Net earnings............................................ 705,860 744,880 827,466
Retained earnings at beginning of period................ 4,762,054 5,317,214 5,851,114
Dividends paid.......................................... (150,700) (210,980) (210,980)
----------- ----------- -----------
Retained earnings at end of period...................... $ 5,317,214 $ 5,851,114 $ 6,467,600
=========== =========== ===========
</TABLE>
F-3
<PAGE> 2393
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 2394
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 2395
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13.
DISSENTERS' RIGHTS.
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
A-1
<PAGE> 2396
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares; (ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (iv) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes; (v)
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional shares so created is to be acquired by cash under
G.S. 55-6-04; (vi) changes the corporation into a nonprofit corporation or
cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 2397
SEC.SEC. 55-13-04 TO 55-13-19. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action created dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 2398
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 2399
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 2400
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 2401
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................. $12,938,379 $827,467 $1,285,800 $1,498,834 $7,070,400
Adjustments to eliminate less than
wholly-owned subsidiaries................. -- -- -- -- --
----------- -------- ---------- ---------- ----------
Adjusted Shareholders' Statement............ $12,938,379 827,467 1,285,800 1,498,834 7,070,400
=========== -------- ---------- ---------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............. -- -- --
Gain/loss on sale of securities........... -- -- --
Impairment loss........................... -- -- --
Equity in earnings of unconsolidated
subsidiaries............................ -- -- --
Gain/loss on discontinued operations...... -- -- --
Adjustment to tax expense................. -- -- -- --
-------- ---------- ----------
Total non-operating items................... -- -- --
-------- ---------- ----------
Other Adjustments:
Adjustment for dividends received from
other Belk entities..................... 5,764 9,408 9,408
Adjustment for ownership in other Belk
entities................................ 1,026,900
-------- ---------- ---------- ----------
Per Model................................... $821,703 $1,276,392 $1,489,426 $6,043,500
======== ========== ========== ==========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................. $ (162,734)
Negative cash balances reclassified to
accounts payable...................... --
Receivables from affiliates, net........ (1,916,437)
Loans receivable from affiliates, net... (8,800)
Liabilities
Notes payable........................... 247,742
Current installments of long-term
debt.................................. --
Current portion of obligations under
capital leases........................ --
Payables to affiliates, net............. --
Long-term debt, excluding current
installments.......................... --
Obligations under capital leases,
excluding current portion............. --
Loans payable to affiliates, net........ --
-----------
Net debt (cash)............................. (1,840,229)
Adjustments to eliminate less than
wholly-owned subsidiaries................. --
-----------
Per Model................................... $(1,840,229)
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 2402
SUPPLEMENT NO. 57
<PAGE> 2403
BELK BROTHERS OF MONROE, NORTH CAROLINA, INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 8:10 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 57
<PAGE> 2404
BELK'S DEPARTMENT STORE OF MOREHEAD CITY, N.C., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk's Department Store of Morehead City, N.C.,
Inc. (the "Company"), to be held on April 16, 1998, at 10:00 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 90.4245 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 421,016 shares of New Belk Class A Common Stock which
will represent approximately 0.7017% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(58)
<PAGE> 2405
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 2406
BELK'S DEPARTMENT STORE OF MOREHEAD CITY, N.C., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK'S DEPARTMENT STORE OF MOREHEAD CITY, N.C.,
INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk's Department Store of Morehead City, N.C., Inc. (the
"Company") will be held on April 16, 1998, at 10:00 a.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 90.4245 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 2407
BELK'S DEPARTMENT STORE OF MOREHEAD CITY, N.C., INC.
SUPPLEMENT NO. 58
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 58 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK'S DEPARTMENT
STORE OF MOREHEAD CITY, N.C., INC. (THE "COMPANY"), THE DISCUSSION HEREIN
SUPERSEDES THE DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE
INFORMATION CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE
IN THE REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN
THE REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY
AND THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT
BE ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL
CAPITALIZED TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE
MEANINGS SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION.................................. B-1
</TABLE>
<PAGE> 2408
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1951. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 10:00 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 90.4245 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 5,920 shares of Common Stock
outstanding held of record by 34 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 55.2% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 2409
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 6,000 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock
3
<PAGE> 2410
held by a New Belk Stockholder who is a Class A Permitted Holder will also
automatically convert into New Belk Class B Common Stock in the event that such
New Belk Stockholder no longer meets the requirements of a Class A Permitted
Holder. New Belk Class B Common Stock has no conversion rights. The Company
Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving
4
<PAGE> 2411
the distribution. The Company Bylaws provide that the Board of Directors of the
Company (the "Company Board") may from time to time declare dividends on the
Company's outstanding shares in the manner and upon the terms and conditions
provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. DGCL requires that
an amendment of the certificate of incorporation of a corporation be adopted by
the board of directors and the holders of a majority of the outstanding shares
of stock entitled to vote thereon. The holders of the outstanding shares of a
class are entitled to vote as a separate class on a proposed amendment that
would increase or decrease the aggregate number of authorized shares of such
class, increase or decrease the par value of the shares of such class or alter
or change the powers, preferences or special rights of the shares of such class
so as to affect them adversely. If any proposed amendment would alter or change
the powers, preferences or special rights of one or more series of any class so
as to affect them adversely, but would not so affect the entire class, then only
the shares of the series so affected by the amendment will be considered a
separate class for purposes of voting by classes. The New Belk Certificate is
consistent with the foregoing provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the
5
<PAGE> 2412
shareholders and approved (i) by a majority (unless the articles of
incorporation, a bylaw adopted by the shareholders or the board of directors
require a greater vote or a vote by voting groups) of the votes entitled to be
cast on the amendment by any voting group with respect to which the amendment
would create dissenters' rights and (ii) when a quorum is present, by all other
voting groups entitled to vote on the amendment through casting more affirmative
than opposing votes. As under the DGCL, the holders of the outstanding shares of
a class or series are entitled to vote as a separate voting group (if
shareholder voting is otherwise required by the NCBCA) on a proposed amendment
if the amendment would change certain fundamental rights and preferences of that
class or series. The Company Articles do not specify a greater voting
requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power, nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has power, by
vote of a majority of all the directors, to make, alter, amend and rescind the
bylaws of the Company. The bylaws enacted by the Shareholders may be affected by
action of the Company Board, and the bylaws enacted by the Company Board may be
affected by the Shareholders; but the Company Board may not en-enact,
substantially or otherwise, a bylaw which the Shareholders have repealed or
altered, nor may they repeal a bylaw enacted by the Shareholders which limits
the powers of the Company Board, or enhances or protects the rights of
shareholders, without the consent of the Shareholders.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without prior notice, if all
holders of outstanding shares entitled to vote on such action sign the written
consent(s) describing such action. The Company Bylaws and Company Articles do
not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be
6
<PAGE> 2413
filled by a majority of the directors then in office, although less than a
quorum, or by a sole remaining director. If at the time of filling any vacancy
or newly created directorship, the directors then in office constitute less than
a majority of the whole board as constituted immediately prior to such increase,
the Delaware Court of Chancery may, upon application of stockholders holding at
least 10% of the total number of shares outstanding having the right to vote for
such directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more than 30% during any 12-month period. The
articles of incorporation or bylaws may establish a variable range for the size
of the board of directors by fixing a minimum and maximum number of directors.
If a variable range is established, the number of directors may be fixed or
changed from time to time, within the minimum and maximum, by the shareholders
or (unless the articles of incorporation or a shareholders' agreement shall
7
<PAGE> 2414
otherwise provide) the board of directors. After shares are issued, only the
shareholders may change the range for the size of the board or change from a
fixed to a variable-range size board or vice versa. The Company Bylaws require
the Company Board to consist of at least three, but no more than 15, members.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
8
<PAGE> 2415
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the disinterested directors or committee authorized, approved or
ratified the transaction; (ii) the material facts of the transaction and the
director's interest were disclosed or known to the shareholders entitled to vote
and the disinterested shares authorized, approved or ratified the transaction;
or (iii) the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly
9
<PAGE> 2416
in conflict with the best interests of the corporation, (ii) any liability under
unlawful distributions, (iii) any transaction from which the director derived an
improper personal benefit or (iv) acts or omissions occurring prior to the date
the provisions became effective.
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested stockholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder,
except in certain circumstances; (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested stockholder, except
in certain circumstances; or (v) any receipt by the interested stockholder of
the benefit of any loans, advances,
10
<PAGE> 2417
guarantees, pledges or other financial benefits (other than those expressly
permitted in (i) through (iv) above) provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) an
affiliate or associate of the corporation that within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
11
<PAGE> 2418
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any final action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates must be deposited,
(iii) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the Payment Demand is received, (iv) set a date
by which the Surviving Corporation must receive the Payment Demand, which date
may not be fewer than 30 nor more than 60 days after the date the Dissenters'
Notice is mailed and (v) be accompanied by a copy of Article 13. A Shareholder
who is sent a Dissenters' Notice and who wishes to assert dissenters' rights
must demand payment and deposit his certificates in accordance with the terms of
the Dissenters' Notice. A Shareholder who demands payment and
12
<PAGE> 2419
deposit his certificates in accordance with the terms of the Dissenters' Notice
retains all other rights of a Shareholder until these rights are canceled or
modified by the consummation and effectiveness of the Merger. A Shareholder who
does not demand payments or deposit his certificates in accordance with the
terms of the Dissenters' Notice will not be entitled to payment for his shares
under the NCBCA. If any such holder of Common Stock fails to perfect or shall
have effectively withdrawn or lost such right, each share of such holder's
Common Stock will thereupon be deemed to have been converted into and to have
become, as of the Effective Time, the right to receive, without any interest
thereon, the number of shares of New Belk Class A Common Stock such Shareholder
is otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such Shareholder dissents and such
Shareholder's other shares were registered in the names of different
shareholders.
13
<PAGE> 2420
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ----------- ----------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales............ $11,029,380 $11,029,380 0.6 $ (798,407) $7,416,035
EBITDA............... 1,053,891 1,053,891 7 (798,407) 8,175,644
EBIT................. 811,181 811,181 10 (798,407) 8,910,217
Net Income........... 496,388 496,388 15 -- 7,445,820
Book Equity.......... 5,297,810 5,064,639 1 -- 5,064,639
</TABLE>
14
<PAGE> 2421
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk Brothers Company .2044% X $262,130,313 = $ 535,794
Belk's Department
Store of Clinton,
N.C., Inc. 5.6297% X 11,043,990 = 621,744
Belk's Department
Store of
Jacksonville, N.C.,
Inc. .5453% X 29,859,959 = 162,826
Belk's Department
Store of New Bern,
N.C., Incorporated 1.0813% X 7,893,728 = 85,355
-----------
Total $ 1,405,719
===========
Relative Operating Value of Company $ 8,910,217
Relative Operating Value of Other Companies Owned by Company + 1,405,719
-----------
Total Relative Value of Company = $10,315,936
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk's Department
Store of Asheville,
North Carolina,
Incorporated 5.2703% X $10,315,936 = $ 543,681
Belk Enterprises,
Inc. 5.2703 X 10,315,936 = 543,681
Belk's Department
Store of Boone,
North Carolina,
Incorporated 5.0676 X 10,315,936 = 522,770
Belk's Department
Store of
Greenville, N.C.,
Inc. 4.0541 X 10,315,936 = 418,218
Belk's Department
Store of
Jacksonville, N.C.,
Inc. 1.6892 X 10,315,936 = 174,257
-----------
Total $ 2,202,607
===========
Total Relative Value of Company $10,315,587
Total Relative Value of Company Owned by Other Belk Companies - 2,202,607
-----------
Net Relative Value of Company = $ 8,113,329
===========
</TABLE>
15
<PAGE> 2422
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$8,113,329 / $1,156,226,577 = .7017%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.7017% X 59,998,834) / 4,656 = 90.4245
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 2423
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 83.85
Dividends(2).............................................. 22.50
Book value per share(3)................................... 894.90
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 86.81
Dividends(2).............................................. 23.51
Book value per share...................................... 1,132.11
</TABLE>
- ---------------
(1) Based on 5,920 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 5,920 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
17
<PAGE> 2424
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $10,639 $10,770 $11,029
Net income.................................................. 406 448 496
Per common share
Net income (loss)(1)...................................... 68.65 75.59 83.85
Dividends................................................. 15.00 20.00 22.50
Book value(2)............................................. 777.96 833.55 894.90
Total assets................................................ 5,342 7,523 7,255
Shareholders' Equity........................................ 4,606 4,935 5,298
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $7,937 $8,187
Income from operations...................................... 525 669
</TABLE>
- ---------------
(1) Based on 5,920 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 5,920 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 2425
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Morehead Plaza
in Morehead City, North Carolina. The Company's store operates in a manner
consistent with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is managed out of the Nipper group office in
Summerville, South Carolina.
Facilities. The Company leases its store building, which contains
approximately 74,000 square feet of floor area. The current term of the lease
expires in 1999, but the Company has options to extend the lease through 2014.
The Company does not believe that the building is adequate to meet its current
needs and is currently studying expansion opportunities at Morehead Plaza.
Competition. Specific competitors in the Company's market include Wal-Mart
and Sears.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 2426
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)........................................... 2,262 38.2%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(c)(e)................................................. 1,584 26.8%
H. W. McKay Belk (Director and Executive Officer)
(b)(c)(e)................................................. 1,584 26.8%
John R. Belk (Director and Executive Officer) (b)(c)(e)..... 1,584 26.8%
Henderson Belk (Director) (d)............................... 80 1.4%
Sarah Belk Gambrell (Director) (d).......................... 392 6.6%
Sarah Gambrell Knight....................................... 312 5.3%
David Belk Cannon (Director) (f)............................ 160 2.7%
W. B. Beery, III (Director)................................. 0 *
Katherine Belk Morris (b)(c)................................ 320 5.4%
Elizabeth K. Baker.......................................... 952 16.1%
William B. Beery, IV (g).................................... 338 5.7%
Martha B. Dineen (g)........................................ 338 5.7%
Katherine E. Beery (g)...................................... 338 5.7%
Thomas A. Nipper (Executive Officer)........................ 0 *
Lars Petersen (Executive Officer)........................... 0 *
Bob Webster (Executive Officer)............................. 0 *
Montgomery Investment Company............................... 312 5.3%
Belk's Department Store of Asheville, North Carolina,
Incorporated.............................................. 312 5.3%
Belk's Department Store of Boone, North Carolina,
Incorporated.............................................. 300 5.1%
Belk Enterprises, Inc. ..................................... 312 5.3%
All Directors and Executive Officers as a group (9
persons).................................................. 3,268 55.2%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk and Katherine Belk Morris -- 2801 West Tyvola Road, Charlotte,
N.C. 28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road, Charlotte, N.C.
28207; Sarah Gambrell Knight -- 810 Colville Road, Charlotte, N.C. 28207; David
Belk Cannon -- 1607 W. Floyd Baker Blvd., Gaffney, S.C. 29341; W. B. Beery, III,
William B. Beery, IV, Martha B. Dineen and Katherine E. Beery -- 1919 Brookhaven
Road, Wilmington, N.C. 28403; Elizabeth K. Baker -- P. O. Box 1133, New Bern,
N.C. 28560; Thomas A. Nipper, Lars Petersen, Bob Webster -- 200 Marymeade Drive,
Summerville, S.C. 29483; Montgomery Investment Company, Belk's Department Store
of Asheville, North Carolina, Incorporated, Belk's Department Store of Boone,
North Carolina, Incorporated and Belk Enterprises, Inc. -- 2801 West Tyvola
Road, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
20
<PAGE> 2427
(a) Includes 312 shares held by Montgomery Investment Company, of which John M.
Belk is the majority shareholder.
(b) Includes 18 shares held by Brothers Investment Company, which Corporation
is equally owned by John M. Belk and the Estate of Thomas M. Belk. Voting
and investment power is shared by John M. Belk, Katherine McKay Belk,
Katherine Belk Morris, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk
and Leroy Robinson.
(c) Includes 124 shares held by Milburn Investment Company, of which the Estate
of Thomas M. Belk is the sole shareholder. Voting and investment power is
shared by the Executors of the Estate of Thomas M. Belk, who are Katherine
McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W. McKay Belk,
John R. Belk, John M. Belk and Leroy Robinson.
(d) Includes 80 shares held in several Trusts established by the Will of W. H.
Belk for the benefit of his children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(e) Includes 312 shares held by Belk's Department Store of Ashville, North
Carolina, Incorporated, 300 shares held by Belk's Department Store of
Boone, North Carolina, Incorporated, 240 shares held by Belk Department
Store of Greenville, N.C., Inc., 312 shares held by Belk Enterprises, Inc.
and 100 shares held by Belk's Department Store of Jacksonville, N.C., Inc.,
which shares are voted by the members of the Executive Committee of the
Board of Directors of each such Corporation, under authority given by the
directors of each such Corporation at the annual meeting of directors held
in March, 1997. The Executive Committee of each such Corporation consists
of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(f) Includes 50 shares held by Residuary Trust U/W Mrs. Henry Belk Cannon. The
Trustees, David Belk Cannon and John C. Daughtridge, have voting and
investment power with respect to such shares.
(g) Represented by 338 shares held by William B. Beery, III and Martha B. Beery
Irrevocable Trust. The Trustees, William B. Beery, IV, Martha B. Dineen and
Katherine E. Beery, have voting and investment power with respect to such
shares.
21
<PAGE> 2428
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 2429
BELK'S DEPARTMENT STORE OF MOREHEAD CITY, N.C., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 85,345 $ 96,757
Accounts receivable, net.................................. 1,418,193 1,646,835
Merchandise inventory..................................... 1,808,303 1,801,943
Receivable from affiliates, net........................... 2,252,921 1,732,518
Deferred income taxes..................................... 15,730 33,405
Other..................................................... 97,989 99,175
---------- ----------
Total current assets........................................ 5,678,481 5,410,633
Loans receivable from affiliates, net....................... 2,066 2,066
Investments................................................. 237 233,171
Property, plant and equipment, net.......................... 1,767,288 1,549,611
Deferred income taxes....................................... 9,000 --
Other noncurrent assets..................................... 65,647 59,032
---------- ----------
$7,522,719 $7,254,513
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable............................................. $1,700,000 $ 800,000
Current installments of long-term debt.................... -- 77,645
Accounts payable and accrued expenses..................... 698,589 725,136
Accrued income taxes...................................... 54,624 39,396
---------- ----------
Total current liabilities................................... 2,453,213 1,642,177
Deferred income taxes....................................... -- 20,381
Long-term debt, excluding current installments.............. -- 155,289
Other noncurrent liabilities................................ 134,884 138,856
---------- ----------
Total liabilities........................................... 2,588,097 1,956,703
Shareholders' equity:
Common stock.............................................. 592,000 592,000
Retained earnings......................................... 4,342,622 4,705,810
---------- ----------
Total shareholders' equity.................................. 4,934,622 5,297,810
---------- ----------
$7,522,719 $7,254,513
========== ==========
</TABLE>
F-2
<PAGE> 2430
BELK'S DEPARTMENT STORE OF MOREHEAD CITY, N.C., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales............................................... $10,638,638 $10,769,924 $11,029,380
Operating costs and expenses............................ 9,924,449 10,019,534 10,220,661
----------- ----------- -----------
Income from operations.................................. 714,189 750,390 808,719
----------- ----------- -----------
Other income (expense):
Interest, net......................................... (39,700) (12,546) (10,175)
Gain (loss) on disposal of property, plant and
equipment.......................................... -- 3,500 --
Miscellaneous, net.................................... (5,997) (7,514) 2,463
----------- ----------- -----------
Total other expense, net................................ (45,697) (16,560) (7,712)
----------- ----------- -----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities..... 668,492 733,830 801,007
Income tax expense (benefit)............................ 262,098 286,330 304,619
----------- ----------- -----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities................... 406,394 447,500 496,388
----------- ----------- -----------
Net earnings............................................ 406,394 447,500 496,388
Retained earnings at beginning of period................ 3,695,928 4,013,522 4,342,622
Dividends paid.......................................... (88,800) (118,400) (133,200)
----------- ----------- -----------
Retained earnings at end of period...................... $ 4,013,522 $ 4,342,622 $ 4,705,810
=========== =========== ===========
</TABLE>
F-3
<PAGE> 2431
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 2432
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 2433
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13.
DISSENTERS' RIGHTS.
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
A-1
<PAGE> 2434
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares; (ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (iv) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes; (v)
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional shares so created is to be acquired by cash under
G.S. 55-6-04; (vi) changes the corporation into a nonprofit corporation or
cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 2435
SEC.SEC. 55-13-04 TO 55-13-19. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 2436
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
A-4
<PAGE> 2437
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-5
<PAGE> 2438
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................... $11,029,380 $496,388 $811,181 $1,053,891 $5,297,810
Adjustments to eliminate less than
wholly-owned subsidiaries................... -- -- -- -- --
----------- -------- -------- ---------- ----------
Adjusted Shareholders' Statement.............. $11,029,380 496,388 811,181 1,053,891 5,297,810
=========== -------- -------- ---------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............... -- -- --
Gain/loss on sale of securities............. -- -- --
Impairment loss............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries.............................. -- -- --
Gain/loss on discontinued operations........ -- -- --
Adjustment to tax expense................... -- -- -- --
-------- -------- ----------
Total non-operating items..................... -- -- --
-------- -------- ----------
Other Adjustments:
Adjustment for dividends received from other
Belk entities............................. -- -- --
Adjustment for ownership in other Belk
entities.................................. (233,171)
-------- -------- ---------- ----------
Per Model..................................... $496,388 $811,181 $1,053,891 $5,064,639
======== ======== ========== ==========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................... $ (96,757)
Negative cash balances reclassified to
accounts payable........................ --
Receivables from affiliates, net.......... (1,732,518)
Loans receivable from affiliates, net..... (2,066)
Liabilities
Notes payable............................. 800,000
Current installments of long-term debt.... 77,645
Current portion of obligations under
capital leases.......................... --
Payables to affiliates, net............... --
Long-term debt, excluding current
installments............................ 155,289
Obligations under capital leases,
excluding current portion............... --
Loans payable to affiliates, net.......... --
-----------
Net debt (cash)............................... (798,407)
Adjustments to eliminate less than
wholly-owned subsidiaries................... --
-----------
Per Model..................................... $ (798,407)
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 2439
SUPPLEMENT NO. 58
<PAGE> 2440
BELK'S DEPARTMENT STORE OF MOREHEAD CITY, N.C., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 10:00 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 58
<PAGE> 2441
BELK'S DEPARTMENT STORE OF MOUNT AIRY, NORTH CAROLINA, INCORPORATED
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk's Department Store of Mount Airy, North
Carolina, Incorporated (the "Company"), to be held on April 16, 1998, at 10:30
a.m., local time, at the offices of Belk Stores Services, Inc., 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 29.8170 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 69,831 shares of New Belk Class A Common Stock which
will represent approximately 0.1164% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(59)
<PAGE> 2442
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 2443
BELK'S DEPARTMENT STORE OF MOUNT AIRY, NORTH CAROLINA, INCORPORATED
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK'S DEPARTMENT STORE OF MOUNT AIRY,
NORTH CAROLINA, INCORPORATED:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk's Department Store of Mount Airy, North Carolina, Incorporated
(the "Company") will be held on April 16, 1998, at 10:30 a.m., local time, at
the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 29.8170 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 2444
BELK'S DEPARTMENT STORE OF MOUNT AIRY,
NORTH CAROLINA, INCORPORATED
SUPPLEMENT NO. 59
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 59 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK'S DEPARTMENT
STORE OF MOUNT AIRY, NORTH CAROLINA, INCORPORATED (THE "COMPANY"), THE
DISCUSSION HEREIN SUPERSEDES THE DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS.
ALL OF THE INFORMATION CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES
PARTICIPATE IN THE REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT
PARTICIPATE IN THE REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT
TO THE COMPANY AND THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS
SHAREHOLDERS MAY NOT BE ACCURATE. SEE "RISK FACTORS" IN THE PROXY
STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED HEREIN WHICH ARE NOT OTHERWISE
DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
STATEMENTS........................................ B-1
</TABLE>
<PAGE> 2445
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1928. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 10:30 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization dated as of November 25, 1997 (the "Reorganization Agreement"),
by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk Acquisition
Co., a South Carolina corporation, and the 112 Belk companies named therein (the
"Belk Companies"), including the Company, pursuant to which the Company will be
merged with and into New Belk (the "Merger") and (ii) the Merger. A copy of the
Reorganization Agreement is attached as Annex A to the Proxy Statement/
Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 29.8170 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 6,416 shares of Common Stock
outstanding held of record by 30 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 87.4% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 2446
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 6,676 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock
3
<PAGE> 2447
held by a New Belk Stockholder who is a Class A Permitted Holder will also
automatically convert into New Belk Class B Common Stock in the event that such
New Belk Stockholder no longer meets the requirements of a Class A Permitted
Holder. New Belk Class B Common Stock has no conversion rights. The Company
Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving
4
<PAGE> 2448
the distribution. The Company Bylaws provide that the Board of Directors of the
Company (the "Company Board") may from time to time declare dividends on the
Company's outstanding shares in the manner and upon the terms and conditions
provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. DGCL requires that
an amendment of the certificate of incorporation of a corporation be adopted by
the board of directors and the holders of a majority of the outstanding shares
of stock entitled to vote thereon. The holders of the outstanding shares of a
class are entitled to vote as a separate class on a proposed amendment that
would increase or decrease the aggregate number of authorized shares of such
class, increase or decrease the par value of the shares of such class or alter
or change the powers, preferences or special rights of the shares of such class
so as to affect them adversely. If any proposed amendment would alter or change
the powers, preferences or special rights of one or more series of any class so
as to affect them adversely, but would not so affect the entire class, then only
the shares of the series so affected by the amendment will be considered a
separate class for purposes of voting by classes. The New Belk Certificate is
consistent with the foregoing provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the
5
<PAGE> 2449
shareholders and approved (i) by a majority (unless the articles of
incorporation, a bylaw adopted by the shareholders or the board of directors
require a greater vote or a vote by voting groups) of the votes entitled to be
cast on the amendment by any voting group with respect to which the amendment
would create dissenters' rights and (ii) when a quorum is present, by all other
voting groups entitled to vote on the amendment through casting more affirmative
than opposing votes. As under the DGCL, the holders of the outstanding shares of
a class or series are entitled to vote as a separate voting group (if
shareholder voting is otherwise required by the NCBCA) on a proposed amendment
if the amendment would change certain fundamental rights and preferences of that
class or series. The Company Articles do not specify a greater voting
requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power, nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has power, by
vote of a majority of all the directors and without the assent or vote of the
shareholders, to make, alter, amend and rescind the bylaws of the Company.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without prior notice, if all
holders of outstanding shares entitled to vote on such action sign the written
consent(s) describing such action. The Company Bylaws and Company Articles do
not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding
6
<PAGE> 2450
having the right to vote for such directors, order an election to be held to
fill any such vacancies or newly created directorships or to replace the
directors chosen by the directors then in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more than 30% during any 12-month period. The
articles of incorporation or bylaws may establish a variable range for the size
of the board of directors by fixing a minimum and maximum number of directors.
If a variable range is established, the number of directors may be fixed or
changed from time to time, within the minimum and maximum, by the shareholders
or (unless the articles of incorporation or a shareholders' agreement shall
otherwise provide) the board of directors. After shares are issued, only the
shareholders may change the range for the size of the board or change from a
fixed to a variable-range size board or vice versa. The Company Bylaws require
the Company Board to consist of at least three, but no more than 15, members.
7
<PAGE> 2451
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the
8
<PAGE> 2452
disinterested directors or committee authorized, approved or ratified the
transaction; (ii) the material facts of the transaction and the director's
interest were disclosed or known to the shareholders entitled to vote and the
disinterested shares authorized, approved or ratified the transaction; or (iii)
the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any transaction from which the director derived an improper
personal benefit or (iv) acts or omissions occurring prior to the date the
provisions became effective.
9
<PAGE> 2453
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested stockholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder,
except in certain circumstances; (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested stockholder, except
in certain circumstances; or (v) any receipt by the interested stockholder of
the benefit of any loans, advances, guarantees, pledges or other financial
benefits (other than those expressly permitted in (i) through (iv) above)
provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation
10
<PAGE> 2454
or (ii) an affiliate or associate of the corporation that within three years of
the date in question was the direct or indirect owner of at least 15% of the
voting power of any class or series of the then outstanding stock of the
corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other
11
<PAGE> 2455
books and records and to make copies or extracts therefrom. A proper purpose
means a purpose reasonably related to such person's interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any final action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates must be deposited,
(iii) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the Payment Demand is received, (iv) set a date
by which the Surviving Corporation must receive the Payment Demand, which date
may not be fewer than 30 nor more than 60 days after the date the
12
<PAGE> 2456
Dissenters' Notice is mailed and (v) be accompanied by a copy of Article 13. A
Shareholder who is sent a Dissenters' Notice and who wishes to assert
dissenters' rights must demand payment and deposit his certificates in
accordance with the terms of the Dissenters' Notice. A Shareholder who demands
payment and deposit his certificates in accordance with the terms of the
Dissenters' Notice retains all other rights of a Shareholder until these rights
are canceled or modified by the consummation and effectiveness of the Merger. A
Shareholder who does not demand payments or deposit his certificates in
accordance with the terms of the Dissenters' Notice will not be entitled to
payment for his shares under the NCBCA. If any such holder of Common Stock fails
to perfect or shall have effectively withdrawn or lost such right, each share of
such holder's Common Stock will thereupon be deemed to have been converted into
and to have become, as of the Effective Time, the right to receive, without any
interest thereon, the number of shares of New Belk Class A Common Stock such
Shareholder is otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such
13
<PAGE> 2457
Shareholder dissents and such Shareholder's other shares were registered in the
names of different shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales.................... $6,524,201 $6,524,201 0.6 $2,443,527 $1,470,993
EBITDA....................... 751,185 683,729 7 2,443,527 2,342,575
EBIT......................... 514,679 447,223 10 2,443,527 2,028,702
Net Income................... 199,606 159,776 15 -- 2,396,640
Book Equity.................. 3,075,844 1,997,848 1 -- 1,997,848
</TABLE>
14
<PAGE> 2458
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk's Department
Store of Eden,
N.C., Inc. 16.9875% X $ 3,010,826 = $ 511,464
Belk's Department
Store of Lenoir,
North Carolina,
Incorporated .8511% X 6,891,593 = 58,654
Belk of Thomasville,
N.C., Inc. 36.3496% X 1,980,347 = 719,848
-----------
Total $ 1,289,967
===========
Relative Operating Value of Company $ 2,396,640
Relative Operating Value of Other Companies Owned by Company + 1,289,967
-----------
Total Relative Value of Company = $ 3,686,607
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Brothers Company 3.6471% X $ 3,686,607 = $ 134,454
Belk Enterprises,
Inc. 55.1122% X 3,686,607 = 2,031,770
Belk's Department
Store of Boone,
North Carolina,
Incorporated 1.8703% X 3,686,607 = 68,951
Belk-Beck Company of
Burlington, North
Carolina, Inc. 2.8678 X 3,686,607 = 105,725
-----------
Total $ 2,340,899
===========
Total Relative Value of Company $ 3,686,607
Total Relative Value of Company Owned by Other Belk Companies - 2,340,899
-----------
Net Relative Value of Company = $ 1,345,707
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$1,345,707 / $1,156,226,577 = .1164%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.1164% X 59,998,834) / 2,342 = 29.8170
</TABLE>
15
<PAGE> 2459
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 2460
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 31.11
Dividends(2).............................................. 7.50
Book value per share(3)................................... 479.40
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 28.62
Dividends(2).............................................. 7.75
Book value per share...................................... 373.31
</TABLE>
- ---------------
(1) Based on 6,416 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 6,416 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
17
<PAGE> 2461
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 6,549 $ 6,382 $ 6,524
Net income.................................................. 99 94 200
Per common share
Net income (loss)(1)...................................... 15.02 14.44 31.11
Dividends................................................. 10.00 7.73 7.50
Book value(2)............................................. 459.73 466.93 479.40
Total assets................................................ 5,659 5,310 6,219
Shareholders' equity........................................ 3,040 2,996 3,076
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... 4,448 4,799
Income from operations...................................... 223 414
</TABLE>
- ---------------
(1) Based on 6,612, 6,514 and 6,416 shares of Common Stock, the weighted average
number of shares of Common Stock outstanding for the years ended January 31,
1995, February 3, 1996 and February 1, 1997, respectively.
(2) Based on 6,612, 6,416 and 6,416 shares of Common Stock outstanding as of
January 31, 1995, February 3, 1996 and February 1, 1997, respectively.
18
<PAGE> 2462
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
To the extent a discussion of the financial condition and results of
operations of the Company for any of the fiscal years ended January 31, 1995,
February 3, 1996 or February 1, 1997 or for either of the nine-month periods
ended November 2, 1996 or November 1, 1997 is necessary to identify certain
trends or conditions that differ from the combined Belk Companies and that are
material to Shareholders' understanding of the financial condition or results of
operations of the Company, such discussion is included below. The discussion
which follows is based upon and should be read in conjunction with the
historical financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus Supplement.
Income from operations increased in fiscal year 1997 due to a decreased
cost of merchandise resulting from better inventory management and lower
markdowns.
Comparable store sales increased in fiscal year 1997 and for the nine
months ended November 1, 1997 due to a successful recovery of market share that
was lost in the prior two years.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Mayberry Mall
in Mount Airy, North Carolina. The Company's store operates in a manner
consistent with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is managed out of the Huffstetler group office
in Greensboro, North Carolina.
Facilities. The Company owns the store property and building, which
contains approximately 58,000 square feet of floor area, together with an
adjacent parking area. The Company believes the building is adequate to meet its
current needs.
Competition. Specific competitors in the Company's market include
Wal-Mart, K-Mart and Penney.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 2463
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer) (a)(b)(c)..... 4,322 67.4%
Thomas M. Belk, Jr. (Director and Executive Officer)
(a)(b)(c)................................................. 4,142 64.6%
H. W. McKay Belk (Director and Executive Officer)
(a)(b)(c)................................................. 4,142 64.6%
John R. Belk (Director and Executive Officer) (a)(b)(c)..... 4,142 64.6%
Henderson Belk (Director)................................... 0 *
Sarah Belk Gambrell (Director).............................. 146 2.3%
David Belk Cannon (Director)................................ 168 2.6%
James K. Glenn, Jr. (Director) (d).......................... 128 2.0%
Leroy Robinson (Director) (a)............................... 20 *
Guy L. Byerly, Jr. (Director)............................... 700 10.9%
Belk Enterprises, Inc. ..................................... 3,536 55.1%
Pete Huffstetler (Executive Officer)........................ 0 *
Gordon J. Tendler (Executive Officer)....................... 0 *
Darrell Murphy (Executive Officer).......................... 0 *
All Directors and Executive Officers as a group (11
persons).................................................. 5,608 87.4%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk and Leroy Robinson -- 2801 West Tyvola Road, Charlotte, N.C.
28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207;
David Belk Cannon -- 1607 W. Floyd Baker Blvd., Gaffney, S.C. 29341; James K.
Glenn, Jr. -- P. O. Box 2736, Winston-Salem, N.C. 27102; Guy L. Byerly,
Jr. -- 1530 Queens Road, Charlotte, N.C. 28207; Pete Huffstetler, Darrell Murphy
and Gordon J. Tendler -- 1-104 Carolina Circle Mall, Greensboro, N.C. 27405;
Belk Enterprises, Inc. -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 20 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(b) Includes 120 shares held by Belk's Department Store of Boone, North
Carolina, Incorporated, 3,536 shares held by Belk Enterprises, Inc. and 184
shares held by Belk-Beck Company of Burlington, North Carolina, Inc., which
shares are voted by the members of the Executive Committee of the Board of
Directors of each such Corporation, under authority given by the directors
of each such Corporation at the annual meeting of directors held in March,
1997. The Executive Committee of each such Corporation consists of John M.
Belk, Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
20
<PAGE> 2464
(c) Includes 234 shares held by J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
(d) Includes 128 shares held by James K. Glenn, Jr., Trustee under Will of
Daisy Belk Mattox. Voting and investment power is vested in James K. Glenn,
Jr., the Trustee.
21
<PAGE> 2465
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 2466
BELK'S DEPARTMENT STORE OF MOUNT AIRY, NORTH CAROLINA, INCORPORATED
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 65,678 $ 106,521
Accounts receivable, net.................................. 1,114,358 1,247,839
Merchandise inventory..................................... 1,163,880 1,220,506
Deferred income taxes..................................... 13,328 12,409
Other..................................................... 56,125 51,024
---------- ----------
Total current assets........................................ 2,413,369 2,638,299
Loans receivable from affiliates, net....................... -- 718
Investments................................................. 145,522 1,077,996
Property, plant and equipment, net.......................... 2,720,111 2,489,194
Other noncurrent assets..................................... 31,022 12,987
---------- ----------
$5,310,024 $6,219,194
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current installments of long-term debt.................... $ 506,613 $ 506,672
Accounts payable and accrued expenses..................... 317,263 391,755
Payables to affiliates, net............................... 853,100 2,044,097
Accrued income taxes...................................... 25,665 88,595
---------- ----------
Total current liabilities................................... 1,702,641 3,031,119
Deferred income taxes....................................... 37,316 39,780
Long-term debt, excluding current installments.............. 506,721 --
Other noncurrent liabilities................................ 67,523 72,451
---------- ----------
Total liabilities........................................... 2,314,201 3,143,350
Shareholders' equity:
Common stock.............................................. 641,600 641,600
Additional paid in capital................................ 3,221 3,221
Retained earnings......................................... 2,351,002 2,431,023
---------- ----------
Total shareholders' equity.................................. 2,995,823 3,075,844
---------- ----------
$5,310,024 $6,219,194
========== ==========
</TABLE>
F-2
<PAGE> 2467
BELK'S DEPARTMENT STORE OF MOUNT AIRY, NORTH CAROLINA, INCORPORATED
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $6,548,985 $6,382,264 $6,524,201
Operating costs and expenses............................... 6,236,485 6,096,806 6,064,754
---------- ---------- ----------
Income from operations..................................... 312,500 285,458 459,447
---------- ---------- ----------
Other income (expense):
Interest, net............................................ (154,684) (166,923) (176,628)
Dividend income.......................................... 1,600 -- 600
Gain (loss) on disposal of property, plant and
equipment............................................. (7,230) 2,161 (98)
Miscellaneous, net....................................... (10,703) (12,399) (12,225)
---------- ---------- ----------
Total other expense, net................................... (171,017) (177,161) (188,351)
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 141,483 108,297 271,096
Income tax expense (benefit)............................... 42,195 14,220 111,024
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 99,288 94,077 160,072
Equity in earnings (loss) of unconsolidated entity, net of
tax...................................................... -- -- 39,534
---------- ---------- ----------
Net earnings............................................... 99,288 94,077 199,606
Retained earnings at beginning of period................... 2,342,172 2,375,340 2,351,002
Dividends paid............................................. (66,120) (49,590) (48,120)
Purchase of treasury stock................................. -- (68,825) --
Retained earnings adjustments.............................. -- -- (71,465)
---------- ---------- ----------
Retained earnings at end of period......................... $2,375,340 $2,351,002 $2,431,023
========== ========== ==========
</TABLE>
F-3
<PAGE> 2468
BELK'S DEPARTMENT STORE OF MOUNT AIRY, NORTH CAROLINA, INCORPORATED
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company." The Company's fiscal year ends on the Saturday closest to each
January 31. Fiscal years 1997, 1996, and 1995 ended on February 1, 1997,
February 3, 1996, and January 31, 1995 respectively.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders equity of the subsidiaries are included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholder's equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
F-4
<PAGE> 2469
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1995 and 1996 amounts have been reclassified in order to be
consistent with classifications adopted in 1997. These reclassifications have no
effect on the Company's total shareholders' equity or net earnings as previously
reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March, 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 2470
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(12) RETAINED EARNINGS ADJUSTMENT
Adjustment to Retained Earnings of the Company at February 1, 1997, relates
to the Company's portion of the retirement of stock by Hudson-Belk Company of
Thomasville, N.C.
F-6
<PAGE> 2471
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
A-1
<PAGE> 2472
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares; (ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (iv) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes; (v)
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional shares so created is to be acquired by cash under
G.S. 55-6-04; (vi) changes the corporation into a nonprofit corporation or
cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 2473
SEC.SEC. 55-13-04 TO 55-13-19. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 2474
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 2475
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 2476
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 2477
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................... $ 6,524,201 $199,606 $514,679 $751,185 $3,075,844
Adjustments to eliminate less than
wholly-owned subsidiaries................... -- -- -- -- --
----------- -------- -------- -------- ----------
Adjusted Shareholders' Statement.............. $ 6,524,201 199,606 514,679 751,185 3,075,844
=========== -------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............... 58 98 98
Gain/loss on sale of securities............. -- -- --
Impairment loss............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries.............................. (39,534) (66,954) (66,954)
Gain/loss on discontinued operations........ -- -- --
Adjustment to tax expense................... -- -- -- --
-------- -------- --------
Total non-operating items..................... (39,476) (66,856) (66,856)
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities............................. (354) (600) (600)
Adjustment for ownership in other Belk
entities.................................. (1,077,996)
-------- -------- -------- ----------
Per Model..................................... $159,776 $447,223 $683,729 $1,997,848
======== ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................... $ (106,523)
Negative cash balances reclassified to
accounts payable........................ --
Receivables from affiliates, net.......... --
Loans receivable from affiliates, net..... (718)
Liabilities
Notes payable............................. --
Current installments of long-term debt.... 506,672
Current portion of obligations under
capital leases.......................... --
Payables to affiliates, net............... 2,044,097
Long-term debt, excluding current
installments............................ --
Obligations under capital leases,
excluding current portion............... --
Loans payable to affiliates, net.......... --
-----------
Net debt (cash)............................... 2,443,528
Adjustments to eliminate less than
wholly-owned subsidiaries................... --
-----------
Per Model..................................... $ 2,443,528
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 2478
SUPPLEMENT NO. 59
<PAGE> 2479
BELK'S DEPARTMENT STORE OF MOUNT AIRY, NORTH CAROLINA, INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 10:30 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 59
<PAGE> 2480
BELK'S DEPARTMENT STORE OF NEW BERN, N.C., INCORPORATED
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk's Department Store of New Bern, N.C.,
Incorporated (the "Company"), to be held on April 16, 1998, at 10:10 a.m., local
time, at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road,
Charlotte, North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 82.0225 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 193,327 shares of New Belk Class A Common Stock which
will represent approximately 0.3222% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(60)
<PAGE> 2481
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 2482
BELK'S DEPARTMENT STORE OF NEW BERN, N.C., INCORPORATED
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK'S DEPARTMENT STORE OF NEW BERN, N.C.,
INCORPORATED:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk's Department Store of New Bern, N.C., Incorporated (the
"Company") will be held on April 16, 1998, at 10:10 a.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 82.0225 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 2483
BELK'S DEPARTMENT STORE OF NEW BERN, N.C., INCORPORATED
SUPPLEMENT NO. 60
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 60 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK'S DEPARTMENT
STORE OF NEW BERN, N.C., INCORPORATED (THE "COMPANY"), THE DISCUSSION HEREIN
SUPERSEDES THE DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE
INFORMATION CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE
IN THE REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN
THE REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY
AND THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT
BE ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL
CAPITALIZED TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE
MEANINGS SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 19
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION.................................. B-1
</TABLE>
<PAGE> 2484
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1934. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 10:10 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 82.0225 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 4,994 shares of Common Stock
outstanding held of record by 44 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 66.9% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 2485
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 6,000 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock
3
<PAGE> 2486
held by a New Belk Stockholder who is a Class A Permitted Holder will also
automatically convert into New Belk Class B Common Stock in the event that such
New Belk Stockholder no longer meets the requirements of a Class A Permitted
Holder. New Belk Class B Common Stock has no conversion rights. The Company
Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving
4
<PAGE> 2487
the distribution. The Company Bylaws provide that the Board of Directors of the
Company (the "Company Board") may from time to time declare dividends on the
Company's outstanding shares in the manner and upon the terms and conditions
provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. DGCL requires that
an amendment of the certificate of incorporation of a corporation be adopted by
the board of directors and the holders of a majority of the outstanding shares
of stock entitled to vote thereon. The holders of the outstanding shares of a
class are entitled to vote as a separate class on a proposed amendment that
would increase or decrease the aggregate number of authorized shares of such
class, increase or decrease the par value of the shares of such class or alter
or change the powers, preferences or special rights of the shares of such class
so as to affect them adversely. If any proposed amendment would alter or change
the powers, preferences or special rights of one or more series of any class so
as to affect them adversely, but would not so affect the entire class, then only
the shares of the series so affected by the amendment will be considered a
separate class for purposes of voting by classes. The New Belk Certificate is
consistent with the foregoing provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the
5
<PAGE> 2488
shareholders be approved (i) by a majority (unless the articles of
incorporation, a bylaw adopted by the shareholders or the board of directors
require a greater vote or a vote by voting groups) of the votes entitled to be
cast on the amendment by any voting group with respect to which the amendment
would create dissenters' rights and (ii) when a quorum is present, by all other
voting groups entitled to vote on the amendment through casting more affirmative
than opposing votes. As under the DGCL, the holders of the outstanding shares of
a class or series are entitled to vote as a separate voting group (if
shareholder voting is otherwise required by the NCBCA) on a proposed amendment
if the amendment would change certain fundamental rights and preferences of that
class or series. The Company Articles do not specify a greater voting
requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power, nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has power, by
vote of a majority of all the directors, and without the assent or vote of the
shareholders, to make, alter, amend and rescind the bylaws of the Company.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without prior notice, if all
holders of outstanding shares entitled to vote on such action sign the written
consent(s) describing such action. The Company Bylaws and Company Articles do
not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding
6
<PAGE> 2489
having the right to vote for such directors, order an election to be held to
fill any such vacancies or newly created directorships or to replace the
directors chosen by the directors then in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more than 30% during any 12-month period. The
articles of incorporation or bylaws may establish a variable range for the size
of the board of directors by fixing a minimum and maximum number of directors.
If a variable range is established, the number of directors may be fixed or
changed from time to time, within the minimum and maximum, by the shareholders
or (unless the articles of incorporation or a shareholders' agreement shall
otherwise provide) the board of directors. After shares are issued, only the
shareholders may change the range for the size of the board or change from a
fixed to a variable-range size board or vice versa. The Company Bylaws require
the Company Board to consist of at least three, but no more than 15, members.
7
<PAGE> 2490
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the
8
<PAGE> 2491
disinterested directors or committee authorized, approved or ratified the
transaction; (ii) the material facts of the transaction and the director's
interest were disclosed or known to the shareholders entitled to vote and the
disinterested shares authorized, approved or ratified the transaction; or (iii)
the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any transaction from which the director derived an improper
personal benefit or (iv) acts or omissions occurring prior to the date the
provisions became effective.
9
<PAGE> 2492
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested stockholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder,
except in certain circumstances; (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested stockholder, except
in certain circumstances; or (v) any receipt by the interested stockholder of
the benefit of any loans, advances, guarantees, pledges or other financial
benefits (other than those expressly permitted in (i) through (iv) above)
provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation
10
<PAGE> 2493
or (ii) an affiliate or associate of the corporation that within three years of
the date in question was the direct or indirect owner of at least 15% of the
voting power of any class or series of the then outstanding stock of the
corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other
11
<PAGE> 2494
books and records and to make copies or extracts therefrom. A proper purpose
means a purpose reasonably related to such person's interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any final action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates must be deposited,
(iii) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the Payment Demand is received, (iv) set a date
by which the Surviving Corporation must receive the Payment Demand, which date
may not be fewer than 30 nor more than 60 days after the date the
12
<PAGE> 2495
Dissenters' Notice is mailed and (v) be accompanied by a copy of Article 13. A
Shareholder who is sent a Dissenters' Notice and who wishes to assert
dissenters' rights must demand payment and deposit his certificates in
accordance with the terms of the Dissenters' Notice. A Shareholder who demands
payment and deposit his certificates in accordance with the terms of the
Dissenters' Notice retains all other rights of a Shareholder until these rights
are canceled or modified by the consummation and effectiveness of the Merger. A
Shareholder who does not demand payments or deposit his certificates in
accordance with the terms of the Dissenters' Notice will not be entitled to
payment for his shares under the NCBCA. If any such holder of Common Stock fails
to perfect or shall have effectively withdrawn or lost such right, each share of
such holder's Common Stock will thereupon be deemed to have been converted into
and to have become, as of the Effective Time, the right to receive, without any
interest thereon, the number of shares of New Belk Class A Common Stock such
Shareholder is otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such
13
<PAGE> 2496
Shareholder dissents and such Shareholder's other shares were registered in the
names of different shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ----------- ----------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales.................. $11,153,974 $11,153,974 0.6 $1,902,755 $4,789,629
EBITDA..................... 1,293,640 1,292,540 7 1,902,755 7,145,025
EBIT....................... 959,675 958,575 10 1,902,755 7,682,995
Net Income................. 472,349 471,673 15 -- 7,075,095
Book Equity................ 3,708,611 3,678,878 1 -- 3,678,878
</TABLE>
14
<PAGE> 2497
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk's Department
Store of Asheville,
North Carolina,
Incorporated .5917% X $ 8,096,519 = $ 47,907
Belk's Department
Store of
Jacksonville, N.C.,
Inc. .5453 X 29,859,959 = 162,826
-----------
Total $ 210,733
===========
Relative Operating Value of Company $ 7,682,995
Relative Operating Value of Other Companies Owned by Company + 210,733
-----------
Total Relative Value of Company = $ 7,893,728
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk's Department
Store of Asheville,
North Carolina,
Incorporated 1.7221% X $ 7,893,728 = $ 135,938
Belk Brothers Company 21.706 X 7,893,728 = 1,713,413
Belk Enterprises,
Inc. 17.1406 X 7,893,728 = 1,353,032
Belk Department Store
of Greenville,
N.C., Inc. 10.6728 X 7,893,728 = 842,482
Belk's Department
Store of
Jacksonville, N.C.,
Inc. .4806 X 7,893,728 = 37,937
Belk's Department
Store of Morehead
City, N.C., Inc. 1.0813 X 7,893,728 = 85,355
-----------
Total $ 4,168,157
===========
Total Relative Value of Company $ 7,893,728
Total Relative Value of Company Owned by Other Belk Companies - 4,168,157
-----------
Net Relative Value of Company = $ 3,725,571
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 3,725,571 / $1,156,226,577 = .3222%
</TABLE>
15
<PAGE> 2498
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.3222% X 59,998,834) / 2,357 = 82.0225
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 2499
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 94.58
Dividends(2).............................................. 25.00
Book value per share(3)................................... 742.61
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 78.74
Dividends(2).............................................. 21.33
Book value per share...................................... 1,026.92
</TABLE>
- ---------------
(1) Based on 4,994 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 4,994 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
17
<PAGE> 2500
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $9,838 $10,284 $11,154
Net income.................................................. 481 368 472
Per common share
Net income (loss)(1)...................................... 96.35 73.78 94.58
Dividends................................................. 20.00 25.00 25.00
Book value(2)............................................. 624.25 673.03 742.61
Total assets................................................ 5,054 6,656 6,672
Shareholders' equity........................................ 3,117 3,361 3,709
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $7,701 $7,845
Income from operations...................................... 526 635
</TABLE>
- ---------------
(1) Based on 4,994 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 4,994 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 2501
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Twin Rivers
Mall in New Bern, North Carolina. The Company's store operates in a manner
consistent with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is managed out of the Nipper group office in
Summerville, South Carolina.
Facilities. The Company owns the store property and building, which
contains approximately 82,000 square feet of floor area, together with an
adjacent parking area. The Company believes the store building is adequate to
meet its current needs.
Competition. Specific competitors in the Company's market include Sears,
Penney, Target, Goody's and Wal-Mart.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 2502
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d).............................................. 2,915 58.4%
Thomas M. Belk, Jr. (Director and Executive Officer)
(c)(d)(e)................................................. 2,779 55.6%
H. W. McKay Belk (Director and Executive Officer)
(c)(d)(f)................................................. 2,677 53.6%
John R. Belk (Director) (c)(d)(g)........................... 2,721 54.5%
Henderson Belk (Director) (b)............................... 2 *
Sarah Belk Gambrell (b)..................................... 275 5.5%
Leroy Robinson (Director)................................... 0 *
W. B. Beery, III (Director)................................. 0 *
Elizabeth K. Baker.......................................... 316 6.3%
William B. Beery, IV (h).................................... 376 7.5%
Martha B. Dineen (h)........................................ 376 7.5%
Katherine E. Beery (h)...................................... 376 7.5%
Thomas A. Nipper (Executive Officer)........................ 0 *
Lars Petersen (Executive Officer)........................... 0 *
Bob Webster (Executive Officer)............................. 0 *
Belk Department Store of Greenville, N.C., Inc. ............ 533 10.7%
Belk Enterprises, Inc. ..................................... 856 17.1%
J.V. Properties............................................. 1,084 21.7%
All Directors and Executive Officers as a group (8
persons).................................................. 3,341 66.9%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk and Leroy Robinson -- 2801 West Tyvola Road, Charlotte, N.C.
28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207; W.
B. Beery, III, William B. Beery, IV, Martha B. Dineen and Katherine E.
Beery -- 1919 Brookhaven Road, Wilmington, N.C. 28403; Elizabeth K.
Baker, -- P.O. Box 1133, New Bern, N.C. 28560; Thomas A. Nipper, Lars Petersen,
Bob Webster -- 200 Marymeade Drive, Summerville, S.C. 29483; Belk Department
Store of Greenville, N.C., Inc., Belk Enterprises, Inc. and J.V.
Properties -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 160 shares held by Montgomery Investment Company, of which John M.
Belk is the majority shareholder.
(b) Includes 2 shares held in several Trusts established by the Will of Mary I.
Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power
20
<PAGE> 2503
of the trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson Belk
is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H. Belk,
Jr. and Irwin Belk.
(c) Includes 86 shares held by Belk's Department Store of Asheville, North
Carolina, Incorporated, 533 shares held by Belk Department Store of
Greenville, N.C., Inc., 856 shares held by Belk Enterprises, Inc., 24
shares held by Belk's Department Store of Jacksonville, N.C., Inc. and 54
shares held by Belk's Department Store of Morehead City, N.C., Inc., which
shares are voted by the members of the Executive Committee of the Board of
Directors of each such Corporation, under authority given by the directors
of each such Corporation at the annual meeting of directors held in March,
1997. The Executive Committee of each such Corporation consists of John M.
Belk, Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(d) Includes 1,084 shares held by J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
(e) Includes 8 shares held by Thomas M. Belk, Jr. as custodian for his minor
children and 64 shares held as custodian for the minor children of his
brother, H. W. McKay Belk.
(f) Includes 24 shares held by H. W. McKay Belk as custodian for his minor
children.
(g) Includes 8 shares held by John R. Belk as custodian for his minor children.
(h) Represented by shares held by William B. Beery, III and Martha B. Beery
Irrevocable Trust. The Trustees, William B. Beery, IV, Martha B. Dineen and
Katherine E. Beery, have voting and investment power with respect to such
shares.
21
<PAGE> 2504
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 2505
BELK'S DEPARTMENT STORE OF NEW BERN, N.C., INCORPORATED
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 90,094 $ 94,650
Accounts receivable, net.................................. 1,529,280 1,847,030
Merchandise inventory..................................... 1,850,098 1,894,968
Deferred income taxes..................................... 17,634 --
Other..................................................... 73,234 77,342
---------- ----------
Total current assets........................................ 3,560,340 3,913,990
Investments................................................. 29,733 29,733
Property, plant and equipment, net.......................... 3,023,896 2,692,292
Other noncurrent assets..................................... 42,163 35,711
---------- ----------
$6,656,132 $6,671,726
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable............................................. $1,000,000 $1,000,000
Current installments of long-term debt.................... 150,000 200,000
Accounts payable and accrued expenses..................... 599,234 750,436
Payables to affiliates, net............................... 514,826 147,079
Deferred income taxes..................................... -- 5,016
Accrued income taxes...................................... 73,775 67,278
---------- ----------
Total current liabilities................................... 2,337,835 2,169,809
Deferred income taxes....................................... 58,148 85,121
Long-term debt, excluding current installments.............. 850,000 650,000
Other noncurrent liabilities................................ 49,037 58,185
---------- ----------
Total liabilities........................................... 3,295,020 2,963,115
Shareholders' equity:
Common stock.............................................. 499,400 499,400
Retained earnings......................................... 2,861,712 3,209,211
---------- ----------
Total shareholders' equity.................................. 3,361,112 3,708,611
---------- ----------
$6,656,132 $6,671,726
========== ==========
</TABLE>
F-2
<PAGE> 2506
BELK'S DEPARTMENT STORE OF NEW BERN, N.C., INCORPORATED
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 7,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.............................................. $9,838,174 $10,284,340 $11,153,974
Operating costs and expenses........................... 8,944,350 9,502,749 10,195,391
---------- ----------- -----------
Income from operations................................. 893,824 781,591 958,583
---------- ----------- -----------
Other income (expense):
Interest, net........................................ (100,437) (170,112) (190,851)
Dividend income...................................... -- -- 600
Gain (loss) on disposal of property, plant and
equipment......................................... 4,036 -- 500
Miscellaneous, net................................... (8,783) (5,771) (9)
---------- ----------- -----------
Total other expense, net............................... (105,184) (175,883) (189,760)
---------- ----------- -----------
Earnings from continuing operations before income
taxes, and equity in earnings of unconsolidated
entities............................................. 788,640 605,708 768,823
Income tax expense (benefit)........................... 307,468 237,228 296,474
---------- ----------- -----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities.................. 481,172 368,480 472,349
---------- ----------- -----------
Net earnings........................................... 481,172 368,480 472,349
Retained earnings at beginning of period............... 2,236,790 2,618,082 2,861,712
Dividends paid......................................... (99,880) (124,850) (124,850)
---------- ----------- -----------
Retained earnings at end of period..................... $2,618,082 $ 2,861,712 $ 3,209,211
========== =========== ===========
</TABLE>
F-3
<PAGE> 2507
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 2508
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 2509
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13.
DISSENTERS' RIGHTS.
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
A-1
<PAGE> 2510
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares; (ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (iv) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes; (v)
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional shares so created is to be acquired by cash under
G.S. 55-6-04; (vi) changes the corporation into a nonprofit corporation or
cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 2511
SEC.SEC. 55-13-04 TO 55-13-19. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 2512
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 2513
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 2514
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 2515
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................... $11,153,974 $472,349 $959,675 $1,293,640 $3,708,611
Adjustments to eliminate less than
wholly-owned subsidiaries................... -- -- -- -- --
----------- -------- -------- ---------- ----------
Adjusted Shareholders' Statement.............. $11,153,974 472,349 959,675 1,293,640 3,708,611
=========== -------- -------- ---------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............... (306) (499) (499)
Gain/loss on sale of securities............. -- -- --
Impairment loss............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries.............................. -- -- --
Gain/loss on discontinued operations........ -- -- --
Adjustment to tax expense................... -- -- -- --
-------- -------- ----------
Total non-operating items..................... (306) (499) (499)
-------- -------- ----------
Other Adjustments:
Adjustment for dividends received from other
Belk entities............................. (369) (600) (600)
Adjustment for ownership in other Belk
entities.................................. (29,733)
-------- -------- ---------- ----------
Per Model..................................... $471,673 $958,575 $1,292,540 $3,678,878
======== ======== ========== ==========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................... $ (94,650)
Negative cash balances reclassified to
accounts payable........................ 326
Receivables from affiliates, net.......... --
Loans receivable from affiliates, net..... --
Liabilities
Notes payable............................. 1,000,000
Current installments of long-term debt.... 200,000
Current portion of obligations under
capital leases.......................... --
Payables to affiliates, net............... 147,079
Long-term debt, excluding current
installments............................ 650,000
Obligations under capital leases,
excluding current portion............... --
Loans payable to affiliates, net.......... --
-----------
Net debt (cash)............................... 1,902,755
Adjustments to eliminate less than
wholly-owned subsidiaries................... --
-----------
Per Model..................................... $ 1,902,755
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 2516
SUPPLEMENT NO. 60
<PAGE> 2517
BELK'S DEPARTMENT STORE OF NEW BERN, N.C., INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 10:10 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 60
<PAGE> 2518
HUDSON-BELK COMPANY
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Hudson-Belk Company (the "Company"), to be held
on April 16, 1998, at 11:30 a.m., local time, at the offices of Belk Stores
Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 37.2679 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 2,859,305 shares of New Belk Class A Common Stock which
will represent approximately 4.7656% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage paid
(61)
<PAGE> 2519
envelope. If you plan to attend the Special Meeting, you may vote in person if
you wish, even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 2520
HUDSON-BELK COMPANY
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF HUDSON-BELK COMPANY:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Hudson-Belk Company (the "Company") will be held on April 16, 1998,
at 11:30 a.m., local time, at the offices of Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, for the following
purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 37.2679 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 2521
HUDSON-BELK COMPANY
SUPPLEMENT NO. 61
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 61 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO HUDSON-BELK COMPANY
(THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE DISCUSSION IN THE PROXY
STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED HEREIN ASSUMES THAT ALL
OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION. IF ANY ONE OR MORE BELK
COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE INFORMATION CONTAINED
HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE REORGANIZATION ON THE
COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE "RISK FACTORS" IN THE
PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED HEREIN WHICH ARE NOT
OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE PROXY
STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
General................................................... 19
Results of Operations..................................... 19
Comparison of Nine Months Ended November 1, 1997 and
November 2, 1996........................................ 19
Comparison of Fiscal Years Ended February 1, 1997 and
February 3, 1996........................................ 20
Comparison of Fiscal Years Ended February 3, 1996 and
January 31, 1995........................................ 20
Seasonality and Quarterly Fluctuations.................... 21
Liquidity and Capital Resources........................... 21
Impact of Inflation....................................... 22
BUSINESS OF THE COMPANY..................................... 22
SECURITY OWNERSHIP OF THE COMPANY........................... 24
INDEX TO HISTORICAL FINANCIAL STATEMENTS.................... F-1
Report of KPMG Peat Marwick LLP, Independent Auditors..... F-2
Balance Sheets............................................ F-3
Statements of Income...................................... F-4
Statements of Shareholders' Equity........................ F-5
Statements of Cash Flows.................................. F-6
Notes to Consolidated Financial Statements................ F-7
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION.................................... B-1
</TABLE>
<PAGE> 2522
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1915. The
Company changed its name from Hudson-Belk-Leggett Company to Hudson-Belk Company
on June 13, 1997. The mailing address of the Company's principal executive
offices is 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500, and its
telephone number at that address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 11:30 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 37.2679 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 98,980 shares of Common Stock
outstanding held of record by 138 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 57.5% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock
2
<PAGE> 2523
vote in favor of the Merger, the vote of such persons, corporations and trusts
in favor of the Merger would be sufficient to approve the Merger under the
governing documents of the Company and applicable state law.
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 100,000 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be
3
<PAGE> 2524
converted automatically into a share of New Belk Class B Common Stock. Shares of
New Belk Class A Common Stock are convertible into New Belk Class B Common
Stock, in whole or in part, at any time and from time to time at the option of
the holder, on the basis of one share of New Belk Class B Common Stock for each
share of New Belk Class A Common Stock converted. Shares of New Belk Class A
Common Stock held by a New Belk Stockholder who is a Class A Permitted Holder
will also automatically convert into New Belk Class B Common Stock in the event
that such New Belk Stockholder no longer meets the requirements of a Class A
Permitted Holder. New Belk Class B Common Stock has no conversion rights. The
Company Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay
4
<PAGE> 2525
its debts as they come due in the usual course of business or (ii) the
corporation's total assets to be less than the sum of its total liabilities plus
(unless the articles of incorporation permit otherwise) the amount that would be
needed, if the corporation were to be dissolved at the time of the payment of
the dividend, to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to those receiving the
distribution. The Company Bylaws provide that the Board of Directors of the
Company (the "Company Board") may from time to time declare dividends on the
Company's outstanding shares in the manner and upon the terms and conditions
provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. The DGCL requires
that an amendment of the certificate of incorporation of a corporation be
adopted by the board of directors and the holders of a majority of the
outstanding shares of stock entitled to vote thereon. The holders of the
outstanding shares of a class are entitled to vote as a separate class on a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely. If any
proposed amendment would alter or change the powers, preferences or special
rights of one or more series of any class so as to affect them adversely, but
would not so affect the entire class, then only the shares of the series so
affected by the amendment will be considered a separate class for purposes of
voting by classes. The New Belk Certificate is consistent with the foregoing
provisions of the DGCL.
5
<PAGE> 2526
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the shareholders and approved (i) by a majority
(unless the articles of incorporation, a bylaw adopted by the shareholders or
the board of directors require a greater vote or a vote by voting groups) of the
votes entitled to be cast on the amendment by any voting group with respect to
which the amendment would create dissenters' rights and (ii) when a quorum is
present, by all other voting groups entitled to vote on the amendment through
casting more affirmative than opposing votes. As under the DGCL, the holders of
the outstanding shares of a class or one or more series are entitled to vote as
a separate voting group (if shareholder voting is otherwise required by the
NCBCA) on a proposed amendment if the amendment would change certain fundamental
rights and preferences of that class or series. The Company Articles do not
specify a greater voting requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power, nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has power, by
vote of a majority of all the directors, and without the assent or vote of the
shareholders, to make, alter, amend and rescind the bylaws of the Company.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without prior notice, if all
holders of outstanding shares entitled to vote on such action sign the written
consent(s) describing such action. The Company Bylaws and Company Articles do
not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be
6
<PAGE> 2527
filled by a majority of the directors then in office, although less than a
quorum, or by a sole remaining director. If at the time of filling any vacancy
or newly created directorship, the directors then in office constitute less than
a majority of the whole board as constituted immediately prior to such increase,
the Delaware Court of Chancery may, upon application of stockholders holding at
least 10% of the total number of shares outstanding having the right to vote for
such directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more than 30% during any 12-month period. The
articles of incorporation or bylaws may establish a variable range for the size
of the board of directors by fixing a minimum and maximum number of directors.
If a variable range is established, the number of directors may be fixed or
changed from time to time, within the minimum and maximum, by the shareholders
or (unless the articles of incorporation or a shareholders' agreement shall
7
<PAGE> 2528
otherwise provide) the board of directors. After shares are issued, only the
shareholders may change the range for the size of the board or change from a
fixed to a variable-range size board or vice versa. The Company Bylaws require
the Company Board to consist of at least three, but no more than 15, members.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificates divides the directors of New Belk into three
classes, designated Class 1, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
8
<PAGE> 2529
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the disinterested directors or committee authorized, approved or
ratified the transaction; (ii) the material facts of the transaction and the
director's interest were disclosed or known to the shareholders entitled to vote
and the disinterested shares authorized, approved or ratified the transaction;
or (iii) the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly
9
<PAGE> 2530
in conflict with the best interests of the corporation, (ii) any liability under
unlawful distributions, (iii) any transaction from which the director derived an
improper personal benefit or (iv) acts or omissions occurring prior to the date
the provisions became effective.
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested shareholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder,
except in certain circumstances; (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested stockholder, except
in certain circumstances; or (v) any receipt by the interested stockholder of
the benefit of any loans, advances,
10
<PAGE> 2531
guarantees, pledges or other financial benefits (other than those expressly
permitted in (i) through (iv) above) provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) an
affiliate or associate of the corporation who within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
11
<PAGE> 2532
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) and the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any final action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholder's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholder's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates
12
<PAGE> 2533
must be deposited, (iii) inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the Payment Demand is received,
(iv) set a date by which the Surviving Corporation must receive the Payment
Demand, which date may not be fewer than 30 nor more than 60 days after the date
the Dissenters' Notice is mailed and (v) be accompanied by a copy of Article 13.
A Shareholder who is sent a Dissenters' Notice and who wishes to assert
dissenters' rights must demand payment and deposits his certificates in
accordance with the terms of the Dissenters' Notice. A Shareholder who demands
payment and deposit his certificates in accordance with the terms of the
Dissenters' Notice retains all other rights of a Shareholder until these rights
are canceled or modified by the consummation and effectiveness of the Merger. A
Shareholder who does not demand payments or deposit his certificates in
accordance with the terms of the Dissenters' Notice will not be entitled to
payment for his shares under the NCBCA. If any such holder of Common Stock fails
to perfect or shall have effectively withdrawn or lost such right, each share of
such holder's Common Stock will thereupon be deemed to have been converted into
and to have become, as of the Effective Time, the right to receive, without any
interest thereon, the number of shares of New Belk Class A Common Stock such
Shareholder is otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
13
<PAGE> 2534
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such Shareholder dissents and such
Shareholder's other shares were registered in the names of different
shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
14
<PAGE> 2535
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ------------ ------------ -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales................ $124,211,976 $124,211,976 0.6 $5,400,591 $69,126,595
EBITDA................... 9,831,574 9,816,838 7 5,400,591 63,317,275
EBIT..................... 7,025,850 7,011,114 10 5,400,591 64,710,549
Net Income............... 3,746,222 3,736,899 15 -- 56,053,485
Book Equity.............. 55,012,725 52,584,656 1 -- 52,584,656
</TABLE>
15
<PAGE> 2536
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk's Department
Store of Albany,
Georgia .1667% X $ 6,361,249 = $ 10,604
Belk of Miss., Inc. .1634 X 19,360,988 = 31,636
Belk of Danville,
Va., Inc. .3595 X 16,469,104 = 59,206
Hudson-Belk Co. of
Fuquay -- Varina,
N.C., Inc. .5898 X 5,660,048 = 33,383
Tags Stores, LLC 12.0670 X 15,118,749 = 1,824,379
-----------
Total $ 1,959,209
===========
Relative Operating Value of Company $69,126,595
Relative Operating Value of Other Companies Owned by Company + 1,959,209
-----------
Total Relative Value of Company = $71,085,804
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Brothers Company 9.8545% X $71,085,804 = $ 7,005,151
Belk Enterprises,
Inc. 11.7731 X 71,085,804 = 8,369,003
Matthews-Belk Company .1344 X 71,085,804 = 95,539
Belk of Orangeburg,
S.C., Inc. .7042 X 71,085,804 = 500,586
Hudson-Belk Co, of
Fuquay -- Varina,
N.C., Inc. .0202 X 71,085,804 = 14,359
-----------
Total $15,984,638
===========
Total Relative Value of Company $71,085,804
Total Relative Value of Company Owned by Other Belk Companies - 15,984,638
-----------
Net Relative Value of Company = $55,101,166
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$55,101,166 / $1,156,226,577 = 4.7656%
</TABLE>
16
<PAGE> 2537
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(4.7656% X 59,998,834) / 76,723 = 37.2679
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
17
<PAGE> 2538
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share, and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the notes thereto, contained elsewhere in this Prospectus Supplement and
unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS
ENDED FEBRUARY 1, ENDED NOVEMBER 1,
1997 1997
----------------- -----------------
<S> <C> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 37.85 $ 17.37
Dividends(2).............................................. 12.00 12.00
Book value per share(3)................................... 555.80 561.17
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96 0.29
Dividends(2).............................................. 0.26 0.22
Book value per share(5)................................... 12.52 12.65
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 35.78 10.63
Dividends(2).............................................. 9.69 8.27
Book value per share...................................... 466.59 471.33
</TABLE>
- ---------------
(1) Based on 98,980 shares of Common Stock, the weighted average number of
shares of Common Stock outstanding during the year ended February 1, 1997
and the nine-month period ended November 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 98,980 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the periods presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying the New Belk pro forma combined book value per share and New
Belk pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
18
<PAGE> 2539
SELECTED HISTORICAL FINANCIAL INFORMATION
The following selected historical financial information of the Company
presented below under the captions "Selected Statement of Income Data" and
"Selected Balance Sheet Data" for, and as of the end of, each of the years in
the five-year period ended February 1, 1997 are derived from the financial
statements of the Company. The financial statements as of February 1, 1997 and
for the year then ended have been audited by KPMG Peat Marwick LLP, independent
certified public accountants. Such financial statements, and the report thereon,
are included elsewhere in this Prospectus Supplement. The selected data
presented below for, and as of the end of, each of the years in the four-year
period ended February 3, 1996 and for the nine-month periods ended November 2,
1996 and November 1, 1997, and as of November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited data reflects, in the
judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
The information presented below under the caption "Selected Operating Data" is
unaudited.
Selected historical combined and pro forma financial data for the Belk
Companies is included in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
------------------------------------------------------------------- -------------------------
FEBRUARY 2, FEBRUARY 1, JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1993 1994 1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED STATEMENT OF INCOME
Revenues...................... 122,390,054 125,017,407 127,943,752 125,517,063 126,554,654 86,172,090 88,428,807
Cost of goods sold............ 84,601,397 85,946,863 86,467,184 85,238,903 86,988,508 59,406,094 60,528,460
Depreciation and
amortization................ 2,798,477 2,731,868 2,824,673 3,112,952 2,805,724 2,145,274 1,963,414
Net income.................... 3,736,150 5,179,096 4,866,474 3,219,484 3,746,222 1,522,322 1,719,473
Net income per share(1)....... 37.75 52.32 49.17 32.53 37.85 15.38 17.37
Dividends per share........... 10.00 10.00 11.00 12.00 12.00 12.00 12.00
Weighted average number of
shares outstanding.......... 98,980 98,980 98,980 98,980 98,980 98,980 98,980
SELECTED BALANCE SHEET DATA:
Accounts receivable -- net.... 21,188,696 20,720,877 19,820,146 19,766,701 21,232,909 20,186,663 20,946,860
Merchandise inventories....... 23,953,158 25,484,308 23,267,802 27,504,793 26,970,504 33,927,159 34,944,598
Working capital............... 40,099,809 43,050,612 42,836,859 34,655,080 38,178,996 33,386,246 37,756,495
Total assets.................. 79,090,649 81,837,804 80,240,550 78,806,027 78,847,101 84,703,643 85,918,662
Short-term debt............... -- -- -- 4,300,000 3,250,000 9,500,000 7,000,000
Long-term debt................ 21,662,434 18,721,736 13,401,615 7,053,256 4,753,252 5,328,253 4,561,585
Capitalized lease
obligations................. -- -- -- -- -- -- --
Shareholders' equity.......... 42,455,550 46,644,846 50,425,004 52,454,263 55,012,725 52,788,825 55,544,438
Book value per share(2)....... 428.93 471.26 509.45 529.95 555.80 533.33 561.17
SELECTED OPERATING DATA:
Number of stores at end of
period...................... 6 6 6 8 7 7 7
Comparable store net revenue
increases (decreases)....... 0.4% 5.0% 2.8% (6.5)% 2.9% 0.6% 4.2%
</TABLE>
- ---------------
(1) Based on the weighted average number of shares of Common Stock outstanding
for each period presented.
(2) Based on the number of shares of Common Stock outstanding at the end of each
period presented.
19
<PAGE> 2540
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is a discussion of the historical financial condition and
results of operations of the Hudson-Belk Company for each of the fiscal years
ended January 31, 1995, February 3, 1996 and February 1, 1997 and for each of
the nine-month periods ended November 2, 1996 and November 1, 1997 which should
be read in conjunction with the historical financial statements, including the
notes thereto, included elsewhere in this Proxy Statement/Prospectus.
GENERAL
Certain Components of Net Income. Revenues include sales from retail
operations and leased departments. Cost of goods sold include cost of
merchandise, buying, and occupancy expense. Selling, general, and administrative
expense ("SG&A") includes payroll, advertising, credit, and depreciation
expense.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship to revenues of certain items in the Hudson-Belk Company's
statements of income and other pertinent financial data.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
--------------------------------------- -------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995(A) 1996(A) 1997(A) 1996 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues.................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold.......................... 67.6 67.9 68.7 68.9 68.4
Selling, general and administrative
expenses.................................. 25.5 27.2 25.8 27.4 26.5
Income from operations...................... 7.0 4.9 5.5 3.6 5.1
Interest expense, net....................... 0.8 0.8 0.9 0.9 0.7
Income taxes................................ 2.4 1.5 1.7 1.0 1.1
Net income.................................. 3.8 2.6 3.0 1.8 1.9
Comparable stores revenues increase
(decrease)................................ 2.8 (6.5) 2.9 0.6 4.2
Number of stores
Opened.................................... 1 2 0 0 0
Closed.................................... 1 0 0 0 0
Transferred to an affiliate............... 0 0 1 1 0
Total -- end of period...................... 6 8 7 7 7
</TABLE>
- ---------------
(a) The fiscal years ended February 1, 1997 and January 31, 1995 consisted of 52
weeks. The fiscal year ended February 3, 1996 consisted of 368 days.
COMPARISON OF NINE MONTHS ENDED NOVEMBER 1, 1997 AND NOVEMBER 2, 1996
Revenues. The Hudson-Belk Company's revenues for the nine months ended
November 1, 1997 increased 2.6% or $2.2 million compared to the same period in
1996 from $86.2 million to $88.4 million. The increase was primarily
attributable to a large increase in revenues at the newly remodeled Raleigh,
North Carolina Crabtree Mall store of $1.9 million.
Cost of Goods Sold. As a percentage of revenues, cost of goods sold
decreased from 68.9% for the nine months ended November 2, 1996 to 68.4% for the
nine months ended November 1, 1997. Cost of merchandise decreases were
experienced due to better inventory management and lower markdowns. Cost of
goods sold increased 1.9%, or $1.1 million, from $59.4 million for the nine
months ended November 2, 1996 to $60.5 million for the nine months ended
November 1, 1997 primarily due to an increase in revenues.
Selling, General, and Administrative Expenses. As a percentage of
revenues, SG&A decreased from 27.4% for the nine months ended November 2, 1996
to 26.5% for the nine months ended November 1, 1997. SG&A decreased 1.0%, or
$0.2 million, for the nine months ended ended November 1, 1997 as compared to
20
<PAGE> 2541
the nine months ended November 2, 1996. The Garner Outlet store, which was
transferred to an affiliate, contributed $0.5 million in SG&A expense for the
nine months ended November 2, 1996. Excluding the impact of the Garner Outlet,
SG&A increased 1.3% or $0.3 million. The increase was attributable to increases
in payroll and bad debt expense, net. These increases were partially offset by a
decrease in depreciation expense.
Interest Expense, Net. Interest expense, net decreased 15.4%, or $0.1
million, from $0.8 million for the nine months ended November 2, 1996 to $0.7
million for the nine months ended November 1, 1997. This decrease resulted from
a decrease in average outstanding borrowings.
Net Income. Net income increased $0.2 million to 1.9% of revenues for the
nine months ended November 1, 1997 compared to 1.8% of revenues for the nine
months ended November 2, 1996. The increase was attributable to a decrease in
cost of goods sold and SG&A , as a percentage of revenues, of 0.5% and 0.9%,
respectively, which was offset by a loss on investment of $1.3 million
recognized during the nine months ended November 1, 1997.
COMPARISON OF FISCAL YEARS ENDED FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
Revenues. The Hudson-Belk Company's revenues in fiscal year 1997 increased
0.8% or $1.1 million over fiscal year 1996 from $125.5 million to $126.6
million. On a comparable store basis, revenues increased 2.9% compared to the
first 52 weeks of fiscal year 1996. The increase was slightly offset by a
revenues decrease associated with the transfer of the net assets of the Garner
Outlet Center in July, 1996 to an affiliated entity.
Cost of Goods Sold. As a percentage of revenues, cost of goods sold
increased from 67.9% in fiscal year 1996 to 68.7% in fiscal year 1997 primarily
due to merchandise increases resulting from higher markdowns. Cost of goods sold
increased 2.1%, or $1.8 million, from $85.2 million in fiscal year 1996 to $87.0
million in fiscal year 1997 primarily due to an increase in revenues,
accompanied by high merchandise costs, resulting from markdowns, at the Durham,
Northgate store.
Selling, General, and Administrative Expenses. SG&A decreased from 27.2%
of revenues in fiscal year 1996 to 25.8% of revenues in fiscal year 1997. Such
decrease, which amounted to $1.5 million, was attributable primarily to
decreases in non-selling payroll expense realized through efficiencies
implemented in the retail department stores and advertising expense.
Interest Expense, Net. Interest expense, net, remained constant at $1.0
million and $1.1 million in fiscal years 1996 and 1997, respectively.
Net Income. Net income increased $0.5 million to 3.0% of revenues in
fiscal year 1997 compared to 2.6% of revenues in fiscal year 1996.
COMPARISON OF FISCAL YEARS ENDED FEBRUARY 3, 1996 AND JANUARY 31, 1995
Revenues. The Hudson-Belk Company's revenues decreased 1.9%, or $2.4
million, from $127.9 million in fiscal year 1995 to $125.5 million in fiscal
year 1996. The decrease in revenues experienced in fiscal year 1996 was
primarily due to the closing of the Raleigh Downtown store, which resulted in a
revenue decrease of $6.5 million. This decrease was slightly offset by an
increase in revenues at the new Durham, North Carolina Northgate Mall store.
Adjusting for the impact of the additional days in fiscal year 1996, comparable
stores revenues decreased 6.5% largely because of a decrease in revenues at the
Durham South Square store, resulting from the opening of the Durham Northgate
Mall store in the same market.
Cost of Goods Sold. As a percentage of revenues, cost of goods sold
increased from 67.6% in fiscal year 1995 to 67.9% in fiscal year 1996. Cost of
goods sold decreased 1.4%, or $1.3 million, from $86.5 million in fiscal year
1995 to $85.2 million in fiscal year 1996 primarily due to a decrease in
revenues.
Selling, General, and Administrative Expenses. SG&A increased 4.7%, or
$1.5 million, from 25.5% of revenues in fiscal year 1995 to 27.2% of revenues in
fiscal year 1996. Such increase was primarily attributable to increases in
advertising, depreciation, and credit expense.
21
<PAGE> 2542
Interest Expense, Net. Interest expense, net was $1.0 million and 0.8% of
revenues in fiscal years 1995 and 1996.
Net Income. Net income decreased $1.6 million to 2.6% of revenues in
fiscal year 1996 compared to 3.8% of revenues in fiscal year 1995.
SEASONALITY AND QUARTERLY FLUCTUATIONS
The Company has historically experienced and expects to continue to
experience seasonal fluctuations in its revenues, operating income and net
income. The highest revenue period for the Company is the fourth quarter which
includes the Christmas selling season. A disproportionate amount of the
Company's revenues and a substantial amount of the Company's operating and net
income are realized during the fourth quarter. If for any reason the Company's
revenues were below seasonal norms during the fourth quarter, the Company's
annual results of operations could be adversely affected. The Company's
inventory levels generally reach their highest in anticipation of increased
revenues during these months.
The following table illustrates the seasonality of revenues by quarter as a
percentage of the full year for the fiscal years indicated.
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
First quarter............................................... 22.4% 21.3% 22.9%
Second quarter.............................................. 22.2 22.4 21.5
Third quarter............................................... 24.3 24.3 23.7
Fourth quarter.............................................. 31.1 32.0 31.9
</TABLE>
The Company's quarterly results of operations could also fluctuate
significantly as a result of a variety of factors, including the timing of new
store openings and remodelings.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of liquidity are cash on hand, cash flow from
operations, and borrowings under credit facilities.
During the nine months ended November 1, 1997, net cash provided by
operations was $19 thousand, compared to net cash used by operations of $2.4
million during the same period in 1996. Cash in the amount of $8.0 million and
$6.9 million was used to invest in additional inventory during the nine months
ended November 1, 1997 and November 2, 1996, respectively. During the nine
months ended November 1, 1997 accounts receivable from customers decreased,
providing cash for operations; however, during the nine months ended November 2,
1996 accounts receivable from customers increased significantly, resulting in an
additional use of funds.
In fiscal year 1997, the Hudson-Belk Company had sufficient cash flows from
operations and credit facilities to fund its working capital needs and capital
expenditures. Net cash provided by operations was $10.7 million, $1.0 million,
and $5.2 million for the 1995, 1996, and 1997 fiscal years, respectively. The
decrease in cash flow in fiscal year 1996 was primarily attributable to reduced
net income and an additional investment in merchandise inventory as a result of
a remodel and expansion of the Raleigh Crabtree store and the opening of the
Durham Northgate store. The increase in cash flow in fiscal year 1997 is
primarily attributable to an increase in net income and accounts payable to
vendors. These increases were slightly offset by the 7.4% increase in accounts
receivable from customers from February 3, 1996 to February 1, 1997 which
resulted in a decrease in cash provided from operations of $1.9 million. The
Hudson-Belk Company has promoted the Belk proprietary credit card through
targeted marketing campaigns and active solicitation efforts on the store sales
floor in order to attract additional Belk charge customers and increase sales to
existing Belk charge customers. While these efforts have been successful in
increasing Belk proprietary credit card sales volume significantly, cash
provided from operations has been negatively impacted.
Investing activities included capital expenditures, primarily for new,
relocated and remodeled stores and sales of property and equipment related to
store closings. Capital expenditures, primarily for new and
22
<PAGE> 2543
remodeled stores, amounted to $2.4 million in the first nine months of fiscal
1998 and $0.5 million in the comparable period in fiscal 1997. Capital
expenditures amounted to $1.1 million, and $7.5 million, and $0.8 million for
the 1995, 1996 and 1997 fiscal years, respectively. In fiscal year 1995, Raleigh
Cameron Village opened; the Raleigh Downtown store and the Raleigh Budget store
locations closed. In fiscal year 1996, two new stores were opened, the Garner
Outlet Center and the Durham Northgate Mall store location adding 46,000 and
104,000 square feet, respectively. In addition, the Raleigh Crabtree store was
remodeled. In fiscal year 1997, the Garner Outlet Center was transferred out of
the Hudson-Belk Company to an affiliate. Management plans to relocate the
Smithfield, North Carolina store in February, 1998 adding an additional 20,000
square feet. In addition, a new store in Garner, North Carolina is planned in
August, 1998.
Financing activities included payments or additional borrowings on credit
facilities. The Hudson-Belk Company's total indebtedness at November 1, 1997 was
$11.6 million, comprised of $8.5 million of current maturities of long-term debt
and short-term borrowings and $3.0 million of long-term debt. Of the $11.6
million of total indebtedness, $4.6 million was variable rate debt based on
LIBOR and $7.0 million was variable rate debt based on interest rates as quoted
by the bank (which historically have been approximately 80 basis points above
LIBOR).
IMPACT OF INFLATION
While it is difficult to determine the precise effects of inflation,
management does not believe inflation had a material impact on the financial
statements for the periods presented.
BUSINESS OF THE COMPANY
General. The Company operates six retail department stores in the
following locations in North Carolina: Cary Towne Center in Cary, University
Mall in Chapel Hill, South Square Plaza and Northgate Mall in Durham, Crabtree
Valley Mall, and Centre Point Plaza in Smithfield. The Company also operates one
3,000 square foot Belk Express store at Cameron Village Shopping Center in
Raleigh. The Company's stores operate in a manner consistent with the business
of the Belk Companies described in the Proxy Statement/ Prospectus except that
the Belk Express store carries a limited selection of cosmetics and hosiery and
does not carry the full lines found in the traditional department stores. The
stores are managed out of the Hudson group office, which the Company operates in
a leased facility in Raleigh, North Carolina. The Hudson group office provides
buying, advertising, accounting, purchasing and other services to stores in the
Hudson group area.
The Company closed its downtown Smithfield store and opened its store at
Centre Pointe Plaza in February 1998. The Company has no continuing obligations
with respect to the former downtown store lease.
The Company also owns approximately 44 acres of land in Morrisville, North
Carolina. The Company operates a distribution center on 15 of such acres and is
holding the remaining 29 acres for future development. The Company uses the
distribution center for receiving, marking and distributing merchandise to the
stores in the Hudson group area. The Company also owns a building and parking
lot in downtown Raleigh, North Carolina that is currently for sale. The Company
plans to open a store containing approximately 46,000 square feet of floor area
in Garner, North Carolina in July 1998. The Company leases its group office
facility at Kidd's Hill Plaza in Raleigh, North Carolina.
The Company has a partnership interest in the Cary Venture Limited
Partnership. The partnership was formed for the purpose of developing the Cary
Village Shopping Center in Cary, North Carolina.
Facilities. The Company operates six retail department stores and the Belk
Express store, all of which are leased under long-term leases. The leases have
termination dates ranging from 1998 through 2017, and for the lease terminating
in 1998 the Company has options to extend the lease to 2013. The floor space of
the leased stores (other than the Belk Express store) ranges from 46,000 to
240,000 square feet. The Company believes these facilities are adequate to meet
its current needs.
Competition. Specific competitors in the Company's market include Dillard,
Hecht's, Sears, Penney and Lord & Taylor.
23
<PAGE> 2544
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
24
<PAGE> 2545
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)(f)(g)(h).................................. 34,428 34.8%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(d)(g)(h)(i)........................................... 25,331 25.6%
H. W. McKay Belk (Director and Executive Officer)
(b)(d)(g)(h)(j)........................................... 24,182 24.4%
John R. Belk (Director and Executive Officer)
(b)(d)(g)(h)(k)........................................... 24,442 24.7%
Henderson Belk (Director) (e)(f)(r)......................... 4,653 4.7%
Sarah Belk Gambrell (e)(f).................................. 9,604 9.7%
David Belk Cannon (Director) (m)............................ 4,761 4.8%
James K. Glenn, Jr. (Director) (l).......................... 5,234 5.3%
Daisy D. Lange (Director) (o)............................... 1,673 1.7%
Karl G. Hudson, Jr. (Director).............................. 50 *
Karl G. Hudson, III (Director and Executive Officer)........ 1,097 1.1%
Suzanne Hudson MacLeod (Director)........................... 2,184 2.2%
Fred B. Leggett, Jr. (Director) (p)(q)...................... 3,330 3.4%
Thomas C. Leggett (Director)................................ 459 *
Leroy Robinson (Director) (b)(d)............................ 1,558 1.6%
Richard Hudson (Executive Officer).......................... 1,097 1.1%
Caesar Lamonica (Executive Officer)......................... 0 *
Martin Todd (Executive Officer)............................. 0 *
Belk Enterprises, Inc. ..................................... 11,653 11.8%
J.V. Properties............................................. 9,754 9.9%
NationsBank, N.A.(n)(o) .................................... 6,023 6.1%
All Directors and Executive Officers as a group (14
persons).................................................. 56,939 57.5%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk and Leroy Robinson -- 2801 West Tyvola Road, Charlotte, N.C.
28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207;
David Belk Cannon -- 1607 W. Floyd Baker Blvd., Gaffney, S.C. 29341; James K.
Glenn, Jr. -- P. O. Box 2736, Winston-Salem, N.C. 27102; Daisy D. Lange -- 7
Brickwall Lane, Ruislip, Middlesex, England HA48JS; Karl G. Hudson, Jr. -- 319
First Federal Building, Raleigh, N.C.; Karl G. Hudson, III, Caesar Lamonica and
Martin Todd -- 5025 Edwards Mill Road, Raleigh, N.C. 27612; Richard W.
Hudson -- 4325 Glenwood Avenue, Raleigh, N.C. 27612; Suzanne Hudson
MacLeod -- P. O. Box 692, Lumberton, N.C. 28359; Fred B. Leggett, Jr. -- 1041
Willow Trail, Sutherlin, Va. 24594; Thomas C. Leggett -- P. O. Box 59, South
Boston, Va. 24592; Belk Enterprises, Inc. and J.V. Properties -- 2801 West
Tyvola Road, Charlotte, N.C. 28207; NationsBank, N.A. -- Sara McDonnell
(NC1-002-07-13), NationsBank, N.A., Charlotte, N.C. 28255.
25
<PAGE> 2546
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 3,231 shares held by Montgomery Investment Company, of which John
M. Belk is the majority shareholder.
(b) Includes 1,556 shares held by Brothers Investment Company, which
Corporation is equally owned by John M. Belk and the Estate of Thomas M.
Belk. Voting and investment power is shared by John M. Belk, Katherine
McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W. McKay Belk,
John R. Belk and Leroy Robinson.
(c) Represented by 13 shares held by Claudia W. Belk, Tr. U/A f/b/o Mary
Claudia Belk and 741 shares held by Mary Claudia Belk Irrevocable Trust
dated 1/4/94. Claudia W. Belk, the Trustee, is John M. Belk's wife.
(d) Includes 2 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
(e) Includes 3,200 shares held in several Trusts established by the Will of W.
H. Belk for the benefit of his children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(f) Includes 1,337 shares held in several Trusts established by the Will of
Mary I. Belk for the benefit of her children. Voting and investment power
of the Trusts for John M. Belk and Thomas M. Belk is shared by John M.
Belk, Sarah Belk Gambrell and Henderson Belk. Voting and investment power
of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson Belk
is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk and W. H.
Belk, Jr.
(g) Includes 697 shares of Belk of Orangeburg, S.C., Inc., 20 shares held by
Hudson-Belk Co. of Fuquay-Varina, N.C., Inc., 11,653 shares of Belk
Enterprises, Inc. and 133 shares held by Matthews-Belk Company, which
shares are voted by the members of the Executive Committee of the Board of
Directors of each such Corporation, under the authority given by the
directors of each such Corporation at the annual meeting of directors held
in March, 1997. The Executive Committee of each such Corporation consists
of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(h) Includes 9,754 shares held by J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
(i) Includes 25 shares held by Thomas M. Belk, Jr. as custodian for his minor
children and 1,192 shares held as custodian for the minor children of his
brother, H. W. McKay Belk.
(j) Includes 5 shares held by H. W. McKay Belk as custodian for his minor
children.
(k) Includes 519 shares held by John R. Belk as custodian for his minor
children.
(l) Includes 1,357 shares held by James K. Glenn, Jr., Trustee under Will of
Daisy Belk Mattox, 650 shares held by John Belk Stevens Trust U/W ITEM III,
Section C f/b/o James Kirk Glenn, Jr., et al and 1,301 shares held by John
Belk Stevens Trust U/W ITEM III, Section B f/b/o Mary S. Whelchel and 1,301
shares held by John Belk Stevens Trust U/W ITEM III, Section A f/b/o Sara
S. Glenn. Voting and investment power is vested in James K. Glenn, Jr., the
Trustee of each trust.
(m) Includes 927 shares held by Residuary Trust U/W Mrs. Henry Belk Cannon. The
Trustees, David Belk Cannon and John C. Daughtridge, have voting and
investment power with respect to such shares.
(n) Includes 1,387 shares held by NationsBank as Trustee for the Daisy Belk
Doughton Lange Revocable Trust dated 3/25/97, 92 shares held by NationsBank
as Trustee for the Robert L. Doughton II Revocable Trust dated 3/25/97,
1,330 shares held by Sara Dew Misner and North Carolina National Bank,
Co-Trustees for Daisy Doughton Lange U/A dated November 5, 1965 and 1,541
shares held by J.
26
<PAGE> 2547
L. Green, Jr. and N.C. Nat'l Bank, Trustees U/A 7/9/65 -- Sadie Belk
Cummings, Grantor. NationsBank has sole voting and investment power with
respect to such shares.
(o) Includes 1,673 shares held by Daisy Doughton Lange and North Carolina
National Bank, Trustees for Robert L. Doughton, II under Agreement dated
July 21, 1965. The named Trustees have voting and investment power with
respect to such shares.
(p) Includes 199 shares held by Fred B. Leggett, Jr., Trustee for Suzanne
Holland Leggett. Fred B. Leggett, Jr., the Trustee, has voting and
investment power with respect to such shares.
(q) Includes 1,835 shares of Suzanne Holland Leggett and Fred B. Leggett, Jr.,
Trustees under the Will of F. B. Leggett, Deceased f/b/o Suzanne H.
Leggett. The Trustees named have sole voting and investing power with
respect to such shares.
(r) Includes 176 shares held by Henderson Belk as Custodian for his minor
grandchildren.
27
<PAGE> 2548
INDEX TO HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of KPMG Peat Marwick LLP, Independent Auditors....... F-2
Balance Sheets.............................................. F-3
Statements of Income........................................ F-4
Statements of Shareholders' Equity.......................... F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 2549
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
Hudson-Belk Company:
We have audited the accompanying balance sheet of Hudson-Belk Company as of
February 1, 1997, and the related statements of income, shareholders' equity and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Hudson-Belk Company at
February 1, 1997, and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Charlotte, North Carolina
November 14, 1997
F-2
<PAGE> 2550
HUDSON-BELK COMPANY
BALANCE SHEETS
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 2,749,663 $ 2,554,578 $ 2,407,049
Accounts receivable, net.............................. 19,766,701 21,232,909 20,946,860
Merchandise inventory................................. 27,504,793 26,970,504 34,944,598
Prepaid income taxes.................................. 374,584 85,696 837,906
Receivables from affiliates........................... 340,410 854,585 343,557
Deferred income taxes................................. 652,558 560,190 644,638
Prepaid expenses and other current assets............. 1,319,577 1,152,392 600,067
----------- ----------- -----------
Total current assets.................................... 52,708,286 53,410,854 60,724,675
Investments............................................. 446,782 2,459,348 1,285,682
Property and equipment, net............................. 25,026,192 22,708,809 23,191,270
Other assets............................................ 624,767 268,090 717,035
----------- ----------- -----------
Total assets............................................ $78,806,027 $78,847,101 $85,918,662
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Line of credit........................................ $ 4,300,000 $ 3,250,000 $ 7,000,000
Accounts payable...................................... 7,465,829 8,079,916 10,232,664
Accrued expenses...................................... 3,416,440 2,862,737 3,640,134
Payables to affiliates................................ 570,933 847,538 581,401
Current installments of long-term debt................ 2,300,004 191,667 1,513,981
----------- ----------- -----------
Total current liabilities............................... 18,053,206 15,231,858 22,968,180
Deferred income taxes................................... 1,329,098 1,565,135 1,801,087
Long-term debt, excluding current installments.......... 4,753,252 4,561,585 3,047,604
Deferred compensation................................... 1,885,297 2,039,413 2,046,638
Other non-current liabilities........................... 330,911 436,385 510,715
----------- ----------- -----------
Total liabilities....................................... 26,351,764 23,834,376 30,374,224
----------- ----------- -----------
Shareholders' equity:
Common stock; $100 par value; authorized 100,000
shares; issued and outstanding 98,980 shares....... 9,898,000 9,898,000 9,898,000
Retained earnings..................................... 42,556,263 45,114,725 45,646,438
----------- ----------- -----------
Total shareholders' equity.............................. 52,454,263 55,012,725 55,544,438
----------- ----------- -----------
Total liabilities and shareholders' equity.............. $78,806,027 $78,847,101 $85,918,662
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 2551
HUDSON-BELK COMPANY
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
------------------------------------------ -------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
------------ ------------ ------------ ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues..................... $127,943,752 $125,517,063 $126,554,654 $86,172,090 $88,428,807
Cost of goods sold (including
occupancy and buying
expenses).................. 86,467,184 85,238,903 86,988,508 59,406,094 60,528,460
Selling, general and
administrative expenses.... 32,570,833 34,108,526 32,610,903 23,625,617 23,398,666
------------ ------------ ------------ ----------- -----------
Income from operations....... 8,905,735 6,169,634 6,955,243 3,140,379 4,501,681
Interest expense, net........ (981,890) (982,439) (1,104,557) (779,157) (659,368)
Loss on investment........... -- -- -- -- (1,265,177)
Other income (expense),
net........................ (4,752) (59,484) 70,607 45,100 148,337
------------ ------------ ------------ ----------- -----------
Income before income taxes... 7,919,093 5,127,711 5,921,293 2,406,322 2,725,473
Income taxes................. 3,052,619 1,908,227 2,175,071 884,000 1,006,000
------------ ------------ ------------ ----------- -----------
Net income................... $ 4,866,474 $ 3,219,484 $ 3,746,222 $ 1,522,322 $ 1,719,473
============ ============ ============ =========== ===========
Earnings per share........... $ 49.17 $ 32.53 $ 37.85 $ 15.38 $ 17.37
============ ============ ============ =========== ===========
Weighted average shares...... 98,980 98,980 98,980 98,980 98,980
============ ============ ============ =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 2552
HUDSON-BELK COMPANY
STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
NET UNREALIZED
COMMON RETAINED GAINS (LOSSES)
STOCK EARNINGS ON INVESTMENTS TOTAL
---------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
Balance at February 1, 1994 (unaudited)...... $9,898,000 $36,746,845 $ -- $46,644,845
Unrealized gains on investments, net of
income taxes (unaudited)................... -- -- 2,465 2,465
Cash dividends (unaudited)................... -- (1,088,780) -- (1,088,780)
Net income (unaudited)....................... -- 4,866,474 -- 4,866,474
---------- ----------- ------- -----------
Balance at January 31, 1995 (unaudited)...... 9,898,000 40,524,539 2,465 50,425,004
Reduction in unrealized gains on investments,
net of income taxes (unaudited)............ -- -- (2,465) (2,465)
Cash dividends (unaudited)................... -- (1,187,760) -- (1,187,760)
Net income (unaudited)....................... -- 3,219,484 -- 3,219,484
---------- ----------- ------- -----------
Balance at February 3, 1996.................. 9,898,000 42,556,263 -- 52,454,263
Cash dividends............................... -- (1,187,760) -- (1,187,760)
Net income................................... -- 3,746,222 -- 3,746,222
---------- ----------- ------- -----------
Balance at February 1, 1997.................. 9,898,000 45,114,725 -- 55,012,725
Cash dividends............................... -- (1,187,760) -- (1,187,760)
Net income................................... -- 1,719,473 -- 1,719,473
---------- ----------- ------- -----------
Balance at November 1, 1997 (unaudited)...... $9,898,000 $45,646,438 $ -- $55,544,438
========== =========== ======= ===========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 2553
HUDSON-BELK COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
---------------------------------------- -------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
----------- ----------- ------------ ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income............................. $ 4,866,474 $ 3,219,484 $ 3,746,222 $ 1,522,322 $ 1,719,473
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Deferred income taxes.................. (157,596) 158,563 328,405 74,604 151,504
Depreciation and amortization.......... 2,824,673 3,112,952 2,805,724 2,145,274 1,963,414
Gain on sale of property and
equipment............................ (1,136) (2,601) (13,762) -- --
Loss on sale of investments............ 21,095 -- -- -- --
Loss on investment..................... -- -- -- -- 1,265,177
(Increase) decrease in:
Accounts receivable, net............. 900,731 53,445 (1,919,208) (872,962) 286,049
Merchandise inventory................ 2,216,506 (4,236,991) 44,581 (6,912,074) (7,974,094)
Receivables from affiliates.......... 482,501 549,226 (1,335,423) 68,854 511,028
Prepaid income taxes................. -- (374,584) 288,888 (201,358) (752,210)
Prepaid expenses and other assets.... (347,331) 267,646 503,567 503,606 103,380
Increase (decrease) in:
Accounts payable and accrued
expenses........................... (64,859) (1,312,959) 250,345 1,843,756 2,930,145
Payables to affiliates............... 157,486 44,645 276,605 (679,295) (266,137)
Accrued income taxes................. (427,285) (789,180) -- -- --
Deferred compensation and other
liabilities........................ 184,287 345,393 261,292 147,444 81,555
----------- ----------- ------------ ----------- -----------
Net cash provided (used) by operating
activities............................. 10,655,546 1,035,039 5,237,236 (2,359,829) 19,284
----------- ----------- ------------ ----------- -----------
Cash flows from investing activities:
Purchase of investments................ -- -- (83,859) (29,158) (91,511)
Purchases of property and equipment.... (1,128,516) (7,513,290) (830,373) (527,009) (2,445,875)
Proceeds from sale of property and
equipment............................ 1,698 3,380 19,675 -- --
Proceeds from sale of investments...... 116,138 -- -- -- --
----------- ----------- ------------ ----------- -----------
Net cash used by investing activities.... (1,010,680) (7,509,910) (894,557) (556,167) (2,537,386)
----------- ----------- ------------ ----------- -----------
Cash flows from financing activities:
Proceeds from (payments on) line of
credit, net.......................... -- 4,300,000 (1,050,000) 5,200,000 3,750,000
Principal payments on long-term debt... (5,320,121) (6,348,359) (2,300,004) (1,725,003) (191,667)
Dividends paid......................... (1,088,780) (1,187,760) (1,187,760) (1,187,760) (1,187,760)
----------- ----------- ------------ ----------- -----------
Net cash provided (used) by financing
activities............................. (6,408,901) (3,236,119) (4,537,764) 2,287,237 2,370,573
----------- ----------- ------------ ----------- -----------
Net increase (decrease) in cash and cash
equivalents............................ 3,235,965 (9,710,990) (195,085) (628,759) (147,529)
Cash and cash equivalents at beginning of
period................................. 9,224,688 12,460,653 2,749,663 2,749,663 2,554,578
----------- ----------- ------------ ----------- -----------
Cash and cash equivalents at end of
period................................. $12,460,653 $ 2,749,663 $ 2,554,578 $ 2,120,904 $ 2,407,049
=========== =========== ============ =========== ===========
Supplemental disclosures of cash flow
information:
Interest paid........................ $ 1,008,128 $ 1,110,135 $ 1,122,426 $ 619,395 $ 504,117
Income taxes paid.................... 2,258,900 2,079,200 2,008,600 894,300 1,954,264
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 2554
HUDSON-BELK COMPANY
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
COMPANY OPERATIONS
Hudson-Belk Company (the Company) operates retail department stores in
North Carolina.
FISCAL YEAR
Starting in fiscal year 1996, the Company's fiscal year ends on the
Saturday closest to each January 31. Fiscal years 1996 and 1997 ended on
February 3, 1996 and February 1, 1997 and included 368 and 365 days,
respectively. Fiscal year 1995 ended on Tuesday, January 31, 1995 and included
364 days.
UNAUDITED FINANCIAL STATEMENTS
The financial statements as of February 3, 1996 and for the years ended
January 31, 1995 and February 3, 1996 and as of and for the periods ended
November 2, 1996 and November 1, 1997 are unaudited. In the opinion of
management, such financial statements reflect all adjustments necessary to
present fairly the Company's financial position and results of operations and
cash flows, but the consolidated financial statements for the interim periods
ended November 2, 1996 and November 1, 1997 are not necessarily indicative of
the results of operations for a full fiscal year.
REVENUES
Revenues include sales from retail operations and leased departments, net
of returns.
COST OF GOODS SOLD
Cost of goods sold includes occupancy and buying expenses. Occupancy
expenses so classified are rent, utilities and real estate taxes. Buying
expenses include payroll and travel expenses associated with the buying
function.
MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market as
determined by the retail inventory method.
FINANCE CHARGES
Selling, general and administrative expenses in the statements of income
are reduced by finance charge revenue arising from customer accounts receivable.
Finance charge revenue amounted to approximately $2,428,000, $2,204,000 and
$2,328,000 in fiscal years 1995, 1996 and 1997, respectively.
PROPERTY AND EQUIPMENT, NET
Property and equipment owned by the Company is stated at cost less
accumulated depreciation. Depreciation and amortization is provided utilizing
straight-line and various accelerated methods over the shorter of estimated
asset lives or related lease terms.
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred income tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement bases
and the respective tax bases of the assets and liabilities and operating loss
and tax credit
F-7
<PAGE> 2555
HUDSON-BELK COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized.
PRE-OPENING COSTS
Store pre-opening costs are expensed as incurred.
CASH EQUIVALENTS
Cash equivalents include liquid investments with an original maturity of 90
days or less.
ADVERTISING
Advertising costs are expensed as incurred and amounted to $3,548,023,
$4,334,218 and $4,102,977 in fiscal years 1995, 1996 and 1997, respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(2) ACCOUNTS RECEIVABLE, NET
Customer receivables arise primarily under open-end revolving credit
accounts used to finance purchases of merchandise from the Company. These
accounts have various billing and payment structures, including varying minimum
payment levels and finance charges rates. Installments of deferred payment
accounts receivable maturing after one year are included in current assets in
accordance with industry practice.
The Company provides an allowance for doubtful accounts which is determined
based on a number of factors, including the risk characteristics of the
portfolio, historical charge-off patterns, and management judgment.
Accounts receivable, net consists of:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Customer receivables............................ $19,654,936 $20,944,822 $21,114,836
Other........................................... 387,989 602,694 204,777
Less allowance for doubtful accounts............ (276,224) (314,607) (372,753)
----------- ----------- -----------
Accounts receivable, net........................ $19,766,701 $21,232,909 $20,946,860
=========== =========== ===========
</TABLE>
F-8
<PAGE> 2556
HUDSON-BELK COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Changes in allowance for doubtful accounts are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
--------------------------------------- -------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1, NOVEMBER 2, NOVEMBER 1,
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance, beginning of
period...................... $ 289,135 $ 269,830 $ 276,224 $ 276,224 $ 314,607
Charged to expense............ 293,741 291,778 492,573 302,952 466,599
Net uncollectible balances
written off................. (313,046) (285,384) (454,190) (308,917) (408,453)
--------- --------- --------- --------- ---------
Balance, end of period........ $ 269,830 $ 276,224 $ 314,607 $ 270,259 $ 372,753
========= ========= ========= ========= =========
</TABLE>
(3) INVESTMENTS
In accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Investments in Debt and Equity Securities," the Company
classifies all equity securities with a readily determinable market value as
available-for-sale securities. Gains and losses on sales of securities are
recognized when realized on a specific identification basis. Gross realized loss
included in income in 1995 was $21,095.
The Company owns 12.1% of TAGS Stores, LLC (TAGS) and, accordingly,
accounts for its investment in TAGS on a cost basis. In September 1997, the
managers and advisory board of TAGS adopted a formal plan to liquidate its
operations during the 1997 Christmas retailing season. During the nine months
ended November 1997, the Company reduced its investment in TAGS by $1,265,177,
to the estimated net realizable value of its investment.
(4) PROPERTY AND EQUIPMENT, NET
Details of property and equipment are as follows:
<TABLE>
<CAPTION>
ESTIMATED FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
LIVES 1996 1997 1997
--------- ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Land................................ N/A $ 2,239,982 $ 2,239,982 $ 2,239,982
Buildings........................... 30-50 24,277,090 24,142,733 24,577,346
Furniture, fixtures and equipment... 5-7 23,351,938 23,688,766 24,882,703
Construction in progress............ N/A 164,617 330,164 1,107,464
------------ ------------ ------------
50,033,627 50,401,645 52,807,495
Less accumulated depreciation....... (25,007,435) (27,692,836) (29,616,225)
------------ ------------ ------------
Property and equipment, net......... $ 25,026,192 $ 22,708,809 $ 23,191,270
============ ============ ============
</TABLE>
F-9
<PAGE> 2557
HUDSON-BELK COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(5) ACCRUED EXPENSES
Accrued expenses are comprised of the following:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Salaries, wages and employee benefits.............. $1,375,078 $1,201,477 $1,319,233
Rent............................................... 1,254,682 977,560 919,773
Taxes, other than income........................... 320,874 205,411 497,512
Interest........................................... 130,916 125,837 283,408
Other.............................................. 334,890 352,452 620,208
---------- ---------- ----------
$3,416,440 $2,862,737 $3,640,134
========== ========== ==========
</TABLE>
(6) BORROWINGS
Long-term debt consists of the following:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, NOVEMBER 1,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Unsecured term loan agreement, due 1999; interest
at LIBOR (5.65% at November 1, 1997) plus 80
basis points................................... $ 7,053,256 $4,753,252 $ 4,561,585
Less current installments........................ (2,300,004) (191,667) (1,513,981)
----------- ---------- -----------
Long-term debt, excluding current installments... $ 4,753,252 $4,561,585 $ 3,047,604
=========== ========== ===========
</TABLE>
The annual maturities of long-term debt over the next three years as of
February 1, 1997 are $191,667, $2,162,830 and $2,398,755. Subsequent to February
1, 1997 the payment terms of the term loan agreement were restructured.
The Company's term loan agreement contains, among other provisions and
covenants, restrictions relating to the creation of additional funded debt,
except as permitted, and the disposal, expansion or purchase of fixed assets,
except as permitted. In addition, the Company must maintain at the end of any
fiscal year a minimum net working capital, as defined and a minimum tangible net
worth, as defined. The Company must also maintain a maximum ratio of total
liabilities to tangible net worth, as defined. The Company was in compliance
with the provisions and covenants of the term loan agreement as of February 1,
1997.
The covenants also include a restriction on dividend payments. The Company
can only declare dividends from net cash flow. At February 1, 1997 the Company
had $38,562,779 of retained earnings unavailable for dividend payments.
At February 1, 1997, the Company has a $10,000,000 unsecured line of credit
agreement at interest rates quoted by the banks (which historically have been
approximately 80 basis points above LIBOR.) The amounts outstanding at February
3, 1996, February 1, 1997 and November 1, 1997 were $4,300,000, $3,250,000, and
$7,000,000, respectively.
(7) LEASES
The Company leases certain of its stores, warehouse facilities and
equipment. The majority of these leases will expire over the next 20 years. The
leases usually contain renewal options and provide for payment by the lessee of
real estate taxes and other expenses and, in certain instances, increased
rentals based on percentages of sales.
F-10
<PAGE> 2558
HUDSON-BELK COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments under noncancelable leases as of February 1,
1997 were as follows:
<TABLE>
<CAPTION>
FISCAL YEAR OPERATING
- ----------- ----------
<S> <C>
1998........................................................ $ 670,334
1999........................................................ 670,334
2000........................................................ 554,635
2001........................................................ 388,000
2002........................................................ 388,000
After 2002.................................................. 1,474,000
----------
Total............................................. $4,145,303
==========
</TABLE>
Rental expense for all operating leases consists of the following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Buildings:
Minimum rentals.................................. $ 958,998 $1,552,519 $1,406,585
Contingent rentals............................... 1,361,446 1,274,686 1,308,477
Equipment.......................................... 81,031 83,529 80,372
---------- ---------- ----------
Total rental expense..................... $2,401,475 $2,910,734 $2,795,434
========== ========== ==========
</TABLE>
Contingent rentals are determined on the basis of a percentage of sales in
excess of stipulated minimums for certain store facilities.
(8) INCOME TAXES
Federal and state income tax expense (benefit) is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED -------------------------
--------------------------------------- NOVEMBER
JANUARY 31, FEBRUARY 3, FEBRUARY 1, 2, NOVEMBER 1,
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
Federal.................... $2,566,598 $1,303,964 $1,475,847 $650,757 $ 690,000
State...................... 643,617 445,700 370,819 158,639 164,496
---------- ---------- ---------- -------- ----------
3,210,215 1,749,664 1,846,666 809,396 854,496
Deferred:
Federal.................... (125,361) 128,066 263,337 63,576 122,703
State...................... (32,235) 30,497 65,068 11,028 28,801
---------- ---------- ---------- -------- ----------
(157,596) 158,563 328,405 74,604 151,504
---------- ---------- ---------- -------- ----------
Income taxes................. $3,052,619 $1,908,227 $2,175,071 $884,000 $1,006,000
========== ========== ========== ======== ==========
</TABLE>
F-11
<PAGE> 2559
HUDSON-BELK COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation between income taxes computed using the effective income
tax rate and the federal statutory income tax rate of 34% is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Income tax at the statutory federal rate........... $2,692,492 $1,743,422 $2,013,240
State income taxes, net of federal income tax
benefit.......................................... 403,512 314,290 287,685
Other.............................................. (43,385) (149,485) (125,854)
---------- ---------- ----------
Income taxes....................................... $3,052,619 $1,908,227 $2,175,071
========== ========== ==========
</TABLE>
Deferred taxes based upon differences between the financial statement and
tax bases of assets and liabilities and available tax carryforwards consists of:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
(UNAUDITED)
<S> <C> <C>
Deferred tax assets:
Benefit plan costs........................................ $ 821,318 $ 922,873
Inventory capitalization.................................. 544,512 541,446
Allowance for doubtful accounts........................... 108,045 123,059
---------- -----------
Gross deferred tax assets................................... 1,473,875 1,587,378
---------- -----------
Deferred tax liabilities:
Property and equipment.................................... 1,416,315 1,597,448
Investments............................................... 577,150 694,965
Prepaid pension costs..................................... 156,950 121,214
Other..................................................... -- 178,696
---------- -----------
Gross deferred tax liabilities.............................. 2,150,415 2,592,323
---------- -----------
Net deferred tax liabilities................................ $ (676,540) $(1,004,945)
========== ===========
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the temporary differences becoming deductible. Management
considers the scheduled reversals of deferred tax liabilities, projected future
income, and tax planning strategies in making this assessment.
(9) BENEFIT PLANS
The Company participates in the Belk Pension Plan, a defined benefit
multi-employer plan, that covers substantially all of the employees of the Belk
companies. Pension expense allocated to the Company was $182,820, $133,102 and
$93,031 for fiscal years 1995, 1996 and 1997, respectively. Because the Belk
Pension Plan is a multi-employer plan, allocation of plan assets to the Company
is not practical.
The Company also participates in the Belk Employee's Group Medical Plan,
that provides medical benefits to substantially all employees of the Belk
companies. This Plan is "self-funded" for medical benefits through a 501(c) (9)
Trust. The Company participates in the Group Life Insurance Plan that provides
life insurance to its employees, and is fully insured through a contract issued
by an insurance company. Contributions by the Company under the Belk Employees'
Group Medical Plan and the Group Life Insurance Plan amounted to approximately
$664,000, $756,000, and $816,000 in fiscal years 1995, 1996 and 1997,
respectively.
F-12
<PAGE> 2560
HUDSON-BELK COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Company participates in the Belk Profit Sharing Plan, a contributory,
defined contribution multi-employer plan that provides benefits for
substantially all employees of the Belk companies. The costs of the plan
generally represents 10% of profits, as defined, and amounted to $928,533,
$612,515 and $687,255 in fiscal years 1995, 1996 and 1997, respectively.
The Company participates in the Supplemental Executive Retirement Plan
(SERP) a non-qualified defined benefit retirement plan that provides retirement
and death benefits to certain qualified executives of the Company. Total SERP
costs charged to operations were $108,112, $126,650 and $128,633, in fiscal
years 1995, 1996 and 1997, respectively. The effective discount rate used in
determining the net periodic SERP cost was 8.5% for fiscal years 1995 and 1996
and 7.25% for fiscal year 1997. Actuarial gains and losses are amortized over
the average remaining service lives of the participants.
Certain eligible employees also participate in a non-qualified Deferred
Compensation Plan (DCP). Participants in the plan have elected to defer a
portion of their regular compensation subject to certain limitations prescribed
by the DCP. The Company is required to pay interest on the employees' deferred
compensation at various rates between 9% and 15%. Total interest expense related
to this plan and charged to operations was $122,141, $132,737 and $135,672, in
fiscal years 1995, 1996 and 1997, respectively.
The Company provides postretirement benefits to certain retired employees
in the form of medical and life insurance premiums. The Company recorded
approximately $55,000, $93,000 and $107,000 as selling, general and
administrative expense in fiscal years 1995, 1996 and 1997, respectively.
(10) RELATED PARTY TRANSACTIONS
The Belk Center, Inc. services the Company's accounts receivable. The
Company paid The Belk Center, Inc. approximately $1,267,000, $1,357,000 and
$1,370,000 during 1995, 1996 and 1997, respectively, for these services.
Various other selling, general, administrative and transaction processing
services are provided by Belk Stores Services, Inc. ("BSS"). The Company paid
BSS approximately $2,417,000, $2,533,000 and $2,362,000 during 1995, 1996 and
1997, respectively, for these services, not including the transaction processing
services. The Company paid approximately $1,435,000, $1,383,000 and $1,441,000
during 1995, 1996 and 1997, respectively, for transaction processing fees.
The Company may participate in operational, inverting and financing
activities with affiliated Companies, which are defined as any companies in the
Belk group of corporations.
The Company may participate in operational, investing and financing
activities with other Belk companies.
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS
For financial instruments which are short-term in nature, such as cash and
cash equivalents, accounts receivable, receivables from affiliates, accounts
payable, payables to affiliates, accrued expenses and line of credit, carrying
values approximates fair value. The carrying value of the Company's variable
rate long-term debt is a reasonable estimate of fair value.
F-13
<PAGE> 2561
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATIONS ACT
STATE OF NORTH CAROLINA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
A-1
<PAGE> 2562
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares; (ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (iv) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes; (v)
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional shares so created is to be acquired by cash under
G.S. 55-6-04; (vi) changes the corporation into a nonprofit corporation or
cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 2563
SEC.SEC. 55-13-04 TO 55-13-19. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 2564
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 2565
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 2566
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 2567
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
------------ ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................ $126,554,654 $3,746,222 $7,025,850 $9,831,574 $55,012,725
Adjustments to eliminate less than
wholly-owned subsidiaries................ -- -- -- -- --
Less: Leased sales......................... 2,342,678 -- -- -- --
------------ ---------- ---------- ---------- -----------
Adjusted Shareholders' Statement........... $124,211,976 3,746,222 7,025,850 9,831,574 55,012,725
============ ---------- ---------- ---------- -----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............ (8,707) (13,762) (13,762)
Gain/loss on sale of securities.......... -- -- --
Impairment loss.......................... -- -- --
Equity in earnings of unconsolidated
subsidiaries........................... -- -- --
Gain/loss on discontinued operations..... -- -- --
Adjustment to tax expense................ -- -- --
---------- ---------- ----------
Total non-operating items.................. (8,707) (13,762) (13,762)
---------- ---------- ----------
Other Adjustments:
Adjustment for dividends received from
other Belk entities.................... (616) (974) (974) --
Adjustment for ownership in other Belk
entities............................... -- -- -- (2,428,069)
---------- ---------- ---------- -----------
Per Model.................................. $3,736,899 $7,011,114 $9,816,838 $52,584,656
========== ========== ========== ===========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................ $ (2,554,578)
Negative cash balances reclassified to
accounts payable..................... --
Receivables from affiliates, net....... (7,047)
Loans receivable from affiliates,
net.................................. (41,036)
Liabilities
Line of credit......................... 3,250,000
Current installments of long-term
debt................................. 191,667
Current portion of obligations under
capital leases....................... --
Payables to affiliates, net............ --
Long-term debt, excluding current
installments......................... 4,561,585
Obligations under capital leases,
excluding current portion............ --
Loans payable to affiliates, net....... --
------------
Net debt (cash)............................ 5,400,591
Adjustments to eliminate less than
wholly-owned subsidiaries................ --
------------
Per Model.................................. $ 5,400,591
============
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 2568
SUPPLEMENT NO. 61
<PAGE> 2569
HUDSON-BELK COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 11:30 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: , 1998
--------------------
--------------------------------
Signature
--------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 61
<PAGE> 2570
BELK DEPARTMENT STORE OF REIDSVILLE, N.C., INC.
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk Department Store of Reidsville, N.C., Inc.
(the "Company"), to be held on April 16, 1998, at 8:50 a.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 81.9355 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 78,576 shares of New Belk Class A Common Stock which
will represent approximately 0.1310% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(62)
<PAGE> 2571
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 2572
BELK DEPARTMENT STORE OF REIDSVILLE, N.C., INC.
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 1998
TO THE SHAREHOLDERS OF BELK DEPARTMENT STORE OF REIDSVILLE, N.C., INC.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk Department Store of Reidsville, N.C., Inc. (the "Company")
will be held on April 16, 1998, at 8:50 a.m., local time, at the offices of Belk
Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 81.9355 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 2573
BELK DEPARTMENT STORE OF REIDSVILLE, N.C., INC.
SUPPLEMENT NO. 62
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 62 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK DEPARTMENT
STORE OF REIDSVILLE, N.C., INC. (THE "COMPANY"), THE DISCUSSION HEREIN
SUPERSEDES THE DISCUSSION IN THE PROXY STATEMENT/PROSPECTUS. ALL OF THE
INFORMATION CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE
IN THE REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN
THE REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY
AND THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT
BE ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL
CAPITALIZED TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE
MEANINGS SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 17
SELECTED HISTORICAL FINANCIAL INFORMATION................... 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS OF THE COMPANY..................................... 20
SECURITY OWNERSHIP OF THE COMPANY........................... 20
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 2574
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1922. The
Company changed its name from Belk-Stevens Company of Reidsville to Belk
Department Store of Reidsville, N.C., Inc. in 1992. The mailing address of the
Company's principal executive offices is 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500, and its telephone number at that address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 16, 1998 at 8:50 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 81.9355 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 1,282 shares of Common Stock
outstanding held of record by 47 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 54.4% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 2575
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. In addition, the Reorganization is expected to have
certain other benefits for the Company and the Shareholders, including the
ability to share the risk associated with the uncertain prospects for the
Company's store in its current location. The store is located in a relatively
small market that is also close to larger markets with larger Belk stores and
other competitors. The prospects for growth of the Company's store may be
limited because of the size of its market and its close proximity to such
competition. The Merger would allow the Company to share with New Belk the risk
associated with the Company's current market and participate in the growth of
other Belk stores located in markets with better growth prospects.
There can be no assurance, however, that any of these benefits will be
achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 2,000 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common
3
<PAGE> 2576
Stock are entitled to 10 votes per share. The holders of New Belk Class B Common
Stock are entitled to one vote per share. Shares of New Belk Class A Common
Stock may be owned only by Class A Permitted Holders. If a share of New Belk
Class A Common Stock is transferred to any person other than a Class A Permitted
Holder, whether by sale, assignment, gift, bequest, appointment or otherwise,
such share will be converted automatically into a share of New Belk Class B
Common Stock. Shares of New Belk Class A Common Stock are convertible into New
Belk Class B Common Stock, in whole or in part, at any time and from time to
time at the option of the holder, on the basis of one share of New Belk Class B
Common Stock for each share of New Belk Class A Common Stock converted. Shares
of New Belk Class A Common Stock held by a New Belk Stockholder who is a Class A
Permitted Holder will also automatically convert into New Belk Class B Common
Stock in the event that such New Belk Stockholder no longer meets the
requirements of a Class A Permitted Holder. New Belk Class B Common Stock has no
conversion rights. The Company Articles provide for only one class of common
stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same
4
<PAGE> 2577
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the distribution. The
Company Bylaws provide that the Board of Directors of the Company (the "Company
Board") may from time to time declare dividends on the Company's outstanding
shares in the manner and upon the terms and conditions provided by law and by
the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. DGCL requires that
an amendment of the certificate of incorporation of a corporation be adopted by
the board of directors and the holders of a majority of the outstanding shares
of stock entitled to vote thereon. The holders of the outstanding shares of a
class are entitled to vote as a separate class on a proposed amendment that
would increase or decrease the aggregate number of authorized shares of such
class, increase or decrease the par value of the shares of such class or alter
or change the powers, preferences or special rights of the shares of such class
so as to affect them
5
<PAGE> 2578
adversely. If any proposed amendment would alter or change the powers,
preferences or special rights of one or more series of any class so as to affect
them adversely, but would not so affect the entire class, then only the shares
of the series so affected by the amendment will be considered a separate class
for purposes of voting by classes. The New Belk Certificate is consistent with
the foregoing provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the shareholders and approved (i) by a majority
(unless the articles of incorporation, a bylaw adopted by the shareholders or
the board of directors require a greater vote or a vote by voting groups) of the
votes entitled to be cast on the amendment by any voting group with respect to
which the amendment would create dissenters' rights and (ii) when a quorum is
present, by all other voting groups entitled to vote on the amendment through
casting more affirmative than opposing votes. As under the DGCL, the holders of
the outstanding shares of a class or series are entitled to vote as a separate
voting group (if shareholder voting is otherwise required by the NCBCA) on a
proposed amendment if the amendment would change certain fundamental rights and
preferences of that class or series. The Company Articles do not specify a
greater voting requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power, nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors. The Company Articles provide that the Company Board has power, by
vote of a majority of all the directors, and without the assent or vote of the
shareholders, to make, alter, amend and rescind the bylaws of the Company.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provides otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and
6
<PAGE> 2579
without prior notice, if all holders of outstanding shares entitled to vote on
such action sign the written consent(s) describing such action. The Company
Bylaws and Company Articles do not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more
7
<PAGE> 2580
than 30% during any 12-month period. The articles of incorporation or bylaws may
establish a variable range for the size of the board of directors by fixing a
minimum and maximum number of directors. If a variable range is established, the
number of directors may be fixed or changed from time to time, within the
minimum and maximum, by the shareholders or (unless the articles of
incorporation or a shareholders' agreement shall otherwise provide) the board of
directors. After shares are issued, only the shareholders may change the range
for the size of the board or change from a fixed to a variable-range size board
or vice versa. The Company Bylaws require the Company Board to consist of at
least three, but no more than 15, members.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
8
<PAGE> 2581
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the disinterested directors or committee authorized, approved or
ratified the transaction; (ii) the material facts of the transaction and the
director's interest were disclosed or known to the shareholders entitled to vote
and the disinterested shares authorized, approved or ratified the transaction;
or (iii) the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
9
<PAGE> 2582
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any transaction from which the director derived an improper
personal benefit or (iv) acts or omissions occurring prior to the date the
provisions became effective.
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not indemnify a director or officer
against liability or litigation expense that he may incur on account of his
activities which were, at the time taken, known or believed by him to be clearly
in conflict with the best interest of the Company. The Company will likewise and
to the same extent indemnify any person who, at the request of the Company, is
or was serving as a director or as an officer of another corporation, joint
venture, trust or other enterprise, as a partner of a partnership or as a
trustee or administrator under an employee benefit plan. The Company will also
indemnify the director or officer for reasonable costs, expenses and attorneys'
fees in connection with the enforcement of rights to indemnification granted
therein, if it is so determined in accordance with the Company Articles that the
director or officer is entitled to indemnification thereunder. The Company
Articles provide that to the fullest extent permitted by the NCBCA a director
will not be personally liable to the Company, or any of its Shareholders or
otherwise for monetary damages for breach of duty of care or other duty as a
director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested stockholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which
10
<PAGE> 2583
results in the issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder, except in certain circumstances; (iv)
any transaction involving the corporation which has the effect of increasing the
proportionate share of the stock of any class or series, or securities
convertible into the stock of any class or series, of the corporation which is
owned by the interested stockholder, except in certain circumstances; or (v) any
receipt by the interested stockholder of the benefit of any loans, advances,
guarantees, pledges or other financial benefits (other than those expressly
permitted in (i) through (iv) above) provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) an
affiliate or associate of the corporation who within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a
11
<PAGE> 2584
preemptive right to purchase, subscribe for or otherwise acquire stock of any
class or series of New Belk or any security convertible into or exchangeable
for, or any warrant, option or right to purchase, subscribe for or otherwise
acquire, stock of any class or series of New Belk, whether now or hereafter
authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(ii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any final action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
12
<PAGE> 2585
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates must be deposited,
(iii) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the Payment Demand is received, (iv) set a date
by which the Surviving Corporation must receive the Payment Demand, which date
may not be fewer than 30 nor more than 60 days after the date the Dissenters'
Notice is mailed and (v) be accompanied by a copy of Article 13. A Shareholder
who is sent a Dissenters' Notice and who wishes to assert dissenters' rights
must demand payment and deposit his certificates in accordance with the terms of
the Dissenters' Notice. A Shareholder who demands payment and deposit his
certificates in accordance with the terms of the Dissenters' Notice retains all
other rights of a Shareholder until these rights are canceled or modified by the
consummation and effectiveness of the Merger. A Shareholder who does not demand
payments or deposit his certificates in accordance with the terms of the
Dissenters' Notice will not be entitled to payment for his shares under the
NCBCA. If any such holder of Common Stock fails to perfect or shall have
effectively withdrawn or lost such right, each share of such holder's Common
Stock will thereupon be deemed to have been converted into and to have become,
as of the Effective Time, the right to receive, without any interest thereon,
the number of shares of New Belk Class A Common Stock such Shareholder is
otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
13
<PAGE> 2586
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such Shareholder dissents and such
Shareholder's other shares were registered in the names of different
shareholders.
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
14
<PAGE> 2587
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales.................... $2,824,091 $2,824,091 0.6 $(324,109) $2,018,564
EBITDA....................... 186,402 183,964 7 (324,109) 1,611,857
EBIT......................... 154,699 152,261 10 (324,109) 1,846,719
Net Income................... 109,098 107,435 15 -- 1,611,525
Book Equity.................. 1,260,722 1,256,271 1 -- 1,256,271
</TABLE>
15
<PAGE> 2588
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
Belk-Beck Co., of
High Point, N.C.,
Inc. .0904% X $ 6,270,761 = $ 5,669
-----------
Total $ 5,669
===========
Relative Operating Value of Company $ 2,018,564
Relative Operating Value of Other Companies Owned by Company + 5,669
-----------
Total Relative Value of Company = $ 2,024,233
===========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Brothers Company 12.8705% X $ 2,024,233 = $ 260,529
Belk Enterprises,
Inc. 4.8362% X 2,024,233 = 97,896
Belk-Beck Company of
Burlington, North
Carolina, Inc. 7.4883% X 2,024,233 = 151,581
-----------
Total $ 510,005
===========
Total Relative Value of Company $ 2,024,233
Total Relative Value of Company Owned by Other Belk Companies -- 510,005
-----------
Net Relative Value of Company = $ 1,514,227
===========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$1,514,227 / $1,156,226,577 = .1310%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.1310% X 59,998,834) / 959 = 81.9355
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
16
<PAGE> 2589
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 85.10
Dividends(2).............................................. 20.00
Book value per share(3)................................... 983.40
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 78.66
Dividends(2).............................................. 21.30
Book value per share...................................... 1,025.83
</TABLE>
- ---------------
(1) Based on 1,282 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 1,282 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
17
<PAGE> 2590
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 3,242 $ 3,055 $ 2,824
Net income.................................................. 132 103 109
Per common share
Net income (loss)(1)...................................... 102.66 80.57 85.10
Dividends................................................. 20.09 20.00 20.00
Book value(2)............................................. 857.73 918.30 983.40
Total assets................................................ 1,307 1,413 1,510
Shareholders' equity........................................ 1,100 1,177 1,261
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $1,994 $1,880
Income from operations...................................... 63 96
</TABLE>
- ---------------
(1) Based on 1,285, 1,282 and 1,282 shares of Common Stock, the weighted average
number of shares of Common Stock outstanding for the years ended January 31,
1995, February 3, 1996 and February 1, 1997, respectively.
(2) Based on 1,282, shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
18
<PAGE> 2591
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
To the extent a discussion of the financial condition and results of
operations of the Company for any of the fiscal years ended January 31, 1995,
February 3, 1996 or February 1, 1997 or for either of the nine-month periods
ended November 2, 1996 or November 1, 1997 is necessary to identify certain
trends or conditions that differ from the combined Belk Companies and that are
material to Shareholders' understanding of the financial condition or results of
operations of the Company, such discussion is included below. The discussion
which follows is based upon and should be read in conjunction with the
historical financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus Supplement.
Comparable store sales decreased in fiscal year 1996 as a result of the
announcement of the closing of American Tobacco Company, the largest employer in
the city, to take place over a two year period. The sales trend decline
continued into fiscal year 1997 due to reduced customer traffic and increase in
vacancies at the mall location.
Comparable store sales have decreased for the nine months ended November 1,
1997 due to the construction of a new shopping center on the major thoroughfare
in the city.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Pennrose Plaza
in Reidsville, North Carolina. The Company's store operates in a manner
consistent with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is managed out of the Huffstetler group office
in Greensboro, North Carolina.
Facilities. The Company leases its store building, which contains
approximately 33,000 square feet of floor area. The current term of the store
lease expires in 2000. The Company believes the building is adequate to meet its
current needs.
Competition. Specific competitors in the Company's market include Peebles
and Wal-Mart.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE> 2592
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)(f)........................................ 438 34.2%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(e)(f)................................................. 339 26.4%
H. W. McKay Belk (Director and Executive Officer)
(b)(e)(f)................................................. 339 26.4%
John R. Belk (Director and Executive Officer) (b)(e)(f)..... 339 26.4%
Henderson Belk (Director) (c)(d)............................ 53 4.1%
Sarah Belk Gambrell (c)(d).................................. 97 7.6%
David Belk Cannon (Director) (h)............................ 56 4.4%
James K. Glenn, Jr. (Director) (g).......................... 174 13.6%
Leroy Robinson (Director) (b)............................... 6 *
Betty B. Melchert........................................... 100 7.8%
James K. Glenn, Jr., Trustee under will of Daisy Belk
Mattox.................................................... 71 5.5%
J.K. Glenn and Sara Stevens Glenn, Trustees under Will of
A.F. Stevens f/b/o Gretchen Stevens....................... 95 7.4%
Belk-Beck Company of Burlington, North Carolina, Inc........ 96 7.4%
J.V. Properties............................................. 165 12.9%
Pete Huffstetler (Executive Officer)........................ 0 *
Gordon J. Tendler (Officer)................................. 0 *
Darrell Murphy (Officer).................................... 0 *
All Directors and Executive Officers as a group (9
persons).................................................. 698 54.4%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk and Leroy Robinson -- 2801 West Tyvola Road, Charlotte, N.C.
28217-4500; Sarah Belk Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207;
David Belk Cannon -- 1607 W. Floyd Baker Blvd., Gaffney, S.C. 29341; James K.
Glenn, Jr. and Sara Stevens Glenn -- P.O. Box 2736, Winston-Salem, N.C. 27102;
Betty B. Melchert -- 1240 Tate Road, Reidsville, N.C. 27320; Pete Huffstetler,
Darrell Murphy and Gordon J. Tendler -- 1-104 Carolina Circle Mall, Greensboro,
N.C. 27405; Belk-Beck Company of Burlington, North Carolina, Inc. and J.V.
Properties -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 56 shares held by Montgomery Investment Company, of which John M.
Belk is the majority shareholder.
(b) Includes 6 shares held by Thomas M. Belk, Trustee U/A dated September 15,
1993. Voting and investment power is shared by the Trustees, who are
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk, John M. Belk and Leroy Robinson.
20
<PAGE> 2593
(c) Includes 50 shares held in several Trusts established by the Will of W. H.
Belk for the benefit of his children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(d) Includes 3 shares held in several Trusts established by the Will of Mary I.
Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(e) Includes 62 shares held by Belk Enterprises, Inc. and 96 shares held by
Belk-Beck Company of Burlington, North Carolina, Inc., which shares are
voted by the members of the Executive Committee of the Board of Directors
of each such Corporation, under authority given by the directors of each
such Corporation at the annual meeting of directors held in March, 1997.
The Executive Committee of each such Corporation consists of John M. Belk,
Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(f) Includes 165 shares held by J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investing power with respect to such
shares.
(g) Included are 71 shares held by James K. Glenn, Jr., Trustee under Will of
Daisy Belk Mattox, 14 shares held by John Belk Stevens Trust U/W ITEM III,
Section C f/b/o James Kirk Glenn, Jr., et al, 29 shares held by John Belk
Stevens Trust U/W ITEM III, Section B f/b/o Mary S. Whelchel and 29 shares
held by John Belk Stevens Trust U/W ITEM III, Section A f/b/o Sara S.
Glenn. Voting and investment power is vested in James K. Glenn, Jr., the
Trustee of each Trust.
(h) Included are 20 shares held by Residuary Trust U/W Mrs. Henry Belk Cannon.
The Trustees, David Belk Cannon and John C. Daughtridge, have voting and
investment power with respect to such shares.
21
<PAGE> 2594
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 2595
BELK DEPARTMENT STORE OF REIDSVILLE, N.C., INC.
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 24,948 $ 28,708
Accounts receivable, net.................................. 448,432 490,940
Merchandise inventory..................................... 527,863 535,464
Receivable from affiliates, net........................... 238,047 295,402
Deferred income taxes..................................... 10,580 5,652
Other..................................................... 28,696 21,559
---------- ----------
Total current assets........................................ 1,278,566 1,377,725
Investments................................................. 4,451 4,451
Property, plant and equipment, net.......................... 117,568 115,908
Other noncurrent assets..................................... 12,905 11,438
---------- ----------
$1,413,490 $1,509,522
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 196,354 $ 194,003
Accrued income taxes...................................... 9,494 25,847
---------- ----------
Total current liabilities................................... 205,848 219,850
Deferred income taxes....................................... 15,433 12,340
Other noncurrent liabilities................................ 14,945 16,610
---------- ----------
Total liabilities........................................... 236,226 248,800
Shareholders' equity:
Common stock.............................................. 128,200 128,200
Retained earnings......................................... 1,049,064 1,132,522
---------- ----------
Total shareholders' equity.................................. 1,177,264 1,260,722
---------- ----------
$1,413,490 $1,509,522
========== ==========
</TABLE>
F-2
<PAGE> 2596
BELK DEPARTMENT STORE OF REIDSVILLE, N.C., INC.
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $3,241,897 $3,054,940 $2,824,091
Operating costs and expenses............................... 3,025,903 2,892,868 2,671,157
---------- ---------- ----------
Income from operations..................................... 215,994 162,072 152,934
---------- ---------- ----------
Other income (expense):
Interest, net............................................ (6,242) (3,958) 5,243
Dividend income.......................................... 160 160 80
Gain (loss) on disposal of property, plant and
equipment............................................. -- -- 2,358
Miscellaneous, net....................................... (3,325) (5,591) (672)
---------- ---------- ----------
Total other expense, net................................... (9,407) (9,389) 7,009
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 206,587 152,683 159,943
Income tax expense (benefit)............................... 74,663 49,395 50,845
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 131,924 103,288 109,098
---------- ---------- ----------
Net earnings............................................... 131,924 103,288 109,098
Retained earnings at beginning of period................... 869,181 971,416 1,049,064
Dividends paid............................................. (25,760) (25,640) (25,640)
Purchase of treasury stock................................. (3,929) -- --
---------- ---------- ----------
Retained earnings at end of period......................... $ 971,416 $1,049,064 $1,132,522
========== ========== ==========
</TABLE>
F-3
<PAGE> 2597
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 2598
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 2599
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
A-1
<PAGE> 2600
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares; (ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (iv) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes; (v)
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional shares so created is to be acquired by cash under
G.S. 55-6-04; (vi) changes the corporation into a nonprofit corporation or
cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 2601
SEC.SEC. 55-13-04 TO 55-13-19. Reserved for future codification purposes.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 2602
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 2603
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision (a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and (a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 2604
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 2605
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
----------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement................... $ 2,824,091 $109,098 $154,699 $186,402 $1,260,722
Adjustments to eliminate less than
wholly-owned subsidiaries................... -- -- -- -- --
----------- -------- -------- -------- ----------
Adjusted Shareholders' Statement.............. $ 2,824,091 109,098 154,699 186,402 1,260,722
=========== -------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E............... (1,608) (2,358) (2,358)
Gain/loss on sale of securities............. -- -- --
Impairment loss............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries.............................. -- -- --
Gain/loss on discontinued operations........ -- -- --
Adjustment to tax expense................... -- -- -- --
-------- -------- --------
Total non-operating items..................... (1,608) (2,358) (2,358)
-------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities............................. (55) (80) (80)
Adjustment for ownership in other Belk
entities.................................. (4,451)
-------- -------- -------- ----------
Per Model..................................... $107,435 $152,261 $183,964 $1,256,271
======== ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER
SHAREHOLDERS' STATEMENT
Assets
Cash & cash equivalents................... $ (28,707)
Negative cash balances reclassified to
accounts payable........................ --
Receivables from affiliates, net.......... (295,402)
Loans receivable from affiliates, net..... --
Liabilities
Notes payable............................. --
Current installments of long-term debt.... --
Current portion of obligations under
capital leases.......................... --
Payables to affiliates, net............... --
Long-term debt, excluding current
installments............................ --
Obligations under capital leases,
excluding current portion............... --
Loans payable to affiliates, net.......... --
-----------
Net debt (cash)............................... (324,109)
Adjustments to eliminate less than
wholly-owned subsidiaries................... --
-----------
Per Model..................................... $ (324,109)
===========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 2606
SUPPLEMENT NO. 62
<PAGE> 2607
BELK DEPARTMENT STORE OF REIDSVILLE, N.C., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Thursday, April 16, 1998, at 8:50 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: ,1998
-------------------
-------------------------------
Signature
-------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 62
<PAGE> 2608
BELK'S DEPARTMENT STORE OF ROCKINGHAM, N.C., INCORPORATED
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk's Department Store of Rockingham, N.C.,
Incorporated (the "Company"), to be held on April 15, 1998, at 11:00 a.m., local
time, at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road,
Charlotte, North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 27.6691 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 110,317 shares of New Belk Class A Common Stock which
will represent approximately 0.1839% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special
(63)
<PAGE> 2609
Meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed postage paid envelope. If you plan to attend the Special Meeting,
you may vote in person if you wish, even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 2610
BELK'S DEPARTMENT STORE OF ROCKINGHAM, N.C., INCORPORATED
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK'S DEPARTMENT STORE OF ROCKINGHAM, N.C.,
INCORPORATED:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk's Department Store of Rockingham, N.C., Incorporated (the
"Company") will be held on April 15, 1998, at 11:00 a.m., local time, at the
offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte, North
Carolina 28217-4500, for the following purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 27.6691 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 2611
BELK'S DEPARTMENT STORE OF ROCKINGHAM, N.C., INCORPORATED
SUPPLEMENT NO. 63
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 63 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK'S DEPARTMENT
STORE OF ROCKINGHAM, N.C., INCORPORATED (THE "COMPANY"), THE DISCUSSION HEREIN
SUPERSEDES THE DISCUSSION IN THE PROXY STATEMENT/ PROSPECTUS. ALL OF THE
INFORMATION CONTAINED HEREIN ASSUMES THAT ALL OF THE BELK COMPANIES PARTICIPATE
IN THE REORGANIZATION. IF ANY ONE OR MORE BELK COMPANIES DO NOT PARTICIPATE IN
THE REORGANIZATION, THE INFORMATION CONTAINED HEREIN WITH RESPECT TO THE COMPANY
AND THE EFFECT OF THE REORGANIZATION ON THE COMPANY AND ITS SHAREHOLDERS MAY NOT
BE ACCURATE. SEE "RISK FACTORS" IN THE PROXY STATEMENT/PROSPECTUS. ALL
CAPITALIZED TERMS USED HEREIN WHICH ARE NOT OTHERWISE DEFINED SHALL HAVE THE
MEANINGS SPECIFIED IN THE PROXY STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 16
SELECTED HISTORICAL FINANCIAL INFORMATION................... 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 18
BUSINESS OF THE COMPANY..................................... 18
SECURITY OWNERSHIP OF THE COMPANY........................... 19
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 2612
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1916. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 11:00 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 27.6691 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 5,348 shares of Common Stock
outstanding held of record by 74 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 55.7% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 2613
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 5,600 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock
3
<PAGE> 2614
held by a New Belk Stockholder who is a Class A Permitted Holder will also
automatically convert into New Belk Class B Common Stock in the event that such
New Belk Stockholder no longer meets the requirements of a Class A Permitted
Holder. New Belk Class B Common Stock has no conversion rights. The Company
Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving
4
<PAGE> 2615
the distribution. The Company Bylaws provide that the Board of Directors of the
Company (the "Company Board") may from time to time declare dividends on the
Company's outstanding shares in the manner and upon the terms and conditions
provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. DGCL requires that
an amendment of the certificate of incorporation of a corporation be adopted by
the board of directors and the holders of a majority of the outstanding shares
of stock entitled to vote thereon. The holders of the outstanding shares of a
class are entitled to vote as a separate class on a proposed amendment that
would increase or decrease the aggregate number of authorized shares of such
class, increase or decrease the par value of the shares of such class or alter
or change the powers, preferences or special rights of the shares of such class
so as to affect them adversely. If any proposed amendment would alter or change
the powers, preferences or special rights of one or more series of any class so
as to affect them adversely, but would not so affect the entire class, then only
the shares of the series so affected by the amendment will be considered a
separate class for purposes of voting by classes. The New Belk Certificate is
consistent with the foregoing provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the
5
<PAGE> 2616
shareholders and approved (i) by a majority (unless the articles of
incorporation, a bylaw adopted by the shareholders or the board of directors
require a greater vote or a vote by voting groups) of the votes entitled to be
cast on the amendment by any voting group with respect to which the amendment
would create dissenters' rights and (ii) when a quorum is present, by all other
voting groups entitled to vote on the amendment through casting more affirmative
than opposing votes. As under the DGCL, the holders of the outstanding shares of
a class or series are entitled to vote as a separate voting group (if
shareholder voting is otherwise required by the NCBCA) on a proposed amendment
if the amendment would change certain fundamental rights and preferences of that
class or series. The Company Articles do not specify a greater voting
requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without prior notice, if all
holders of outstanding shares entitled to vote on such action sign the written
consent(s) describing such action. The Company Bylaws and Company Articles do
not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
6
<PAGE> 2617
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum and if the vacancy is one that the directors are authorized to
fill, then the directors may fill the vacancy by the affirmative vote of a
majority of all the directors remaining in office. If the vacant office was held
by a director elected by a voting group of shareholders, only the remaining
director or directors elected by that voting group or the holders of shares of
that voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more than 30% during any 12-month period. The
articles of incorporation or bylaws may establish a variable range for the size
of the board of directors by fixing a minimum and maximum number of directors.
If a variable range is established, the number of directors may be fixed or
changed from time to time, within the minimum and maximum, by the shareholders
or (unless the articles of incorporation or a shareholders' agreement shall
otherwise provide) the board of directors. After shares are issued, only the
shareholders may change the range for the size of the board or change from a
fixed to a variable-range size board or vice versa. The Company Bylaws require
the Company Board to consist of at least three, but no more than 15, members.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless
7
<PAGE> 2618
otherwise provided in the certificate of incorporation or the bylaws. The New
Belk Bylaws and the New Belk Certificate do not provide for any qualifications
for directors of the New Belk Board.
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the disinterested directors or committee authorized, approved or
ratified the transaction; (ii) the material facts of the transaction and the
director's interest were disclosed or known to the shareholders entitled to vote
and the
8
<PAGE> 2619
disinterested shares authorized, approved or ratified the transaction; or (iii)
the transaction was fair to the corporation.
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any transaction from which the director derived an improper
personal benefit or (iv) acts or omissions occurring prior to the date the
provisions became effective.
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers
9
<PAGE> 2620
against any and all liability and litigation expense, including reasonable
attorneys' fees, arising out of their status as such or their activities in
either of such capacities; provided, however, that the Company will not
indemnify a director or officer against liability or litigation expense that he
may incur on account of his activities which were, at the time taken, known or
believed by him to be clearly in conflict with the best interest of the Company.
The Company will likewise and to the same extent indemnify any person who, at
the request of the Company, is or was serving as a director or as an officer of
another corporation, joint venture, trust or other enterprise, as a partner of a
partnership or as a trustee or administrator under an employee benefit plan. The
Company will also indemnify the director or officer for reasonable costs,
expenses and attorneys' fees in connection with the enforcement of rights to
indemnification granted therein, if it is so determined in accordance with the
Company Articles that the director or officer is entitled to indemnification
thereunder. The Company Articles provide that to the fullest extent permitted by
the NCBCA a director will not be personally liable to the Company, or any of its
Shareholders or otherwise for monetary damages for breach of duty of care or
other duty as a director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested stockholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder,
except in certain circumstances; (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested stockholder, except
in certain circumstances; or (v) any receipt by the interested stockholder of
the benefit of any loans, advances, guarantees, pledges or other financial
benefits (other than those expressly permitted in (i) through (iv) above)
provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) an
affiliate or associate of the corporation that within three years of the date in
question was the direct
10
<PAGE> 2621
or indirect owner of at least 15% of the voting power of any class or series of
the then outstanding stock of the corporation.
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
11
<PAGE> 2622
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder makes the demand in good faith
and for a proper purpose, (ii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iii) the records are directly connected with the purpose and (iv) the
shareholder gives the corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to inspect and
copy such records. Such documents include: (i) records of any final action taken
by the board of directors, records of any final action of a committee of the
board of directors while acting in place of the board of directors on behalf of
the corporation, minutes of any meeting of the shareholders and records of
action taken by the shareholders or board of directors without a meeting; (ii)
accounting records of the corporation; and (iii) the record of shareholders.
DISSENTERS' RIGHTS OF APPRAISAL
If the Reorganization and the transactions contemplated thereby are
consummated, any Shareholder who properly perfects his statutory dissenters'
rights of appraisal in accordance with Article 13 of the NCBCA ("Article 13") is
entitled to receive in cash the fair value of such Shareholders' shares of
Common Stock determined immediately prior to the Merger, excluding any
appreciation or depreciation in value in anticipation of the Merger. The
following is a summary of Article 13 and the procedures for Shareholders
dissenting from the Merger and perfecting such dissenters' rights of appraisal.
This summary is qualified in its entirety by reference to Article 13, which is
reprinted in full as Annex A to this Prospectus Supplement. Annex A should be
reviewed carefully by any Shareholder who wishes to perfect such statutory
dissenters' rights of appraisal. FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES
SET FORTH IN ARTICLE 13 WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS.
Any Shareholder who (i) gives written notice of his intent to demand
payment for his shares if the Merger is consummated and becomes effective, which
notice is actually received by the Company before the vote is taken at the
Special Meeting and (ii) does not vote his shares at the Special Meeting in
favor of the proposal to approve the Reorganization Agreement, is entitled, if
the Reorganization Agreement is approved and consummated, to receive payment of
the fair value of such shareholders's shares upon compliance with the applicable
procedural requirements. Such payment shall be made by the "Surviving
Corporation" which, for purposes of this Dissenters' Rights summary, means (i)
the Company, with respect to action taken prior to the Effective Time and (ii)
New Belk, with respect to action taken after the Effective Time.
Any written notice of a Shareholders's intent to demand payment for such
Shareholder's shares of Common Stock if the Merger is consummated must be
received by the Company at: 2801 West Tyvola Road, Charlotte, North Carolina
28217-4500, Attention: Ralph A. Pitts, General Counsel, prior to the shareholder
vote at the Special Meeting. A Shareholder who votes for the Merger will have no
dissenters' rights. The submission by a Shareholder of a proxy card without
voting instructions with respect to the proposal to approve the Merger or a
proxy voted in favor of the Reorganization Agreement (if not revoked) will count
as a vote in favor of the Merger and will serve to waive dissenters' rights. A
Shareholder who does not satisfy each of these requirements is not entitled to
payment for such Shareholder's shares of Common Stock under the dissenters'
rights provisions of the NCBCA and will be bound by the terms of the
Reorganization Agreement.
After the Special Meeting, but no later than 10 days after the Effective
Time, the Surviving Corporation must mail, by registered or certified mail,
return receipt requested, a written dissenters' notice (a "Dissenters' Notice")
to all Shareholders who have given the required notice and not voted in favor of
the Reorganization Agreement as described above. The Dissenters' Notice will (i)
supply a form for demanding payment (a "Payment Demand"), (ii) state where the
Payment Demand must be sent and where and when certificates must be deposited,
(iii) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the Payment Demand is received, (iv) set a date
by which the Surviving Corporation must receive the Payment Demand, which date
may not be fewer than 30 nor more than 60 days after the date the Dissenters'
Notice is mailed and (v) be accompanied by a copy of Article 13. A Shareholder
who is sent a Dissenters' Notice and who wishes to assert dissenters' rights
must demand payment and deposit his certificates in accordance with the terms of
the Dissenters' Notice. A Shareholder who demands payment and
12
<PAGE> 2623
deposit his certificates in accordance with the terms of the Dissenters' Notice
retains all other rights of a Shareholder until these rights are canceled or
modified by the consummation and effectiveness of the Merger. A Shareholder who
does not demand payments or deposit his certificates in accordance with the
terms of the Dissenters' Notice will not be entitled to payment for his shares
under the NCBCA. If any such holder of Common Stock fails to perfect or shall
have effectively withdrawn or lost such right, each share of such holder's
Common Stock will thereupon be deemed to have been converted into and to have
become, as of the Effective Time, the right to receive, without any interest
thereon, the number of shares of New Belk Class A Common Stock such Shareholder
is otherwise entitled to as a result of the Merger.
As soon as the Merger is consummated, or within 30 days after receipt of a
Payment Demand, the Surviving Corporation must pay each dissenter who complied
with the requirements of Article 13 the amount the Surviving Corporation
estimates to be the fair value of such Shareholder's shares of Common Stock,
plus interest accrued to the date of payment ("Payment"). The Payment must be
accompanied by: (i) the Surviving Corporation's most recent available balance
sheet as of the end of a fiscal year ending not more than 16 months before the
date of the Payment, an income statement for that year, a statement of cash
flows for that year and the latest available interim financial statements, if
any; (ii) an explanation of how the Corporation estimated the fair value of the
shares; (iii) an explanation of how the interest was calculated; (iv) a
statement of the dissenters' right to demand payment under the provisions of the
NCBCA; and (v) a copy of Article 13. If the Merger is not effected within 60
days after the date set for demanding payment and depositing Certificates, the
Surviving Corporation will return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares. If after returning
deposited certificates and releasing transfer restrictions, the Merger is
effected, the Surviving Corporation will deliver a new Dissenters' Notice and
repeat the payment demand procedure.
A dissenting Shareholder may notify the Surviving Corporation in writing of
his own estimate of the fair value of such shares and the amount of interest
due, and demand payment of the amount in excess of the Payment for the fair
value of his shares and interest due (a "Demand for Payment") if:
(i) the dissenting Shareholder believes the amount paid by the
Surviving Corporation is less than the fair value of his shares or that the
interest due is incorrectly calculated;
(ii) the Surviving Corporation fails to make the Payment; or
(iii) the Surviving Corporation, having failed to take the proposed
action, does not return the deposited certificates within 60 days after the
date set for demanding payment.
A dissenting Shareholder waives his right to make a Demand for Payment
under (i), (ii) and (iii) above unless he notifies the Surviving Corporation of
his demand in writing under subparagraph (i) above within 30 days after the
Surviving Corporation's Payment for his shares or under subparagraph (ii) or
(iii) above within 30 days after the Surviving Corporation has failed to perform
in a timely manner. A dissenting Shareholder who fails to notify the Surviving
Corporation of his Demand for Payment under (i), (ii) or (iii) above within the
applicable 30-day period will be deemed to have withdrawn his dissent and Demand
for Payment.
If a Demand for Payment remains unsettled, the dissenting Shareholder may
commence a proceeding within 60 days after the earlier of (i) the date of his
Demand for Payment or (ii) the date the Payment is made, and petition the
Superior Court Division of the General Court of Justice (the "Court"), to
determine the fair value of the shares and accrued interest. A dissenting
Shareholder who takes no action within such 60-day period is deemed to have
withdrawn his dissent and Demand for Payment.
A Shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he complies with the conditions established by
Article 13 with respect to all shares beneficially owned by any one person and
notifies the Company in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. The rights of such a partial dissenting
Shareholder are determined as to which such Shareholder dissents and such
Shareholder's other shares were registered in the names of different
shareholders.
13
<PAGE> 2624
A beneficial Shareholder may assert dissenters' rights as to the shares
held on his behalf only if (i) such Shareholder submits to the Company the
record Shareholder's written consent to the dissent not later than the time the
beneficial Shareholder asserts dissenters' rights and (ii) such Shareholder does
so with respect to all shares of which he is the beneficial Shareholder.
DETERMINATION OF EXCHANGE RATIO
The methodology used to determine the Exchange Ratio for the Merger is
described in detail in the Proxy Statement/Prospectus under the caption
"Determination of Applicable Exchange Ratios." As further described in the Proxy
Statement/Prospectus, the first step in determining the Exchange Ratio is to
calculate the relative operating value (the "Relative Operating Value") of the
Company by applying the designated multiples and taking the highest of: (i) the
Company's adjusted sales during the period from February 4, 1996 to February 1,
1997 (the "Measurement Period") multiplied by six-tenths, less Net Debt
(calculated in accordance with Annex B of this Prospectus Supplement under
"Components of Net Debt (Cash) per Shareholders' Statement") at the end of the
Measurement Period; (ii) the Company's adjusted earnings before interest, taxes,
depreciation and amortization ("EBITDA") during the Measurement Period
multiplied by seven, less Net Debt at the end of the Measurement Period; (iii)
the Company's adjusted earnings before interest and taxes ("EBIT") during the
Measurement Period multiplied by 10, less Net Debt at the end of the Measurement
Period; (iv) the Company's adjusted net income during the Measurement Period
multiplied by 15; and (v) the Company's adjusted book equity multiplied by one.
The second step involves determining the total relative value (the "Total
Relative Value") of the Company by adding the Relative Operating Value for the
Company to the product of (i) the percentage ownership in other Belk Companies
held by the Company and (ii) the corresponding Total Relative Value of the other
Belk Companies in which the Company owns a percentage interest.
The net relative value (the "Net Relative Value") for the Company is then
determined by subtracting from the Total Relative Value of the Company the
product of (i) the respective percentage ownership interest of the Company held
by other Belk Companies and (ii) the Total Relative Value of the Company.
The percentage of New Belk Class A Common Stock allocated to the
Shareholders (other than Belk Companies) upon consummation of the Merger is then
determined by dividing the Net Relative Value of the Company by the aggregate
Net Relative Values of all Belk Companies.
Finally, the Exchange Ratio for the Merger is determined by dividing the
product of (i) the percentage of New Belk Class A Common Stock expected to be
owned by the Shareholders (other than Belk Companies) upon consummation of the
Merger and (ii) 59,998,834 (the number of shares of New Belk Class A Common
Stock expected to be issued to Existing Belk Shareholders (other than Belk
Companies) in the Reorganization), by the number of shares of Common Stock
outstanding on November 25, 1997 (other than shares of Common Stock held by
other Belk Companies). See "Determination of Applicable Exchange Ratios" in the
Proxy Statement/Prospectus.
The following table shows the computation of Relative Operating Value for
the Company, based on each separate methodology as described above:
<TABLE>
<CAPTION>
NET DEBT RELATIVE
METHODOLOGY ACTUAL ADJUSTED MULTIPLE (CASH) OPERATING VALUES
- ----------- ---------- ---------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales..................... $6,162,425 $6,162,425 0.6 $852,990 $2,844,465
EBITDA........................ 437,520 437,520 7 852,990 2,209,650
EBIT.......................... 179,639 179,639 10 852,990 943,400
Net Income.................... 68,076 68,076 15 -- 1,021,140
Book Equity................... 2,852,161 2,851,585 1 -- 2,851,585
</TABLE>
14
<PAGE> 2625
The following table shows the method used to calculate the Total Relative
Value of the Company:
<TABLE>
<CAPTION>
TOTAL RELATIVE VALUE RELATIVE OPERATING
PERCENTAGE OF OTHER OF VALUE OF
OTHER BELK COMPANIES BELK COMPANIES OWNED OTHER BELK COMPANIES OTHER BELK COMPANIES
OWNED BY COMPANY BY COMPANY OWNED BY COMPANY OWNED BY COMPANY
<S> <C> <C> <C> <C> <C>
N/A N/A% X $ N/A = $ N/A
----------
Total $ N/A
==========
Relative Operating Value of Company $2,851,585
Relative Operating Value of Other Companies Owned by Company + --
----------
Total Relative Value of Company = $2,851,585
==========
</TABLE>
The following table shows the method used to calculate the Net Relative
Value of the Company:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
PERCENTAGE OWNERSHIP
OF OTHER BELK TOTAL RELATIVE VALUE
OTHER BELK COMPANIES COMPANIES TOTAL RELATIVE VALUE OF COMPANY OWNED BY
THAT OWN COMPANY IN COMPANY OF COMPANY OTHER BELK COMPANIES
<S> <C> <C> <C> <C> <C>
Belk Brothers Company 10.4712% X $ 2,851,585 = $ 298,595
Belk Enterprises,
Inc. 10.1533% X 2,851,585 = 289,530
Belk Department Store
of Clinton, N.C.,
Inc. 4.8242% X 2,851,585 = 137,566
----------
Total $ 725,691
==========
Total Relative Value of Company $2,851,585
Total Relative Value of Company Owned by Other Belk Companies - 725,691
----------
Net Relative Value of Company = $2,125,894
==========
</TABLE>
The following table shows the method used to calculate the percentage of
New Belk Class A Common Stock allocated to the Shareholders (other than Belk
Companies) upon consummation of the Merger:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------- -----------------------------
AGGREGATE NET RELATIVE VALUE PERCENTAGE OF NEW BELK CLASS
NET RELATIVE VALUE OF OF ALL A COMMON STOCK ALLOCATED TO
COMPANY BELK COMPANIES SHAREHOLDERS(1)
<S> <C> <C> <C> <C>
$ 2,125,894 / $1,156,226,577 = .1839%
</TABLE>
The following table shows the method used to calculate the Exchange Ratio
for the Merger:
<TABLE>
<CAPTION>
- --------------------- --------------------- --------------------- ---------------------
SHARES OF NEW BELK
CLASS A
PERCENTAGE OF NEW COMMON STOCK ISSUED
BELK IN THE
CLASS A COMMON STOCK REORGANIZATION TO NUMBER OF OUTSTANDING
ALLOCATED TO EXISTING SHARES OF COMMON
SHAREHOLDERS(1) BELK SHAREHOLDERS STOCK(2) EXCHANGE RATIO
<S> <C> <C> <C> <C> <C> <C>
(.1839% X 59,998,834) / 3,987 = 27.6691
</TABLE>
(1) Does not include any Belk Companies that own Common Stock of the Company.
(2) Does not include shares of Common Stock held by other Belk Companies.
The Exchange Ratio was derived from certain financial information in the
Company's financial statements for the fiscal year ended February 1, 1997
included elsewhere herein (the "Company Financials"). Such financial information
has been adjusted to take into account unusual items and to reflect only the
direct operating business of the Company. The adjustments to such financial
information are described in Annex B to the Prospectus Supplement.
15
<PAGE> 2626
COMPARATIVE PER SHARE DATA
Set forth below are certain historical earnings per share and book value
per share data of the Company, unaudited pro forma combined per share data of
New Belk and unaudited pro forma equivalent per share data of New Belk giving
effect to the Reorganization. The data set forth below should be read in
conjunction with the historical financial statements of the Company, including
the condensed notes thereto, contained elsewhere in this Prospectus Supplement
and unaudited pro forma combined financial statements of New Belk, including the
notes thereto, contained in the Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
FEBRUARY 1, 1997
-----------------
<S> <C>
COMPANY HISTORICAL
Earnings per share(1)..................................... $ 12.73
Dividends(2).............................................. 12.50
Book value per share(3)................................... 533.31
NEW BELK PRO FORMA COMBINED(4)
Earnings per share from continuing operations............. 0.96
Dividends(2).............................................. 0.26
Book value per share(5)................................... 12.52
PRO FORMA EQUIVALENTS(4)(6)
Earnings per share from continuing operations............. 26.56
Dividends(2).............................................. 7.19
Book value per share...................................... 346.42
</TABLE>
- ---------------
(1) Based on 5,348 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding during the year ended February 1, 1997.
(2) The total dividends paid by the Company in fiscal 1997 includes dividends
paid by the Company to other Belk Companies. Such dividends would be
eliminated in the Reorganization. In addition, the per share data numbers
above are not reflective of the dividend policy which New Belk intends to
implement following the Reorganization. See "Summary -- Dividend Policy" in
the Proxy Statement/Prospectus.
(3) Historical book value per share information for the Company is computed by
dividing historical shareholders' equity for the Company by 5,348 shares of
Common Stock, the number of shares of Common Stock outstanding at the end of
the period presented.
(4) All pro forma per share data has been calculated on the basis of 59,713,460
shares of New Belk Class A Common Stock outstanding upon consummation of the
Reorganization, which excludes the 246,042 shares of New Belk Class A Common
Stock which will be acquired by Belk-Simpson in the Belk-Simpson Merger and
the 285,375 shares of New Belk Class A Common Stock which will be acquired
by Belk-Lindsey Stores, Inc. in the Reorganization that will be canceled
upon consummation of the Reorganization. See "Determination of Exchange
Ratio."
(5) Pro forma combined book value per share information is computed by dividing
pro forma shareholders' equity by the pro forma shares of New Belk.
(6) Pro forma equivalent per share information for the Company is computed by
multiplying New Belk pro forma combined book value per share and New Belk
pro forma combined earnings per share from continuing operations by the
Exchange Ratio for the Merger.
16
<PAGE> 2627
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected data presented below for, and as of the end of, each of the
years in the three-year period ended February 1, 1997 and for the nine-month
periods ended November 2, 1996 and November 1, 1997 is derived from the
unaudited financial statements of the Company, certain of which are included
elsewhere in this Prospectus Supplement. The unaudited interim data reflects, in
the judgment of management, all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation of the results for such interim
periods. Results of operations for unaudited interim periods are not necessarily
indicative of results which may be expected for any interim or annual period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $ 6,127 $ 6,059 $ 6,162
Net income.................................................. 186 168 68
Per common share
Net income (loss)(1)...................................... 34.87 31.46 12.73
Dividends................................................. 15.00 12.50 12.50
Book value(2)............................................. 514.12 533.08 533.31
Total assets................................................ 3,075 4,256 4,471
Shareholders' Equity........................................ 2,750 2,851 2,852
</TABLE>
---------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 2, NOVEMBER 1,
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $4,236 $4,186
Income from operations...................................... 47 78
</TABLE>
- ---------------
(1) Based on 5,348 shares of Common Stock, the weighted average number of shares
of Common Stock outstanding for the years ended January 31, 1995, February
3, 1996 and February 1, 1997.
(2) Based on 5,348 shares of Common Stock outstanding as of January 31, 1995,
February 3, 1996 and February 1, 1997.
17
<PAGE> 2628
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A discussion of the historical combined financial condition and results of
operations of the Belk Companies for each of the fiscal years ended January 31,
1995, February 3, 1996 and February 1, 1997 and for each of the nine-month
periods ended November 2, 1996 and November 1, 1997 is included in the Proxy
Statement/Prospectus. The financial information, discussion and analysis
included therein is based upon and should be read in conjunction with the
historical combined financial statements of the Belk Companies, including the
notes thereto, which are also included in the Proxy Statement/Prospectus.
To the extent a discussion of the financial condition and results of
operations of the Company for any of the fiscal years ended January 31, 1995,
February 3, 1996 or February 1, 1997 or for either of the nine-month periods
ended November 2, 1996 or November 1, 1997 is necessary to identify certain
trends or conditions that differ from the combined Belk Companies and that are
material to Shareholders' understanding of the financial condition or results of
operations of the Company, such discussion is included below. The discussion
which follows is based upon and should be read in conjunction with the
historical financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus Supplement.
Revenues increased 8.3% for the nine months ended November 2, 1996 due to a
remodel of the store in November of fiscal year 1996.
Income from operations as a percent of sales decreased in fiscal year 1997
from costs incurred in fiscal year 1996 due to an increase in depreciation. The
increase in depreciation is attributable to costs incurred in the remodel of the
store in November of fiscal year 1996.
BUSINESS OF THE COMPANY
General. The Company operates a retail department store in Richmond Plaza
in Rockingham, North Carolina. The Company's store operates in a manner
consistent with the business of the Belk Companies described in the Proxy
Statement/Prospectus. The store is managed out of the Howard group office in
Fayetteville, North Carolina.
Facilities. The Company leases its store building, which contains
approximately 46,000 square feet of floor area. The current term of the lease
expires in 2005. The Company believes the building is adequate to meet its
current needs.
Competition. Specific competitors in the Company's market include Wal-Mart
and Penney.
Legal Proceedings. The Company is not currently a party to any material
litigation and is currently not aware of any pending or threatened litigation
that could have a material adverse effect on the Company's business, financial
condition or results of operations.
18
<PAGE> 2629
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth, based on the number of shares of Common
Stock of the Company beneficially owned as of December 31, 1997, the beneficial
ownership of Common Stock of the Company by: (i) each person who is the
beneficial owner of more than 5% of the outstanding shares of Common Stock of
the Company; (ii) the chief executive officer and the four other persons who
were the most highly compensated executive officers of the Company at the end of
fiscal year 1997; (iii) each director of the Company; and (iv) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
SHARES OF PERCENT OF
COMPANY COMPANY
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John M. Belk (Director and Executive Officer)
(a)(b)(c)(d)(e)(f)(g)..................................... 1,844 34.5%
Thomas M. Belk, Jr. (Director and Executive Officer)
(b)(d)(f)(g)(h)........................................... 1,558 29.1%
H. W. McKay Belk (Director and Executive Officer)
(b)(d)(f)(g)(i)........................................... 1,571 29.4%
John R. Belk (Director and Executive Officer)
(b)(d)(f)(g)(j)........................................... 1,574 29.4%
Henderson Belk (Director) (e)............................... 8 *
Sarah Belk Gambrell (Director) (e).......................... 434 8.1%
David Belk Cannon (Director)................................ 287 5.4%
James K. Glenn, Jr. (Director) (l).......................... 184 3.4%
Leroy Robinson (Director) (b)(d)............................ 143 2.7%
Troy M. Howard (Director and Executive Officer)............. 45 *
Mike Belk Hudson............................................ 320 6.0%
Katherine McKay Belk (b)(d)(k).............................. 281 5.3%
James W. Stephenson, III (m)................................ 265 5.0%
Joe John Stephenson (n)..................................... 269 5.0%
Robert F. Stephenson (o).................................... 266 5.0%
William R. Young (Executive Officer)........................ 0 *
Belk Enterprises, Inc. ..................................... 543 10.2%
J.V. Properties............................................. 560 10.5%
All Directors and Executive Officers as a group (10
persons).................................................. 2,977 55.7%
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
The business/mailing addresses for the beneficial owners, directors and/or
officers are: John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk, John R. Belk,
Henderson Belk, Leroy Robinson, Katherine McKay Belk, Belk Enterprises, Inc. and
J.V. Properties -- 2801 West Tyvola Road, Charlotte, N.C. 28217-4500; Sarah Belk
Gambrell -- 300 Cherokee Road, Charlotte, N.C. 28207; David Belk Cannon -- 1607
W. Floyd Baker Blvd., Gaffney, S.C. 29341; James K. Glenn, Jr. -- P. O. Box
2736, Winston-Salem, N.C. 27102; Mike Belk Hudson -- P. O. Box 556,
Narragansett, R. I. 02882; Troy M. Howard and William R. Young -- 4525 Camp
Ground Road, Fayetteville, N.C. 28314; James W. Stephenson, III -- 104 Cathcart
Circle, Winnsboro, S.C. 29180; Joe John Stephenson -- 306 Carlisle Avenue,
Winnsboro, S.C. 29180; Robert F. Stephenson -- 1879 Havenwood Drive, Lancaster,
S.C. 29720.
All shares of Common Stock indicated in the above table are subject to the
sole investment and voting power of the beneficial owners, directors and/or
officers, except as otherwise set forth in the footnotes below.
(a) Includes 192 shares held by Montgomery Investment Company, of which John M.
Belk is the majority shareholder.
(b) Includes 20 shares held by Brothers Investment Company, which Corporation
is equally owned by John M. Belk and the Estate of Thomas M. Belk. Voting
and investment power is shared by John M. Belk,
19
<PAGE> 2630
Katherine McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W.
McKay Belk, John R. Belk and Leroy Robinson.
(c) Includes 4 shares held by Claudia W. Belk, Tr. U/A f/b/o Mary Claudia Belk.
Claudia W. Belk, Trustee, is John M. Belk's wife.
(d) Includes 123 shares held by Milburn Investment Company, of which the Estate
of Thomas M .Belk is the sole shareholder. Voting and investment power is
shared by the Executors of the Estate of Thomas M. Belk, who are Katherine
McKay Belk, Katherine Belk Morris, Thomas M. Belk, Jr., H. W. McKay Belk,
John R. Belk, John M. Belk and Leroy Robinson.
(e) Includes 8 shares held in several Trusts established by the Will of Mary I.
Belk for the benefit of her children. Voting and investment power of the
Trusts for John M. Belk and Thomas M. Belk is shared by John M. Belk, Sarah
Belk Gambrell, Henderson Belk and W. H. Belk, Jr. Voting and investment
power of the Trusts for Sarah Belk Gambrell, W. H. Belk, Jr. and Henderson
Belk is shared by John M. Belk, Sarah Belk Gambrell, Henderson Belk, W. H.
Belk, Jr. and Irwin Belk.
(f) Includes 543 shares held by Belk Enterprises, Inc. and 258 shares held by
Belk Department Store of Clinton, N.C., Inc., which shares are voted by the
members of the Executive Committee of the Board of Directors of each such
Corporation, under the authority given by the directors of each such
Corporation at the annual meeting of directors held in March, 1997. The
Executive Committee of each such Corporation consists of John M. Belk,
Thomas M. Belk, Jr., H. W. McKay Belk and John R. Belk.
(g) Includes 560 shares held by J.V. Properties, a partnership. The Board of
Managers, consisting of John M. Belk, Thomas M. Belk, Jr., H. W. McKay Belk
and John R. Belk, have voting and investment power with respect to such
shares.
(h) Includes 13 shares held by Thomas M. Belk, Jr. as custodian for his minor
children.
(i) Includes 3 shares held by H. W. McKay Belk as custodian for his minor
children.
(j) Includes 13 shares held by John R. Belk as custodian for his minor
children.
(k) Includes 98 shares held by Katherine M. Belk as custodian for her minor
grandchildren.
(l) Includes 164 shares held by James K. Glenn, Jr., Trustee under Will of
Daisy Belk Mattox and 20 shares held by John Belk Stevens Trust U/W ITEM
III, Section C f/b/o James Kirk Glenn, Jr., et al. Voting and investment
power is vested in James K. Glenn, Jr., the Trustee of each trust.
(m) Includes 15 shares held by James W. Stephenson's wife, Ivor P. Stephenson.
(n) Includes 15 shares held by Joe John Stephenson's wife, Alita T. Stephenson.
(o) Includes 15 shares held by Robert F. Stephenson's wife, Locketta B.
Stephenson.
20
<PAGE> 2631
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Balance Sheets.................................... F-2
Unaudited Statements of Earnings and Retained Earnings...... F-3
Condensed Notes to Unaudited Historical Financial
Statements................................................ F-4
</TABLE>
F-1
<PAGE> 2632
BELK'S DEPARTMENT STORE OF ROCKINGHAM, N.C., INCORPORATED
UNAUDITED BALANCE SHEETS
FEBRUARY 1, 1997 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 65,486 $ 78,221
Accounts receivable, net.................................. 1,121,251 1,309,537
Merchandise inventory..................................... 1,142,886 1,351,024
Refundable income taxes................................... 41,623 5,645
Deferred income taxes..................................... 31,921 60,334
Other..................................................... 54,253 43,050
---------- ----------
Total current assets........................................ 2,457,420 2,847,811
Investments................................................. 576 576
Property, plant and equipment, net.......................... 1,773,245 1,600,760
Other noncurrent assets..................................... 25,150 21,992
---------- ----------
$4,256,391 $4,471,139
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................... $ 384,113 $ 415,270
Payables to affiliates, net............................... 448,508 435,363
Accrued income taxes...................................... -- 31,658
---------- ----------
Total current liabilities................................... 832,621 882,291
Deferred income taxes....................................... 46,266 89,837
Loans payable to affiliates, net............................ 495,841 495,841
Other noncurrent liabilities................................ 30,728 37,274
---------- ----------
Total liabilities........................................... 1,405,456 1,505,243
Deferred income............................................. -- 113,735
Shareholders' equity:
Common stock.............................................. 534,800 534,800
Retained earnings......................................... 2,316,135 2,317,361
---------- ----------
Total shareholders' equity.................................. 2,850,935 2,852,161
---------- ----------
$4,256,391 $4,471,139
========== ==========
</TABLE>
F-2
<PAGE> 2633
BELK'S DEPARTMENT STORE OF ROCKINGHAM, N.C., INCORPORATED
UNAUDITED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 3, FEBRUARY 1,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................. $6,126,575 $6,058,927 $6,162,425
Operating costs and expenses............................... 5,822,374 5,821,581 5,984,591
---------- ---------- ----------
Income from operations..................................... 304,201 237,346 177,834
---------- ---------- ----------
Other income (expense):
Interest, net............................................ 8,372 (5,921) (70,649)
Gain (loss) on disposal of property, plant and
equipment............................................. (2,393) -- --
Miscellaneous, net....................................... (6,905) 152 1,805
---------- ---------- ----------
Total other expense, net................................... (926) (5,769) (68,844)
---------- ---------- ----------
Earnings from continuing operations before income taxes,
and equity in earnings of unconsolidated entities........ 303,275 231,577 108,990
Income tax expense (benefit)............................... 116,801 63,325 40,914
---------- ---------- ----------
Earnings from continuing operations before equity in
earnings of unconsolidated entities...................... 186,474 168,252 68,076
---------- ---------- ----------
Net earnings............................................... 186,474 168,252 68,076
Retained earnings at beginning of period................... 2,108,479 2,214,733 2,316,135
Dividends paid............................................. (80,220) (66,850) (66,850)
---------- ---------- ----------
Retained earnings at end of period......................... $2,214,733 $2,316,135 $2,317,361
========== ========== ==========
</TABLE>
F-3
<PAGE> 2634
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS
FEBRUARY 1, 1997, FEBRUARY 3, 1996 AND JANUARY 31, 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) FISCAL YEAR
The financial statements are prepared on a corporate or consolidated basis,
as appropriate, for each entity and such entity will hereafter be referred to as
the "Company". The Company's fiscal year ends on the Saturday closest to each
January 31.
(2) CONSOLIDATION
The Company's financial statement includes its share of earnings from
consolidated and unconsolidated subsidiaries, if any. A consolidated subsidiary
is one that the parent company owns greater than 50% of the outstanding stock of
the subsidiary. The consolidated statements present the results of operations
and financial position of the parent company and its subsidiaries essentially as
if the group were a single enterprise. This means the Company's ownership
percentage of current shareholders' equity of the subsidiaries is included in
the consolidated financial statements.
An unconsolidated subsidiary is one that the company owns 20% or more but
not greater than 50% of the outstanding stock of another company. The financial
statements of the owning company reflect its ownership percentage of the
earnings of the owned company. The investment in that company is recorded using
the equity method.
(3) NET SALES
Net sales include merchandise sales, net of returns. Layaway sales are
recorded upon receipt of the initial deposit.
(4) MERCHANDISE INVENTORY
Merchandise inventory is stated at the lower of average cost or market
determined by the retail inventory method.
(5) INCOME TAXES
The Company uses an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement and tax bases of assets and liabilities. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets related to net operating loss
carryforwards and/or tax credit carryforwards, if any, are stated at estimated
net realizable value based on projections of future taxable income provided by
the Company's management. If in future years, evidence suggests that the Company
will not generate federal taxable income, as projected by management, some or
all of the deferred tax assets in the accompanying balance sheets will be
written-off as tax expense from continuing operations and shareholders' equity
will be reduced accordingly.
(6) PROPERTY AND EQUIPMENT
Capital additions, improvements, and major renewals are classified as
property and equipment and are reported at cost. Depreciation is provided over
the estimated useful lives (3-40 years) of the assets utilizing straight-line
and various accelerated methods for financial reporting purposes.
Major additions and improvements are capitalized. Expenditures for
maintenance, repair and minor replacements are charged to operations as
incurred.
F-4
<PAGE> 2635
CONDENSED NOTES TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENT SECURITIES
Effective February 2, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 requires
that the Company classify investments in equity securities that have readily
determinable fair values and all investments in debt securities in three
categories and account for them as follows:
- Debt securities that the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity securities and
reported at amortized cost.
- Debt and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and losses
included in earnings.
- Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of
shareholders' equity.
Investments in equity securities of closely held companies and securities
that do not have readily determinable fair values such as investments in other
Belk companies are not subject to the provisions of SFAS No. 115. Any
investments in these types of securities owned by the Company are recorded at
original cost unless the ownership is 20% or more (see note 2 above).
(8) TRANSACTIONS WITH AFFILIATED COMPANIES
The Company participates with Belk Stores Services, Inc. ("BSS") in
obtaining merchandising, architectural, legal, accounting, internal audit,
accounts payable, and other administrative services.
The Company participates in operational, investing and financing activity
with affiliated companies, which are defined as any companies in the Belk group
of corporations. Receivables from and payables to affiliates within the Company
have been eliminated. All other loans and receivables from and loans and
payables to affiliates have been netted in the accompanying balance sheets.
(9) POSTRETIREMENT BENEFITS
The Company accounts for postretirement benefits in accordance with the
provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" which requires that the cost of these benefits be
recognized in the financial statements over an employee's term of service with
the Company.
(10) RECLASSIFICATIONS
Certain 1996 amounts have been reclassified in order to be consistent with
classifications adopted in 1997. These reclassifications have no effect on the
Company's total shareholders' equity or net earnings as previously reported.
(11) NEW ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which addresses the identification and measurement of
asset impairments. SFAS No. 121 is effective for financial statements issued for
all fiscal periods starting after December 15, 1995 and requires the recognition
of impairment losses on long-lived assets when book values exceed expected
future cash flows.
F-5
<PAGE> 2636
ANNEX A
DISSENTERS' RIGHTS OF APPRAISAL
CHAPTER 55
NORTH CAROLINA BUSINESS CORPORATION ACT
STATE OF NORTH CAROLINA
ARTICLE 13.
DISSENTERS' RIGHTS.
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SEC. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and in
the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances, giving due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not less than the rate
provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SEC. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a part unless
(i) approval by the shareholders of that corporation is not required under
G.S. 55-11-03(g) or (ii) such shares are then redeemable by the corporation
at a price not greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(i) alters or abolishes a preferential right of the shares;
A-1
<PAGE> 2637
(ii) creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares; (iii) alters or abolishes a preemptive right of
the holder of the shares to acquire shares or other securities; (iv)
excludes or limits the right of the shares to vote on any matter, or to
cumulate votes; (v) reduces the number of shares owned by the shareholder
to a fraction of a share if the fractional shares so created is to be
acquired by cash under G.S. 55-6-04; (vi) changes the corporation into a
nonprofit corporation or cooperative organization;
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of dissent in favor of holders of shares of any class or series which, at
the record date fixed to determine the shareholders entitled to receive notice
of and to vote at the meeting at which the plan of merger or share exchange or
the sale or exchange of property is to be acted on, were (i) listed on a
national securities exchange or (ii) held by at least 2,000 record shareholders,
unless in either case:
(1) The articles of incorporation of the corporation issuing the
shares provide otherwise;
(2) In the case of a plan of merger or share exchange, the holders of
the class or series are required under the plan of merger or share exchange
to accept for the shares anything except:
a. Cash.
b. Shares, or shares and cash in lieu of fractional shares of the
surviving or acquiring corporation, or of any other corporation which,
at the record date fixed to determine the shareholders entitled to
receive notice of and vote at the meeting at which the plan of merger or
share exchange is to be acted on, were either listed subject to notice
of issuance on a national securities exchange or held of record by at
least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SEC. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
A-2
<PAGE> 2638
SEC.SEC. 55-13-04 TO 55-13-19. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SEC. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SEC. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-15-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SEC. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertified shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
SEC. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
A-3
<PAGE> 2639
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set forth in the dissenters'
notice, is not entitled to payment for his shares under this Article.
SEC. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SEC. 15-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
payment, an income statement for that year, a statement of cash flows for
that year, and the latest available interim financial statements, if any:
(2) An explanation of how the corporation estimated the fair value of
the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
SEC. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on the uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SEC. 55-13-27. RESERVED FOR FUTURE CODIFICATION PURPOSES.
SEC. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S. 55-13-25 is
less than the fair value of his shares or that the interest due is
incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25; or
A-4
<PAGE> 2640
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notified the corporation of his demand in writing (i) under
subdivision(a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions(a)(2) and(a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
SEC. 55-13-29. RESERVED FOR FUTURE CODIFICATION PURPOSES.
PART 3. JUDICIAL APPRAISAL OF SHARES
SEC. 55-13-30. COURT ACTION.
(a) If a demand of payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i) the
date payment is made under G.S. 55-13-25, or (ii) the date of the dissenter's
payment demand under G.S. 55-13-28 and by filing a complaint with the Superior
Court Division of the General Court of Justice to determine the fair value of
the shares and accrued interest. A dissenter who takes no action within the
60-day period shall be deemed to have withdrawn his dissent and demand for
payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the complaint. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The parties are entitled to
the same discovery rights as parties in other civil proceedings. The proceeding
shall be tried as in other civil actions. However, in a proceeding by a
dissenter in a corporation that was a public corporation immediately prior to
consummation of the corporate action giving rise to the right of dissent under
G.S. 55-13-02, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
SEC. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
A-5
<PAGE> 2641
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
A-6
<PAGE> 2642
ANNEX B
ADJUSTMENTS TO CERTAIN
HISTORICAL FINANCIAL INFORMATION
The table below sets forth certain adjustments to financial information
from the historical financial statements of the Company for fiscal year 1997
which has been used to calculate the Exchange Ratio for the Merger. The data set
forth below should be read in conjunction with the historical financial
statements of the Company contained elsewhere in this Prospectus Supplement and
the calculation of the Exchange Ratio under "Determination of Exchange Ratio."
<TABLE>
<CAPTION>
TOTAL
NET INCOME SHAREHOLDERS'
NET SALES (LOSS)(1) EBIT(2) EBITDA(2) EQUITY
---------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Per Shareholders' Statement.................... $6,162,425 $68,076 $179,639 $437,520 $2,852,161
Adjustments to eliminate less than wholly-owned
subsidiaries................................. -- -- -- -- --
---------- ------- -------- -------- ----------
Adjusted Shareholders' Statement............... $6,162,425 68,076 179,639 437,520 2,852,161
========== ------- -------- -------- ----------
Adjustments for non-operating items:
Gain/loss on disposal of PP&E................ -- -- --
Gain/loss on sale of securities..............
Impairment loss.............................. -- -- --
Equity in earnings of unconsolidated
subsidiaries............................... -- -- --
Gain/loss on discontinued operations......... -- -- --
Adjustment to tax expense.................... -- -- -- --
------- -------- --------
Total non-operating items...................... -- -- --
------- -------- --------
Other Adjustments:
Adjustment for dividends received from other
Belk entities.............................. -- -- --
Adjustment for ownership in other Belk
entities................................... (576)
------- -------- -------- ----------
Per Model...................................... $68,076 $179,639 $437,520 $2,851,585
======= ======== ======== ==========
COMPONENTS OF NET DEBT (CASH) PER SHAREHOLDERS'
STATEMENT
Assets
Cash & cash equivalents.................... $ (78,220)
Negative cash balances reclassified to
accounts payable......................... 6
Receivables from affiliates, net...........
Loans receivable from affiliates, net......
Liabilities
Notes payable.............................. --
Current installments of long-term debt..... --
Current portion of obligations under
capital leases........................... --
Payables to affiliates, net................ 435,363
Long-term debt, excluding current
installments............................. --
Obligations under capital leases, excluding
current portion.......................... --
Loans payable to affiliates, net........... 495,841
----------
Net debt (cash)................................ 852,990
Adjustments to eliminate less than wholly-owned
subsidiaries................................. --
----------
Per Model...................................... $ 852,990
==========
</TABLE>
- ---------------
(1) Adjustments to net income are made net of income taxes based on the
effective tax rate.
(2) Post tax items have been grossed up based on the effective tax rate for the
reported entity.
B-1
<PAGE> 2643
SUPPLEMENT NO. 63
<PAGE> 2644
BELK'S DEPARTMENT STORE OF ROCKINGHAM, N.C., INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John M. Belk and Thomas M. Belk, Jr., and
each of them, as proxies, with full power of substitution, and authorizes them,
and each of them, to vote and act with respect to all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, April 15, 1998, at 11:00 a.m., local time,
at the offices of Belk Stores Services, Inc., 2801 West Tyvola Road, Charlotte,
North Carolina 28217-4500, and at any and all adjournments thereof.
The Board of Directors recommends a vote FOR the following proposal:
PROPOSAL TO APPROVE AND ADOPT THE PLAN AND AGREEMENT OF REORGANIZATION, AS
AMENDED, DATED AS OF NOVEMBER 25, 1997, BY AND AMONG BELK, INC., BELK
ACQUISITION CO., AND THE SEPARATE BELK COMPANIES NAMED THEREIN (THE
"REORGANIZATION AGREEMENT").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THIS PROXY MUST BE DATED AND SIGNED BELOW
THE PROXIES SHALL VOTE SUCH SHARES AS SPECIFIED HEREIN. IF A CHOICE IS NOT
SPECIFIED, THEY SHALL VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION
AGREEMENT.
Dated: ,1998
-------------------
-------------------------------
Signature
-------------------------------
Signature
Name(s) should be signed exactly
as shown to the left hereof.
Title should be added if signing
as executor, administrator,
trustee, etc.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE
Supplement No. 63
<PAGE> 2645
BELK-HARRY COMPANY
, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Belk-Harry Company (the "Company"), to be held
on April 15, 1998, at 8:40 a.m., local time, at the offices of Belk Stores
Services, Inc., 2801 West Tyvola Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve (i) the Plan and Agreement of Reorganization, as amended
(the "Reorganization Agreement"), dated as of November 25, 1997, by and among
the Company, the other Belk Companies named therein, Belk Acquisition Co., a
South Carolina corporation ("New Belk Sub"), and Belk, Inc., a Delaware
corporation ("New Belk"), pursuant to which the Company will be merged with and
into New Belk (the "Merger") and (ii) the Merger. The Merger will be part of a
transaction pursuant to which 112 separate Belk companies will be merged into a
single operating entity (the "Reorganization"). New Belk, a recently formed
corporation, would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of common stock, par value $100 per share,
of the Company ("Company Common Stock") (other than shares entitled to
dissenters' rights of appraisal under North Carolina law and other than shares
of Company Common Stock owned by other Belk Companies, which will be canceled)
will be converted, without any action on the part of the holder thereof, into
the right to receive 25.8812 shares (the "Exchange Ratio") of Class A Common
Stock, par value $.01 per share, of New Belk ("New Belk Class A Common Stock").
It is expected that the shareholders of the Company will receive in the
aggregate approximately 289,973 shares of New Belk Class A Common Stock which
will represent approximately 0.4833% of the New Belk Class A Common Stock
outstanding after the Reorganization. All of the shares of New Belk Class A
Common Stock to be received by each shareholder in the Reorganization will be
aggregated and the total will be rounded to the nearest whole share. No
fractional shares will be issued.
The Reorganization Agreement has been approved and adopted by the Board of
Directors of the Company, and the Reorganization Agreement and the Merger are
subject to the approval by a majority of the outstanding shares of Company
Common Stock entitled to vote at the Special Meeting. I intend to vote in favor
of the Merger, as do certain other persons who are expected to serve as
directors of New Belk, and if our family members, controlled corporations and
family trusts who also own Company Common Stock vote in favor of the Merger, the
vote of myself and such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
The Board of Directors of the Company has received a written opinion, dated
November 25, 1997, of Willamette Management Associates, Inc. to the effect that
the methodology used to determine the Exchange Ratio is reasonable and is fair,
from a financial point of view, to the shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED AND ADOPTED
THE REORGANIZATION AGREEMENT AND THE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE MERGER.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Proxy Statement/Prospectus. Additional
information regarding the Company also is set forth in the Proxy
Statement/Prospectus and in the accompanying Supplement to the Proxy
Statement/Prospectus relating to the Company.
It is important that your shares be represented at the Special Meeting
either in person or by proxy. A proxy card for Company Common Stock has been
enclosed. Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage paid
(64)
<PAGE> 2646
envelope. If you plan to attend the Special Meeting, you may vote in person if
you wish, even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
IF YOU OWN SHARES OF COMMON STOCK IN BELK COMPANIES OTHER THAN THE COMPANY,
YOU MUST COMPLETE PROXY CARDS FOR EACH BELK COMPANY IN WHICH YOU OWN SHARES.
I strongly support the Merger and join with the other members of the Board
of Directors in enthusiastically recommending the Merger to you. We urge you to
vote in favor of the approval and adoption of the Reorganization Agreement and
the Merger. If you should have any questions regarding the Merger, please
contact Mr. Ralph A. Pitts, General Counsel, Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, telephone number (704)
357-1000.
Sincerely,
/s/ John M. Belk
John M. Belk,
Chairman, Board of Directors
<PAGE> 2647
BELK-HARRY COMPANY
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1998
TO THE SHAREHOLDERS OF BELK-HARRY COMPANY:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Belk-Harry Company (the "Company") will be held on April 15, 1998,
at 8:40 a.m., local time, at the offices of Belk Stores Services, Inc., 2801
West Tyvola Road, Charlotte, North Carolina 28217-4500, for the following
purposes:
(1) To consider and vote upon a proposal to approve (a) the Plan and
Agreement of Reorganization, as amended (the "Reorganization Agreement"),
dated as of November 25, 1997, by and among the Company, the other Belk
Companies named therein, Belk Acquisition Co., a South Carolina
corporation, and Belk, Inc., a Delaware corporation ("New Belk"), pursuant
to which the Company would be merged with and into New Belk (the "Merger")
and (b) the Merger. The Merger will be part of a transaction pursuant to
which 112 separate Belk companies will be merged into a single operating
entity. If the Merger is consummated, each outstanding share of common
stock, par value $100 per share, of the Company ("Company Common Stock")
(other than shares entitled to dissenters' rights of appraisal under North
Carolina law and other than shares of Company Common Stock owned by other
Belk Companies, which will be canceled) will be converted into the right to
receive 25.8812 shares of Class A Common Stock, par value $.01 per share,
of New Belk (the "New Belk Class A Common Stock"). All of the shares of New
Belk Class A Common Stock to be received by each shareholder in the
Reorganization will be aggregated and the total will be rounded to the
nearest whole share. No fractional shares will be issued.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 12, 1998,
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof.
From March 12, 1998, until the date of the Special Meeting, a list of
shareholders entitled to vote at the Special Meeting will be available at the
offices of Belk Stores Services, Inc. (at the above address) for examination
during normal business hours by any shareholder.
Your attention is directed to the Proxy Statement/Prospectus and the
Supplement to the Proxy Statement/Prospectus relating to the Company submitted
with this Notice.
By order of the Board of Directors
/s/ John M. Belk
John M. Belk
Chairman, Board of Directors
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 2648
BELK-HARRY COMPANY
SUPPLEMENT NO. 64
TO
PROXY STATEMENT/PROSPECTUS
DATED , 1998
---------------------
THIS SUPPLEMENT NO. 64 (THIS "PROSPECTUS SUPPLEMENT") IS PART OF THE PROXY
STATEMENT/PROSPECTUS DATED , 1998 (THE "PROXY
STATEMENT/PROSPECTUS"), AS SUPPLEMENTED, AND SHOULD BE READ IN CONNECTION
THEREWITH. TO THE EXTENT THAT THIS PROSPECTUS SUPPLEMENT IS INCONSISTENT WITH
THE PROXY STATEMENT/PROSPECTUS AS TO ANY MATTER RELATING TO BELK-HARRY COMPANY
(THE "COMPANY"), THE DISCUSSION HEREIN SUPERSEDES THE DISCUSSION IN THE PROXY
STATEMENT/PROSPECTUS. ALL OF THE INFORMATION CONTAINED HEREIN ASSUMES THAT ALL
OF THE BELK COMPANIES PARTICIPATE IN THE REORGANIZATION. IF ANY ONE OR MORE BELK
COMPANIES DO NOT PARTICIPATE IN THE REORGANIZATION, THE INFORMATION CONTAINED
HEREIN WITH RESPECT TO THE COMPANY AND THE EFFECT OF THE REORGANIZATION ON THE
COMPANY AND ITS SHAREHOLDERS MAY NOT BE ACCURATE. SEE "RISK FACTORS" IN THE
PROXY STATEMENT/PROSPECTUS. ALL CAPITALIZED TERMS USED HEREIN WHICH ARE NOT
OTHERWISE DEFINED SHALL HAVE THE MEANINGS SPECIFIED IN THE PROXY
STATEMENT/PROSPECTUS.
PROSPECTUS SUPPLEMENTS FOR ANY BELK COMPANY ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM RALPH A. PITTS, GENERAL COUNSEL, BELK STORES
SERVICES, INC., 2801 WEST TYVOLA ROAD, CHARLOTTE, NORTH CAROLINA 28217-4500,
TELEPHONE NUMBER (704) 357-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST SHOULD BE MADE BY
APRIL 8, 1998. PROSPECTUS SUPPLEMENTS FOR ANY OF THE BELK COMPANIES ARE
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 2
GENERAL INFORMATION......................................... 2
SPECIAL MEETING............................................. 2
THE MERGER.................................................. 3
Recommendation of Board of Directors...................... 3
Reasons for the Reorganization............................ 3
Interests of Certain Persons in the Merger................ 3
Comparison of Shareholder Rights.......................... 3
Dissenters' Rights of Appraisal........................... 12
DETERMINATION OF EXCHANGE RATIO............................. 14
COMPARATIVE PER SHARE DATA.................................. 16
SELECTED HISTORICAL FINANCIAL INFORMATION................... 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 18
BUSINESS OF THE COMPANY..................................... 18
SECURITY OWNERSHIP OF THE COMPANY........................... 19
INDEX TO UNAUDITED HISTORICAL FINANCIAL STATEMENTS.......... F-1
Unaudited Balance Sheets.................................. F-2
Unaudited Statements of Earnings and Retained Earnings.... F-3
Condensed Notes to Unaudited Historical Financial
Statements............................................. F-4
ANNEX A: DISSENTERS' RIGHTS OF APPRAISAL................... A-1
ANNEX B: ADJUSTMENTS TO CERTAIN HISTORICAL FINANCIAL
INFORMATION....................................... B-1
</TABLE>
<PAGE> 2649
THE COMPANY
The Company was incorporated as a North Carolina corporation in 1902. The
mailing address of the Company's principal executive offices is 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500, and its telephone number at that
address is (704) 357-1000.
GENERAL INFORMATION
This Prospectus Supplement is being furnished to the shareholders of the
Company (the "Shareholders") in connection with the solicitation of Proxies by
the Board of Directors of the Company for a special meeting (the "Special
Meeting") of the Shareholders to be held on April 15, 1998 at 8:40 a.m., local
time, at the offices of Belk Stores Services, Inc. ("BSS"), 2801 West Tyvola
Road, Charlotte, North Carolina 28217-4500.
At the Special Meeting, the Shareholders will be asked to consider and vote
upon a proposal to approve and adopt (i) the Plan and Agreement of
Reorganization, as amended, dated as of November 25, 1997 (the "Reorganization
Agreement"), by and among Belk, Inc., a Delaware corporation ("New Belk"), Belk
Acquisition Co., a South Carolina corporation, and the 112 Belk companies named
therein (the "Belk Companies"), including the Company, pursuant to which the
Company will be merged with and into New Belk (the "Merger") and (ii) the
Merger. A copy of the Reorganization Agreement is attached as Annex A to the
Proxy Statement/Prospectus.
The Merger would be part of a transaction in which the Belk Companies will
be merged into a single operating entity pursuant to the Reorganization
Agreement. New Belk will be the surviving corporation in the Reorganization.
If the Merger is consummated, each outstanding share of common stock, par
value $100 per share, of the Company (the "Common Stock") (except for shares of
Common Stock owned by other Belk Companies and shares of Common Stock owned by a
Shareholder who perfects his dissenters' rights of appraisal under North
Carolina law), will be converted, without any action on the part of the
Shareholder, into the right to receive 25.8812 shares (the "Exchange Ratio") of
Class A Common Stock, par value $.01 per share, of New Belk (the "New Belk Class
A Common Stock"). All of the shares of New Belk Class A Common Stock received by
each Existing Belk Shareholder in the Reorganization will be aggregated and the
total will be rounded to the nearest whole share. No fractional shares will be
issued.
SPECIAL MEETING
The record date for the Special Meeting is March 12, 1998 (the "Record
Date"). Only holders of Common Stock at the close of business on the Record Date
are entitled to notice of and to vote at the Special Meeting and any adjournment
thereof. As of the Record Date, there were 19,800 shares of Common Stock
outstanding held of record by 36 Shareholders.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the Special Meeting
is necessary to constitute a quorum of the Special Meeting. The affirmative vote
of the holders of a majority of the outstanding shares of Common Stock, voting
in person or by proxy, is required to approve and adopt the Reorganization
Agreement and the Merger. Holders of record of Common Stock are entitled to one
vote per share on any matter that may properly come before the Special Meeting.
As of the Record Date, the executive officers and directors of the Company
owned 90.0% of the outstanding shares of Common Stock. Mr. John M. Belk and
certain other persons who are expected to serve as directors of New Belk have
indicated that they intend to vote in favor of the Merger. If Mr. Belk and such
other prospective directors of New Belk vote in favor of the Merger, and if the
family members, controlled corporations and family trusts of Mr. Belk and such
other prospective directors who also own Common Stock vote in favor of the
Merger, the vote of such persons, corporations and trusts in favor of the Merger
would be sufficient to approve the Merger under the governing documents of the
Company and applicable state law.
2
<PAGE> 2650
THE MERGER
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER OF THE COMPANY WITH
AND INTO NEW BELK IS IN THE BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS,
HAS APPROVED AND ADOPTED THE REORGANIZATION AGREEMENT AND THE MERGER AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT AND THE MERGER. For additional information with respect
to the determination made by, and recommendation of, the Board of Directors, see
"-- Reasons for the Reorganization" herein and "The Reorganization -- Reasons
for the Reorganization" in the Proxy Statement/Prospectus.
REASONS FOR THE REORGANIZATION
The expected benefits of the Reorganization for the Company and the other
Belk Companies participating in the Reorganization are described in "The
Reorganization -- Reasons for the Reorganization" in the Proxy
Statement/Prospectus. There can be no assurance, however, that any of these
benefits will be achieved. See "Risk Factors" in the Proxy Statement/Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, the Shareholders should be aware that certain
officers and directors of the Company have interests in the Reorganization that
may present them with potential conflicts of interest with respect to the
Merger. For a discussion of these interests, see "The Reorganization -- Interest
of Certain Persons in the Reorganization" in the Proxy Statement/Prospectus.
COMPARISON OF SHAREHOLDER RIGHTS
Upon consummation of the Merger, each Shareholder who does not exercise
dissenters' rights of appraisal as described herein will become a holder of New
Belk Common Stock. The rights of the Shareholders will thereafter be governed by
Delaware Law, including Delaware General Corporation Law (the "DGCL"), the New
Belk Certificate and the New Belk Bylaws. The following is a summary of the
material differences between the rights of the Shareholders and the rights of
the New Belk Stockholders pursuant to the differences between the DGCL and the
North Carolina Business Corporation Act (the "NCBCA"), between the New Belk
Certificate and the Articles of Incorporation of the Company (the "Company
Articles") and between the New Belk Bylaws and the Bylaws of the Company (the
"Company Bylaws").
Authorized Capital Stock. The authorized capital stock of New Belk
consists of: (i) 200,000,000 shares, par value $.01 per share, of New Belk Class
A Common Stock; (ii) 200,000,000 shares, par value $.01 per share, of New Belk
Class B Common Stock; and (iii) 20,000,000 shares, par value $.01 per share, of
New Belk Preferred Stock. There are no current plans to issue New Belk Preferred
Stock. The authorized capital stock of the Company consists of 39,600 shares of
Common Stock.
Classes of Common Stock. The shares of New Belk Class A Common Stock and
New Belk Class B Common Stock are identical in all respects, except for voting
rights and certain conversion rights and transfer restrictions in respect of New
Belk Class A Common Stock. The holders of New Belk Class A Common Stock are
entitled to 10 votes per share. The holders of New Belk Class B Common Stock are
entitled to one vote per share. Shares of New Belk Class A Common Stock may be
owned only by Class A Permitted Holders. If a share of New Belk Class A Common
Stock is transferred to any person other than a Class A Permitted Holder,
whether by sale, assignment, gift, bequest, appointment or otherwise, such share
will be converted automatically into a share of New Belk Class B Common Stock.
Shares of New Belk Class A Common Stock are convertible into New Belk Class B
Common Stock, in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of New Belk Class B Common Stock
for each share of New Belk Class A Common Stock converted. Shares of New Belk
Class A Common Stock
3
<PAGE> 2651
held by a New Belk Stockholder who is a Class A Permitted Holder will also
automatically convert into New Belk Class B Common Stock in the event that such
New Belk Stockholder no longer meets the requirements of a Class A Permitted
Holder. New Belk Class B Common Stock has no conversion rights. The Company
Articles provide for only one class of common stock.
Dividends and Other Distributions. The DGCL permits a corporation, subject
to restrictions in the certificate of incorporation, to declare and pay
dividends to its stockholders out of surplus (defined as net assets minus
capital) or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of any classes which may have a preference
upon the distribution of assets.
The New Belk Certificate provides that the New Belk Board may determine the
date and amount of the dividends to be distributed to New Belk Stockholders
subject to the preferences of New Belk Preferred Stock, of which none currently
is issued and for which no dividend right now exists. New Belk may not pay
dividends or make distributions to holders of any class of New Belk Common Stock
unless simultaneously with such dividend or distribution New Belk makes the same
dividend or distribution with respect to each other class of outstanding New
Belk Common Stock. In the case of dividends or other distributions payable in
shares of a class of New Belk Common Stock, including distributions pursuant to
stock splits or divisions of a class of New Belk Common Stock which occur after
the first issuance of a class of New Belk Common Stock, only shares of New Belk
Class A Common Stock may be distributed with respect to New Belk Class A Common
Stock and only shares of New Belk Class B Common Stock may be distributed with
respect to New Belk Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of a class of New
Belk Common Stock, is payable in shares of New Belk Class A Common Stock or New
Belk Class B Common Stock, the number of shares of each class of New Belk Common
Stock payable per share of such class of New Belk Common Stock must be equal in
number. In the case of dividends or other distributions consisting of other
voting securities of New Belk or of voting securities of any corporation which
is a wholly-owned subsidiary of New Belk, New Belk must declare and pay such
dividends in two separate classes of such voting securities, identical in all
respects, except that (i) the voting rights of each such security paid to the
holders of New Belk Class B Common Stock must be one-tenth of the voting rights
of each such security paid to the holders of New Belk Class A Common Stock and
(ii) such security paid to the holders of New Belk Class A Common Stock must
convert into the security paid to the holders of New Belk Class B Common Stock
upon the same terms and conditions applicable to the conversion of New Belk
Class A Common Stock into New Belk Class B Common Stock and must have the same
restrictions on transfer and ownership applicable to the transfer and ownership
of the New Belk Class A Common Stock. In the case of dividends or other
distributions consisting of securities convertible into, or exchangeable for,
voting securities of New Belk or voting securities of another corporation which
is a wholly-owned subsidiary of New Belk, such convertible or exchangeable
securities and the underlying securities must be identical in all respects
(including, without limitation, the conversion or exchange rate), except that
(i) the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of New Belk Class B Common Stock must
be one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the New Belk Class A Common Stock
and (ii) such underlying securities paid to the holders of New Belk Class A
Common Stock must convert into the underlying securities paid to the holders of
New Belk Class B Common Stock upon the same terms and conditions applicable to
the conversion of New Belk Class A Common Stock into New Belk Class B Common
Stock and must have the same restrictions on transfer and ownership applicable
to the transfer and ownership of the New Belk Class A Common Stock.
Pursuant to the NCBCA, a corporation, subject to restrictions in the
articles of incorporation, may make distributions to shareholders as long as
such distributions do not cause (i) the corporation to be unable to pay its
debts as they come due in the usual course of business or (ii) the corporation's
total assets to be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the payment of the dividend,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving
4
<PAGE> 2652
the distribution. The Company Bylaws provide that the Board of Directors of the
Company (the "Company Board") may from time to time declare dividends on the
Company's outstanding shares in the manner and upon the terms and conditions
provided by law and by the Company Articles.
Special Meetings of Shareholders. The DGCL permits the board of directors
or person(s) authorized by the certificate of incorporation or the bylaws to
call a special meeting. The New Belk Certificate authorizes only the Chairman of
the New Belk Board and, upon a resolution adopted by the affirmative vote of a
majority of the entire New Belk Board, the New Belk Board to call a special
meeting.
The NCBCA permits the board of directors, person(s) authorized by the
articles of incorporation or the bylaws and shareholders of at least 10% of all
votes entitled to be cast on the proposed corporate action to call a special
meeting. The Company Bylaws authorize the Chairman, President, Secretary, the
Company Board and any shareholder pursuant to the written request of the holders
of not less than 10% of all the shares entitled to vote at the meeting to call a
special meeting.
Voting Requirements Generally. Unless the certificate of incorporation,
the bylaws of the corporation or the DGCL specifies a different voting
requirement, the DGCL permits the affirmative vote of the majority of shares
present in person or represented by proxy at a duly held meeting at which a
quorum is present and entitled to vote on the subject matter to be the act of
the stockholders.
The New Belk Bylaws provide that, in all matters other than the election of
directors, the affirmative vote of a majority of outstanding shares of New Belk
Class A Common Stock and New Belk Class B Common Stock, taken together, present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless a greater vote is
required by law, by the New Belk Certificate or by the New Belk Bylaws.
Directors will be elected by the affirmative vote of a plurality of the shares
of New Belk Class A Common Stock and New Belk Class B Common Stock, taken
together, present in person or represented by proxy at the meeting and entitled
to vote on the election of directors.
The New Belk Certificate provides that to alter, amend, repeal or adopt any
provision inconsistent with the provisions of the New Belk Certificate related
to stockholder meetings or the provisions of the New Belk Certificate which
describe the membership, powers and procedures of the New Belk Board requires
the affirmative vote of at least 66 2/3% of all outstanding shares of capital
stock of New Belk, voting together as a single class. In addition, the New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of capital stock of New Belk, voting together as a single
class, to remove for cause a member of the New Belk Board.
According to the NCBCA, unless the articles of incorporation, a bylaw
adopted by the shareholders or the NCBCA specifies a different voting
requirement, if the votes cast within the voting group in favor of the corporate
action exceed the votes cast in opposition to the corporate action at a duly
held meeting at which a quorum is present, the corporate action is deemed to be
approved by the stockholders. The Company Articles do not specify a different
voting requirement.
Amendment of Certificate or Articles of Incorporation. DGCL requires that
an amendment of the certificate of incorporation of a corporation be adopted by
the board of directors and the holders of a majority of the outstanding shares
of stock entitled to vote thereon. The holders of the outstanding shares of a
class are entitled to vote as a separate class on a proposed amendment that
would increase or decrease the aggregate number of authorized shares of such
class, increase or decrease the par value of the shares of such class or alter
or change the powers, preferences or special rights of the shares of such class
so as to affect them adversely. If any proposed amendment would alter or change
the powers, preferences or special rights of one or more series of any class so
as to affect them adversely, but would not so affect the entire class, then only
the shares of the series so affected by the amendment will be considered a
separate class for purposes of voting by classes. The New Belk Certificate is
consistent with the foregoing provisions of the DGCL.
Under the NCBCA, unless the articles of incorporation provide otherwise, a
corporation's board of directors may adopt certain minor amendments to the
corporation's articles of incorporation without shareholder action, such as to
delete the names and addresses of the initial directors. Otherwise, the NCBCA
requires that an amendment to the articles of incorporation be recommended by
the board of directors to the
5
<PAGE> 2653
shareholders and approved (i) by a majority (unless the articles of
incorporation, a bylaw adopted by the shareholders or the board of directors
require a greater vote or a vote by voting groups) of the votes entitled to be
cast on the amendment by any voting group with respect to which the amendment
would create dissenters' rights and (ii) when a quorum is present, by all other
voting groups entitled to vote on the amendment through casting more affirmative
than opposing votes. As under the DGCL, the holders of the outstanding shares of
a class or series are entitled to vote as a separate voting group (if
shareholder voting is otherwise required by the NCBCA) on a proposed amendment
if the amendment would change certain fundamental rights and preferences of that
class or series. The Company Articles do not specify a greater voting
requirement to amend the Company Articles.
Amendment of Bylaws. The DGCL requires stockholder approval to amend the
bylaws of the corporation, unless the certificate of incorporation confers the
power to amend such bylaws to the board of directors. Conferring such power to
the board of directors of the corporation does not divest or limit the
stockholders' power to adopt, amend or repeal the bylaws of the corporation. The
New Belk Certificate confers upon the New Belk Board the power to adopt, amend
or repeal the New Belk Bylaws.
The NCBCA vests the power to amend or repeal the bylaws of the corporation
in the board of directors except (i) as otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or the NCBCA and (ii) a
bylaw adopted, amended or repealed by the shareholders may not be readopted,
amended or repealed by the board of directors if neither the articles of
incorporation nor a bylaw adopted by the shareholders authorizes the board of
directors to adopt, amend or repeal that particular bylaw or the bylaws
generally. Conferring such power upon the board of directors of the corporation
does not divest the shareholders of their power, nor limit their power to adopt,
amend or repeal the bylaws of the corporation.
The Company Bylaws provide that the Company Bylaws may be amended or
repealed and new bylaws may be adopted by the affirmative vote of a majority of
the directors then holding office at any regular or special meeting of the
Company Board or by the affirmative vote of a majority of the shares outstanding
and entitled to vote at any regular or special meeting of the Shareholders.
Furthermore, the Company Bylaws provide that the Company Board has no power to
adopt a bylaw: (i) requiring more than a majority of the voting shares for a
quorum at a meeting of the Shareholders, except where higher percentages are
required by law; (ii) providing for the management of the Company otherwise than
by the Company Board or its executive committees; (iii) increasing or decreasing
the number of directors; or (iv) classifying and staggering the election of
directors.
Action by Written Consent. Unless otherwise provided in the certificate of
incorporation, the DGCL permits any action that may be taken by an annual or
special meeting of stockholders to be taken without a meeting and without prior
notice. Holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or to take such action at a meeting
at which all shares entitled to vote on the action were present and voted must
sign the written consent(s) describing such action. The New Belk Certificate
provides that no action required to be taken or which may be taken at any annual
or special meeting of New Belk may be taken without a meeting, and the power of
New Belk Stockholders to consent in writing, without a meeting, to the taking of
any action is denied specifically.
Pursuant to the NCBCA, unless the articles of incorporation or bylaws
provide otherwise, any action that may be taken by an annual or special meeting
of shareholders may be taken without a meeting and without prior notice, if all
holders of outstanding shares entitled to vote on such action sign the written
consent(s) describing such action. The Company Bylaws and Company Articles do
not provide otherwise.
Filling Vacancies in the Board of Directors. Unless otherwise provided in
the certificate of incorporation or the bylaws, the DGCL permits vacancies in
the board of directors and newly created directorships to be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. If at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the whole board as constituted immediately prior to such increase, the Delaware
Court of Chancery may, upon application of stockholders holding at least 10% of
the total number of shares outstanding having the right to vote for such
directors, order an election to be held to fill any such vacancies or newly
created directorships or to replace the directors chosen by the directors then
in office.
6
<PAGE> 2654
According to the New Belk Certificate, subject to the rights of the holders
of any series of New Belk Preferred Stock then outstanding, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the New Belk Board resulting from death, resignation,
disqualification, removal or other cause must be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum, or by the sole remaining director, as the case may be, and not by the
New Belk Stockholders. The New Belk Certificate provides that whenever the
holders of any one or more classes or series of New Belk Preferred Stock have
the right, voting separately by class or series, to elect directors at an annual
or special meeting, (i) the election, filling of vacancies and other features of
such directorships will be governed by the terms of the New Belk Certificate or
the designation of the New Belk Preferred Stock applicable to such class or
series of the New Belk Preferred Stock, (ii) the then authorized number of
directors of New Belk will be increased by the number of additional directors to
be elected and (iii) the directors so elected will serve a term which will
expire at the annual meeting of stockholders next succeeding their election or
as otherwise specified by the terms of the New Belk Certificate or the
designation of the New Belk Preferred Stock applicable to such class or series.
Unless otherwise provided in the articles of incorporation, the NCBCA
permits a vacancy in the board of directors to be filled by the shareholders or
by the board of directors. If the directors remaining in office constitute fewer
than a quorum if the vacancy is one that the directors are authorized to fill,
then the directors may fill the vacancy by the affirmative vote of a majority of
all the directors remaining in office. If the vacant office was held by a
director elected by a voting group of shareholders, only the remaining director
or directors elected by that voting group or the holders of shares of that
voting group are entitled to fill the vacancy.
The Company Bylaws provide that a vacancy occurring in the Company Board
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining director, but a vacancy created by an increase
in the authorized number of directors must be filled only by election at an
annual meeting or at a special meeting of the Shareholders called for that
purpose. The Shareholders may elect a director at any time to fill any vacancy
not filled by the directors.
Number of Directors. The DGCL requires at least one director. The number
of directors is set by the bylaws or the certificate of incorporation, and if
the number of directors is set by the certificate of incorporation, then that
number may be changed only by an amendment to the certificate of incorporation.
The New Belk Bylaws provide for not less than two nor more than 18 directors, as
determined from time to time exclusively by the New Belk Board pursuant to a
resolution adopted by a majority of directors of New Belk then in office.
The NCBCA requires a corporation to have at least one director. The number
of directors is set in the articles of incorporation or the bylaws. The
shareholders may from time to time increase or decrease the number of directors
by amendment to the articles of incorporation or the bylaws, but no such
decrease shall be made for a corporation to which cumulative voting is
applicable when the number of shares voting against the proposal for decrease
would be sufficient to elect a director by cumulative voting if such shares are
entitled to be voted cumulatively for the election of directors. If a board of
directors has power under the articles of incorporation or bylaws to fix or
change the number of directors and if the shareholders do not have the right to
cumulate their votes for directors, the board may increase or decrease the
number of directors by not more than 30% during any 12-month period. The
articles of incorporation or bylaws may establish a variable range for the size
of the board of directors by fixing a minimum and maximum number of directors.
If a variable range is established, the number of directors may be fixed or
changed from time to time, within the minimum and maximum, by the shareholders
or (unless the articles of incorporation or a shareholders' agreement shall
otherwise provide) the board of directors. After shares are issued, only the
shareholders may change the range for the size of the board or change from a
fixed to a variable-range size board or vice versa. The Company Bylaws require
the Company Board to consist of at least three, but no more than 15, members.
Qualifications of Directors. The DGCL allows the certificate of
incorporation or the bylaws to provide for the qualifications of directors. A
director does not have to be a stockholder in the corporation unless otherwise
provided in the certificate of incorporation or the bylaws. The New Belk Bylaws
and the New Belk Certificate do not provide for any qualifications for directors
of the New Belk Board.
7
<PAGE> 2655
The NCBCA allows the articles of incorporation or the bylaws to provide for
the qualifications of directors. A director need not be a resident of North
Carolina or a shareholder of the corporation unless otherwise provided for in
the articles of incorporation or the bylaws. The Company Bylaws do not require
directors of the Company to be residents of North Carolina or shareholders of
the Company.
Classification of the Board of Directors. The DGCL permits the certificate
of incorporation or the bylaws to provide for the classification of the board
into one to three classes, with the term of each class expiring at the annual
meeting in successive years beginning with the first class and progressing to
the third class, if any. Thereafter, directors are chosen for a full term to
succeed those whose terms expire.
The New Belk Certificate divides the directors of New Belk into three
classes, designated Class I, Class II and Class III. In the event that the
number of directors is not evenly divisible by three, the New Belk Board will
determine in which class or classes the remaining director or directors, as the
case may be, shall be included. The term of office of each director is three
years; provided, however, all of the initial directors shall serve a term of
office expiring at the first annual meeting of the stockholders after the date
of filing of the New Belk Certificate; and provided further, that the directors
in Class I, Class II and Class III shall serve terms commencing on the date of
their election as directors at the first annual meeting of the stockholders
after the date of filing of the New Belk Certificate and expiring at the annual
meeting of New Belk Stockholders in 1999, 2000 and 2001, respectively.
The NCBCA provides that if there are nine or more directors, the articles
of incorporation or the bylaws may allow for staggering their terms by dividing
the total number of directors into two, three or four groups, with each group
containing one-half, one-third or one-fourth of the total. The term of each
group expires each successive year beginning with the first group and
progressing to the fourth group. Thereafter, directors are chosen for a term of
two, three or four years to succeed those whose terms expire. The Company
Articles do not provide for the staggering of the Company Board.
Removal of Directors. The DGCL provides that if the certificate of
incorporation does not provide otherwise and the board of directors is
classified, then the directors may be removed only for cause. The New Belk
Certificate requires the affirmative vote of the holders of at least 66 2/3% of
all outstanding shares of New Belk entitled to vote to remove for cause a member
of the New Belk Board.
Under the NCBCA, unless the articles of incorporation provide that
directors may be removed only for cause, the shareholders may remove one or more
directors with or without cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove him. If cumulative voting is not authorized, a director may be
removed only if the number of votes cast to remove him exceeds the number of
votes cast not to remove him. The Company Articles do not provide otherwise.
Cumulative Voting. Under both the DGCL and the NCBCA, cumulative voting of
stock applies only when so provided in the certificate of incorporation or the
articles of incorporation, as the case may be. Neither the New Belk Certificate
nor the Company Articles provides for cumulative voting.
Conflict-of-Interest Transactions. The DGCL generally permits transactions
involving a Delaware corporation and an interested director or officer of that
corporation if: (i) the material facts are disclosed and a majority of
disinterested directors consents; (ii) the material facts are disclosed and a
majority of shares entitled to vote thereon consents; or (iii) the transaction
is fair to the corporation at the time it is authorized by the board of
directors, a committee of the board or the stockholders.
Similar to the DGCL, the NCBCA generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
(i) the material facts of the transaction and the director's interest were
disclosed or known to the board of directors or a committee of the board of
directors and the disinterested directors or committee authorized, approved or
ratified the transaction; (ii) the material facts of the transaction and the
director's interest were disclosed or known to the shareholders entitled to vote
and the disinterested shares authorized, approved or ratified the transaction;
or (iii) the transaction was fair to the corporation.
8
<PAGE> 2656
Indemnification and Limitation of Liability. The DGCL gives a corporation
the power to indemnify an agent of the corporation against expenses, judgments,
fines and settlements incurred in a proceeding, other than an action by or in
the right of the corporation, if the agent acted in good faith and reasonably
believed that the act was in the best interests, or at least not opposed to the
best interests, of the corporation, and, with respect to a criminal proceeding,
the agent had no reasonable cause to believe the agent's conduct was unlawful.
In the case of an action by or in the right of the corporation, the corporation
has the power to indemnify any agent against expenses incurred in defending or
settling the action if the agent acted in good faith and reasonably believed
that the act was in, or at least was not opposed to, the best interests of the
corporation; provided, however, that no indemnification may be given where the
agent is adjudged liable to the corporation with respect to any claim, issue or
matter, unless a court shall deem it proper, and then such indemnification may
be made only to the extent that such court shall determine. The DGCL requires a
corporation to indemnify an agent of the corporation to the extent the agent was
successful in the defense of any proceeding, on the merits or otherwise, to
which the agent was a party because the agent is or was an agent of the
corporation or is or was serving at the corporation's request as an agent of
another foreign or domestic corporation or other entity.
The DGCL permits a corporation to adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such provision may not eliminate or
limit a director's monetary liability for: (i) breaches of the director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends, stock repurchases or redemptions; or
(iv) transactions in which the director received an improper personal benefit.
To the fullest extent permitted and authorized by the DGCL, the New Belk
Bylaws and the New Belk Certificate provide for indemnification of its agents
and for the elimination or limitation of personal liability of a Director to New
Belk or the New Belk Stockholders for monetary damages. New Belk's obligation,
if any, to indemnify any person who was or is serving at its request as a
director of another corporation, partnership, joint venture, trust, enterprise
or non-profit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit entity.
Except as otherwise provided in the NCBCA, a corporation may indemnify an
individual who is a party to a proceeding because he is or was a director or
officer against liability incurred in the proceeding if such individual
conducted himself in good faith and such individual (i) reasonably believed, in
the case of conduct in his official capacity, that such conduct was in the best
interests of the corporation, (ii) reasonably believed, in all other cases, that
such conduct was at least not opposed to the best interests of the corporation
and (iii) in the case of any criminal proceeding, that the individual had no
reasonable cause to believe such conduct was unlawful. A corporation may not
indemnify a director under the NCBCA (i) in connection with a proceeding by or
in the right of the corporation in which the director was adjudged liable to the
corporation or (ii) in connection with any proceeding with respect to conduct
for which he was adjudged liable on the basis that personal benefit was
improperly received by him, whether or not involving action in his official
capacity. A corporation will indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he was a director or officer of the corporation
against reasonable expenses incurred by the director or officer in connection
with the proceeding.
Under NCBCA, a provision limiting or eliminating the personal liability of
any director is not effective with respect to (i) acts or omissions that the
director at the time of such breach knew or believed were clearly in conflict
with the best interests of the corporation, (ii) any liability under unlawful
distributions, (iii) any transaction from which the director derived an improper
personal benefit or (iv) acts or omissions occurring prior to the date the
provisions became effective.
The Company Bylaws authorize indemnification as provided in the NCBCA. In
addition, the Company Bylaws state that the Company will indemnify and hold
harmless its present or former directors and officers against any and all
liability and litigation expense, including reasonable attorneys' fees, arising
out of their status as such or their activities in either of such capacities;
provided, however, that the Company will not
9
<PAGE> 2657
indemnify a director or officer against liability or litigation expense that he
may incur on account of his activities which were, at the time taken, known or
believed by him to be clearly in conflict with the best interest of the Company.
The Company will likewise and to the same extent indemnify any person who, at
the request of the Company, is or was serving as a director or as an officer of
another corporation, joint venture, trust or other enterprise, as a partner of a
partnership or as a trustee or administrator under an employee benefit plan. The
Company will also indemnify the director or officer for reasonable costs,
expenses and attorneys' fees in connection with the enforcement of rights to
indemnification granted therein, if it is so determined in accordance with the
Company Articles that the director or officer is entitled to indemnification
thereunder. The Company Articles provide that to the fullest extent permitted by
the NCBCA a director will not be personally liable to the Company, or any of its
Shareholders or otherwise for monetary damages for breach of duty of care or
other duty as a director.
Merger, Consolidation or the Sale of All or Substantially All of the
Assets. The DGCL requires stockholders eligible to vote to approve a merger or
consolidation by a majority vote of each constituent corporation. Unless
required by a corporation's certificate of incorporation, in the case of a
merger or consolidation, the DGCL does not require the vote of stockholders of a
constituent corporation surviving the merger or consolidation if (i) the merger
agreement does not amend the existing certificate of incorporation, (ii) each
share of the surviving corporation outstanding before the merger or
consolidation is an identical outstanding or treasury share after the merger or
consolidation and (iii) either no shares of the surviving corporation and no
securities convertible into such stock are to be issued in the merger or
consolidation or the number of shares to be issued by the surviving corporation
in the merger or consolidation does not exceed 20% of the shares outstanding
immediately prior to the merger or consolidation. The DGCL also requires
approval by majority vote of the stockholders eligible to vote to approve the
sale of all or substantially all of the assets of the corporation other than in
the usual and regular course of business.
The NCBCA concerning the approval of a merger or share exchange is similar
in all material respects to the DGCL, except that under the NCBCA the surviving
company's shareholders must approve the transaction if, after giving effect to
the transaction, their interest in participating shares is reduced by more than
20%. "Participating shares" are those shares that are entitled to participate
without limitation in distributions. The DGCL and the NCBCA provisions on sales
of all or substantially all of the assets of a corporation other than in the
regular course of business are similar in all material respects.
Anti-Takeover Provisions. Both the DGCL and the NCBCA include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of a freeze-out merger. A
freeze-out merger occurs when the controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the DGCL,
"business combinations" generally encompass the following: (i) any merger or
consolidation of the corporation or any direct or indirect majority-owned
subsidiary of the corporation with an interested stockholder; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition to or with the
interested stockholder of a substantial percentage of assets of the corporation;
(iii) any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder,
except in certain circumstances; (iv) any transaction involving the corporation
which has the effect of increasing the proportionate share of the stock of any
class or series, or securities convertible into the stock of any class or
series, of the corporation which is owned by the interested stockholder, except
in certain circumstances; or (v) any receipt by the interested stockholder of
the benefit of any loans, advances, guarantees, pledges or other financial
benefits (other than those expressly permitted in (i) through (iv) above)
provided by or through the corporation.
The DGCL defines an "interested stockholder" as any person who is (i) the
direct or indirect beneficial owner of at least 15% of the voting power of any
class or series of the then outstanding stock of the corporation or (ii) an
affiliate or associate of the corporation who within three years of the date in
question was the direct or indirect owner of at least 15% of the voting power of
any class or series of the then outstanding stock of the corporation.
10
<PAGE> 2658
The DGCL prohibits a corporation from engaging in any business combination
with any interested stockholder for a period of three years following the time
that such stockholder became an interested stockholder unless: (i) prior to such
time the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by (a) persons
who are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
Under the NCBCA, a "business combination" includes any merger or
consolidation of a corporation with or into any other corporation, or the sale
or lease of all or any substantial part of the corporation's assets to, or any
payment, sale or lease to the corporation or any subsidiary thereof in exchange
for securities of the corporation of any assets (except assets having an
aggregate fair market value of less than $5 million) of any other entity. The
NCBCA requires the approval of 95% of the voting shares of a corporation for the
adoption or authorization of a business combination with another entity if that
entity is the beneficial owner, directly or indirectly, of 20% of the voting
shares of the corporation.
Proxies. The DGCL permits a stockholder to appoint a proxy to vote or
otherwise act for the stockholder. The appointment of proxy is valid for three
years unless the proxy provides for a longer period or, in the case of a
revocable proxy, is earlier revoked.
As under the DGCL, the NCBCA provides that a shareholder may appoint a
proxy to vote or otherwise act for the shareholder. However, the proxy is valid
for only 11 months unless a longer period is expressly provided in the
appointment form or, in the case of a revocable proxy, is earlier revoked.
Preemptive Rights. Under the DGCL, no stockholder has any preemptive right
to subscribe for additional shares of stock issued by a corporation or to any
security convertible into such stock except to the extent the certificate of
incorporation so provides.
With two exceptions, the holders of New Belk Common Stock are not entitled
to any preemptive rights to subscribe for any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of bonds,
debentures or other securities convertible into or exchangeable for stock. When
New Belk makes an offering of options, rights or warrants to subscribe for
shares of any other class or classes of capital stock (other than New Belk Class
A Common Stock) to all holders of a class of New Belk Common Stock, New Belk is
required to make simultaneously an identical offering to all holders of the
other classes of New Belk Common Stock other than to any class of New Belk
Common Stock the holders of which, voting as a separate class, determine that
such offering need not be made to such class. Further, New Belk may grant by
contract a preemptive right to purchase, subscribe for or otherwise acquire
stock of any class or series of New Belk or any security convertible into or
exchangeable for, or any warrant, option or right to purchase, subscribe for or
otherwise acquire, stock of any class or series of New Belk, whether now or
hereafter authorized.
The NCBCA concerning preemptive rights is similar in all material respects
to the DGCL. The Company Articles do not contain a provision with respect to
preemptive rights.
Shareholder Inspection Rights. Under the DGCL, any stockholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders and its other books and records and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Pursuant to the NCBCA, a shareholder is entitled to inspect, during regular
business hours at a reasonable location specified by the corporation, certain
records of the corporation if (i) the shareholder
11
<PAGE> 
